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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-40, (hereinafter referred as ld. CIT (A), Mumbai dated 27.10.2017 for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:
The Learned Commissioner of Income Tax, in the facts in circumstances of the case and in law erred .in holding that the amount of Rs. 49,81,018/- being the provision made for leave salary made by the appellant based on actuarial valuation was not allowable as deduction u/s. 43B(f) of the Act and also further erred in holding that the claim in respect of the same was not made in the return of income and hence, not allowable 2. The above grounds of appeal are distinct and separate and without prejudice to each other.
Mum 2018-M/s Group M Media (India) Pvt. Ltd.
3. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted. 2. Brief facts of the case are that the assessee-company is engaged in Media planning, buying, selling and consultancy services, filed its return of income for Assessment Year 2010-11 on 13.10.2010 declaring total income of Rs. 64,49,47,710/-. Subsequently, the revised return was filed by assessee on 27.12.2010 declaring the same income relating credit of Tax Deducted at Source (TDS) of Rs. 41,09,442/-. The return was selected for scrutiny and assessment was completed under section 143(3) on 12.03.2013. During the assessment, the assessee claimed that they have offered to tax of Rs. 49,81,018/- in respect of leave encashment provision as disallowable u/s. 43B(f) of the Act, the same should not be disallowed in computing the income for the year. The assessee relied upon the decision of Hon’ble Kolkata High Court in Exide Industries Ltd. vs. Union of India, wherein the said provision is declared as invalid.
The claim of assessee was not accepted by Assessing Officer holding that the assessee has itself offered the same in computation of income along with the return of income as disallowable. On appeal before the ld. CIT(A), the action of Assessing Officer was upheld. The ld. CIT(A) concluded that in view of the decision of Hon’ble Supreme Court in Goetz (India) Ltd. vs. CIT [284 ITR 323], no fresh claim can be entertained by the Assessing Officer. This restriction is also applicable to Mum 2018-M/s Group M Media (India) Pvt. Ltd. ld. CIT(A), therefore, the claim of assessee cannot be entertained in the appeal as well. Aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that in view of the decision of Hon’ble jurisdictional High Court in CIT vs. Pruthvi Brokers & Shareholders [349 ITR 336 (Bom), the assessee is entitled to raise additional grounds of appeal
before the appellate authority. The ld. AR of the assessee further submits that on merit, the sole grounds of appeal, the assessee is covered in favour of assessee by the decision of co-ordinate bench in Everest Industries Ltd. vs. JCIT [2018] 90 taxmann.com 330 (Mum. Trib.), wherein it was held that if the decision of Hon’ble Supreme Court comes in favour of assessee, the assessee is free to seek the amendment of assessment order.
4. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The ld. DR further submits that in view of the decision of CIT vs. Pruthvi Brokers & Shareholders (supra), the grounds of appeal may be restored to the file of Assessing Officer to decide the issue afresh.
5. We have considered the submission of parties and have gone through the orders of authorities below. We have noted that the Assessing Officer not ITA No. 501 Mum 2018-M/s Group M Media (India) Pvt. Ltd. accepted the revised claim of the assessee. The ld. CIT(A) also concurred with the decision of Assessing Officer. However, keeping in view the ratio of law laid down by Hon’ble jurisdictional High Court in CIT vs. CIT vs. Pruthvi Brokers and Shareholders (supra), we admit the additional ground of claim raised by assessee and restore the issue to the file of Assessing Officer to decide the issue as per the decision of co- ordinate bench in Everest Industries Ltd. vs. JCIT (supra). For appreciation of fact the relevant part of decision of Everest Industries Ltd. (supra) is extracted below:
“13. The second issue contested by the assessee relates to deduction respect of "Provision of leave encashment". The assessee created a provision of Rs. 120.60 lakhs towards leave encashment and claimed the same as deduction. When the AO sought to disallow the same u/s. 43B of the Act, the assessee contended that the Provision for leave encashment is not a statutory liability and hence it is not liable to be disallowed u/s. 43B of the Act. In this regard, the assessee placed its reliance on the decision rendered by Hon'ble Calcutta High Court in the case of Exide Industries Ltd. v. Union of India[2007] 292 ITR 470/164 Taxman 9. The Assessing Officer, however, disallowed the claim of the assessee on the reasoning that the decision rendered by Hon'ble Calcutta High Court in the case of Exide Industries Ltd. (supra) holding that the provisions of section 43B(f) is unconstitutional, has since been stayed by Hon'ble Supreme Court. The learned CIT(A) also confirmed the same.
The Learned AR submitted that Hon'ble Cochin Bench of the ITAT has considered an identical issue in the case of Muthoot Vehicles & Asset Finance Ltd. [IT Appeal No. 623 (Coch) of 2013, dated 6-12-2013], and the Tribunal has restored the matter to the file of the Assessing Officer with the direction to consider the issue afresh as per the decision that may be rendered by Hon'ble Apex Court in the case of Exide Industries Ltd. (supra).
We have heard learned Departmental Representative and perused the record. We noticed that the Cochin Bench of the Tribunal has considered an identical issue and restored the matter to the file of the Assessing Officer with following observations :— Mum 2018-M/s Group M Media (India) Pvt. Ltd.
'3. We have heard the rival contentions on this issue. We notice that this bench of Tribunal has considered an identical issue in the case of M/s. Kerala Feeds Ltd. (ITA No.179 & 180/Coch/2013) and the Tribunal, vide its order dated 27-09-2013, has set aside this issue to the file of the AO with the following observations:—
We have heard the rival contentions and perused the record. With regard to the claim of Provision for leave encashment, the Ld Counsel placed reliance on the decision of Hon'ble Kerala High Court in the case of Hindustan Latex Ltd. (supra) and also on the decision rendered by Hon'ble Rajasthan High Court in the case of CIT v. Raj. State Bride and Construction Corporation Ltd.(2012) (346 ITR 53). We notice that the Rajasthan High Court, in the above cited case, has considered the claim of deduction of Provision for leave encashment for assessment year 2000-01. However, the provisions of sec. 43B(f) was inserted into the Act by Finance Act,2001 w.e.f. 1.4.2002, which could not have been considered by Hon'ble Rajasthan High Court. Hence, reliance placed by the assessee on the said decision may not be useful for the year under consideration.
We have also carefully gone through the decision rendered by the jurisdictional Kerala High Court in the case of Hindustan Latex Ltd. (supra) and notice that the High Court has allowed the claim of the assessee on two grounds viz.,
(a) The Hon'ble Kerala High Court, in para 5 of its order, has concurred with the view expressed by the Hon'ble Calcutta High Court in the case of Exide Industries Ltd (supra) that Clause (f) of Section 43B is unconstitutional. (b) The decision rendered by the Hon'ble Calcutta High Court has not been challenged before the Supreme Court. (Para 5 and 8). Accordingly, the Hon'ble Kerala High Court, by following the decision rendered by the Hon'ble Supreme Court in the case of Berger Paints Ltd. v. CIT (266 ITR 99), has further held that the Revenue having not challenged the correctness of the law laid down by the Calcutta High Court, it is not open to the Revenue to challenge its correctness in the case of another assessee.
However, we notice that the department has challenged the decision rendered by the Hon'ble Calcutta High Court in the case of Exide Industries Ltd, by filing appeal before Hon'ble Supreme Court and the Hon'ble Apex Court has stayed the judgment of the Hon'ble Calcutta High Court. In fact, the Hon'ble Apex Court has 5 Mum 2018-M/s Group M Media (India) Pvt. Ltd.
passed two interim orders in this regard, which are detailed below:— (a) The first order was passed on 08-09-2008 in the petition for Special Leave to Appeal (Civil) CC 12060/2008 in the case of CIT v. Exide Industries Ltd. (from the judgment and order dated 27-6-2007 in APO No.301/2005 of The High Court of Calcutta). The order reads as under:-
"Upon hearing counsel the Court made the following ORDER Issue notice.
In the meantime, there shall be stay of the impugned judgment, until further orders." (b) The second order was passed on 08-05-2009 in the petition for Special Leave to Appeal (Civil) No(s) 22889/2008 (from the very same judgment of the High Court of Calcutta). The order reads as under:—
Pending hearing and final disposal of the Civil Appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed.
We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns.
Thus, it is noticed that the Hon'ble Apex Court has not only stayed the operation of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd (supra), but also observed that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book. Though the interim orders were passed by the Hon'ble Apex Court in the years 2008/2009, it was not brought to the notice of Hon'ble jurisdictional High Court. We further notice that the Hon'ble Supreme Court has modified the decision rendered in the case of Berger Paints (supra) in its subsequent decision in the case of Gangadharan (304 ITR 61). The operative part of the said decision reads as under:-
"In answering the reference, we hold that merely because in some cases the Revenue has not preferred appeal that does not operate as 6 Mum 2018-M/s Group M Media (India) Pvt. Ltd. a bar for the Revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts.
We also notice that the Calcutta Bench of Tribunal has considered an identical issue in the case of S.R Batliboy & Co. in and the Tribunal, vide its decision dated 13-03-2012, has set aside the matter to the file of the AO with the direction to consider the issue afresh as per the decision of Hon'ble Apex Court in the case of Exide Industries Ltd. (supra). Accordingly, we set aside the orders of Ld CIT(A) on this issue in both the years under consideration and restore them to the file of the AO with the direction to examine the issue afresh in the light of discussions made supra." 4. Consistent with the view taken in the case of Kerala Feeds Ltd. (supra), we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in accordance with the decision rendered by Hon'ble Supreme Court in the case of M/s. Exide Industries Ltd. (supra).' 16. It can be noticed that the Hon'ble Supreme Court has held that the assessee shall pay tax on the disallowance of "Provision for leave encashment" as if sec. 43B(f) is on Statute book. Hence the addition made by the AO is required to be sustained. If the decision of Hon'ble Supreme Court comes in favour of the assessee in future, then the assessee is free to seek amendment of assessment order.” 6. Considering the decision of co-ordinate bench on merit of the case, the grounds of appeal
is restored to the file of Assessing Officer in case the decision of Hon'ble Supreme Court comes in favour of the assessee in future, then the assessee is free to seek amendment of assessment order.
7. In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 27/03/2019.
Sd/- Sd/- N.K. PRADHAN, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER 7 Mum 2018-M/s Group M Media (India) Pvt. Ltd. Mumbai, Date: 27.03.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “G” Bench, ITAT, Mumbai 6. Guard File