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Income Tax Appellate Tribunal, ‘A’ BENCH
Before: Shri P.M. Jagtap & Shri S.S.Viswanethra Ravi
This appeal by the Assessee is against the order dated 20-03-2015 passed by the Commissioner of Income Tax, Kolkata-4, Kolkata for the assessment year 2010-11.
The assessee has raised the following grounds of appeal:-
1. That the learned Commissioner of Income Tax has erred in law and in fact by disallowing the leave salary of Rs.3,35,269 on the ground that is a provision though it is an ascertained liabilities.
2. That the learned Commission of Income Tax has erred in law and in fact by disallowing the leave salary M/s. C & E Limited 1 of Rs.3,35,269 though it is an ascertained liabilities based on actuarial valuation. 3. That the learned Commissioner of Income Tax has erred in law and in fact by disallowing the leave salary of Rs.3,35,269 on the ground that it a provision though it is an ascertained liabilities accrued on mercantile system of accounts followed by the appellant.
Brief facts of the case are that the assessee is a company having engaged in the business of manufacturing of leather chemicals and trading of dyes and chemicals. The assessee filed its return of income declaring total income of Rs.1,82,33,290/- on 03-10-2010. Thereafter, the assessee filed revised return of income on 18-06-2011, wherein the claim of credit under MAT was increased. Under scrutiny notices u/s. 143(2) and 142(1) were issued. In response to which, the A/R of the assessee appeared and produced the relevant details before the AO. After considering the submissions of the assessee the AO passed an assessment order u/s. 143(3) of the Act dated 21-03-2013 determining the total income at Rs.2,07,01,302/- for the year under consideration.
Thereafter, the CIT having exercising his jurisdiction u/s. 263 on perusal of the assessment records found from Schedule 21.2(xii) (Details of Provision) appended to the P & L Account that a provision for leave salary to the extent of Rs.3,35,269/- was made found lying unpaid in the balance sheet as on 31-03- 2010. Under show cause notice, the assessee filed written submission in respect of leave salary to the extent of Rs.3,35,269/- stating that it was not a provision. It was an actuarial liability, which will be ascertained as per actuarial valuation of leave encashment as per Revise Indian Accounting M/s. C & E Limited 2 Standar-15. The leave salary is payable to the employee every year and such amount will be paid ascertaining the amount of leave salary. Considering the submissions of the assessee the CIT has set aside the impugned assessment order dated 21-03- 2013 passed u/s. 143(3) of the Act by treating the same as erroneous and prejudicial to the interest of the revenue and directed the AO to add the unpaid leave salary to the total income of the assessee and to pass an order accordingly.
Aggrieved by such order passed by the CIT u/s. 263 now the Assesee is in appeal before us by raising the above mentioned grounds of appeal and further contended that such claim was made in pursuant to the order of the Hon’ble Jurisdictional High Court of Calcutta. But, however, the AO disallowed the same in view of a SLP (Special Leave Petition) (Civil) preferred by the revenue before the Hon’ble Supreme Court against the order/judgment of the Hon’ble Jurisdictional Calcutta High Court, which was still pending for disposal of the same. Finally the ld.AR has sought to remand the issue to the file of the AO in view of order dated 8-5-2009.
The Ld. DR concedes that the order/judgment of the Hon’ble Supreme is binding on the respondent-revenue. He also sought to remand the issue to the file of the AO.
Heard rival submissions and perused the material evidence available on record. We find that the respondent revenue had preferred SLP (Special Leave Petition) (Civil) petition before the Hon’ble Supreme Court against the judgment of the Hon’ble Jurisdictional Calcutta High Court. The Hon’ble Apex Court in SLP proceedings in CC 12060/2008 dated 8.9.2008 had held as under:-
“The petition was called on for hearing today. Upon hearing counsel the court made the following Order.
M/s. C & E Limited 3
Issue Notice. In the meantime, there shall be stay of the impugned judgement, until further orders.” Later the Hon’ble Supreme Court in CC 22889 / 2008 dated 8.5.2009 had held as under:- “The petition was called on for hearing today. Upon hearing counsel the court made the following Order Delay condoned. Leave granted. 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.”
In view of the above, we remit the issue to the file of the AO to decide the same taking into consideration the outcome of the main case in SLP (civil) 22889/2008 of the Hon’ble Supreme Court. Therefore, the grounds raised by the assessee are allowed for statistical purpose.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order Pronounced in the Open Court on 16th September 2016.