Loading judgment…
Facts
The assessee filed an appeal against the order of the CIT(A) who had deleted an addition of Rs. 41,44,047/- made by the AO for disallowance of provision for leave encashment under Section 43B. The CIT(A) relied on the judgment of the Kolkata High Court in the case of Exide Industries.
Held
The Tribunal noted that the Hon'ble Supreme Court has reversed the decision of the Kolkata High Court in the case of UOI vs. Exide Industries Ltd., upholding the constitutionality of Section 43B. Following the Supreme Court's decision and the co-ordinate bench's order, the appeal of the revenue was allowed.
Key Issues
Whether the disallowance of provision for leave encashment under Section 43B was justified, especially in light of the Supreme Court's decision in Exide Industries.
Sections Cited
43B, 115JB, 250
AI-generated summary — verify with the full judgment below
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Appellant by : Shri Ajit Shah Respondent by : Shri Paresh Deshpande Date of Hearing 09.10.2024 Date of Pronouncement 30.10.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Kolkata-16/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 18.03.2016 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2011-12.
The assessee has raised following grounds of appeal:
1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 41,44,047/- u/s 43B on the issue of disallowance for provision for leave encashment u/s 115JB relying upon the judgment of jurisdictional High Court in the case of Exide Industries vs. UOI A.Y. 2011-12 M/s. Bates India Pvt. Ltd. 292 ITR 470 (SC) when it is noticed that for Α.Υ. 2007-08, the Hon'ble ITAT has set aside the case of the assessee as the judgment of Hon'ble High Court of Calcutta in the case of Exide Industries vs- UOI (referred above) has been stayed by the Hon'ble Supreme Court on same issue.”
3. The brief facts of the case are that disallowance u/s 43B was made by the AO in respect of Provision for leave encashment amounting to Rs. 41,44,047/- vide order dated 26.03.2014. The Ld. CIT(A) vide order dated 18.03.2016 allowed the appeal of the assessee on this issue relying upon the judgement of the Hon’ble Kolkata High Court in the case of Exide Industries v/s UOI. The revenue is in appeal before us against the decision of the Ld. CIT(A).
We have heard the rival submissions. The Ld. DR has pointed out that the decision of the Hon’ble Kolkata High Court in the Exide Industries (supra) has been subsequently reversed by the Hon’ble Supreme Court. As such the order of the AO deserves to be upheld. It has also been clarified by the Ld. DR that since the constitutional validity of the section was challenged, therefore, this case falls under one of the exceptions provided in the CBDT circular relating to low tax effect. In this regard, a copy of the order of the co-ordinate bench in the assessee’s appeal for the same AY 2011-12 has been placed before us. On perusal of the order, it is seen that the issue relating to disallowance of provisions for leave of encashment u/s 43B as well as adding the same u/s 115JB of the Act has already been decided by the co-ordinate bench vide order dated 01.07.2022 in A.Y. 2011-12 M/s. Bates India Pvt. Ltd. ITA No. 1046/Kol/2016. Relevant portion of the order of the co-ordinate bench is reproduced below:
“4. Coming to the ground no. 3 which is against the action of the Ld. CIT(A) disallowing Provision for Leave encashment u/s 43B of the Act as well as adding the same u/s 115JB of the Act. We note that this issue is no longer res-integra after the decision of the Hon'ble Supreme Court in the case of UOI Vs. Excide Industries Ltd. [Civil Appeal No.3545/2009 dated 24.04.2020.] We note that the Hon'ble Supreme Court has upheld the constitutionality of Section 43B of the Act in Excide Industries (supra) and thereby reversing the action of Hon'ble Calcutta High Court. Therefore, this ground of the assessee stands dismissed.”
Respectfully following the order of the co-ordinate bench as well as in the light of the decision of the Hon’ble Supreme Court, the appeal of the revenue is allowed. Thus, the disallowance of provision for leave encashment u/s 43B of the Act is upheld with the observation that the same is to be allowed in the year of actual payment.
In the result, the appeal of the revenue is allowed. Order pronounced in the open court on 30.10.2024.