BATES INDIA PVT LTD,KOLKATA vs. D.C.I.T CIR -8, KOLKATA, KOLKATA

The only issue to be decided in this appeal is as to whether the assessee is entitled for deduction towards leave encashment amounting to Rs.38,07,649/- u/s. 43B(f) of the Act.

The brief facts of this issue are that the assessee has made a provision for leave encashment amounting to Rs. 38, 07,649/- in its P & L account and claimed the same as deduction in its return of income. The ld. AO during the course of assessment proceeding disallowed the same as per provision of section 43B(f) of the Act, wherein the leave encashment could be granted as deduction only on payment basis. This action of the 1 M/s. Bates India Pvt. Limited ld.AO was upheld by the ld.CIT(A) on 1st appeal. Aggrieved, the assessee is in appeal before us on the following grounds :- 1(a). That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the action of Assessing Officer in disallowing provision for leave encashment amounting to Rs. 38,07,649 invoking the provisions of section 43B of the Act. 1(b). That on the facts and in the circumstances of the case, Assessing Officer erred in disallowing the impugned sum disregarding a binding decision of the Hon’ble High Court of jurisdiction.

None appeared on behalf of the revenue. So we have proceeded to dispose off the appeal after hearing the ld.AR and perusing the material available on record.

The ld. AR argued that the issue is covered by the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of Exide Industries Ltd Vs. Union of India reported in (2007) 164 Taxman 9 (Cal)/292 ITR 470(Cal). On further appeal by the revenue before the Hon’ble Supreme Court, the Hon’ble Supreme Court initially had stayed the judgment of the Hon’ble Jurisdictional Calcutta High Court in the case of (referred to supra), but in subsequent proceedings it upheld the constitutional validity of the provision of section and permitted the assesses’ to claim the provision of leave encashment in its return of income as deduction , but directed the assesses’ to pay the taxes on the same as if section 43B(f) is prevailing in the statute.

We have heard the ld.AR and perused the materials available on record. We find that the issue has been dealt by the Hon’ble Jurisdictional Calcutta High Court in the case of assessee’s own (referred to supra), wherein the Hon’ble Calcutta High Court had struck down the constitutional validity as per provisions of section 43B(f) of the Act and placed reliance on the decision of the Hon’ble Apex Court in the case of Bharat Earth Movers Limited reported in 245 ITR 428(SC). We find that the appeal filed by the revenue on this issue, the Hon’ble Supreme Court had initially stayed the operation of the judgment of the Hon’ble Calcutta High Court vide order dated 8-9-2008. But later vide subsequent order dated 8/05/2009 in Appeal (Civil) Nos. 22889/2008 had held as under:-

In the result, the appeal of the assessee is allowed for statistical purpose as stated above.