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Issues involved: Appeal against disallowance of provision for EL encashment u/s 43B(f) of the Income-tax Act, 1961.
Summary: The appeal by the Revenue challenged the order of the Commissioner of Income-tax(Appeals)-II Hyderabad regarding the disallowance of provision for EL encashment u/s 43B(f) for the assessment year 2007-08. The Revenue contended that the Assessing Officer's disallowance should have been upheld as the provision was not actually paid before the due date for filing the return. The Revenue also argued that the matter was not finalized as the Supreme Court had admitted a Special Leave Petition against a Kolkata High Court decision related to the issue. The Tribunal found that the issue was previously decided in favor of the assessee in a prior order dated 19th November, 2012, based on an earlier decision for the assessment year 2005-06. The Tribunal highlighted that under section 43B(f), leave encashment should be deductible only when actually paid by the employer to the employees. The Tribunal emphasized that leave encashment is not a statutory or contingent liability but a provision for an employee's entitlement earned during a specific financial year. The Tribunal concluded that the consistent view taken in the assessee's previous cases supported upholding the CIT(A)'s order for the current year. Therefore, the Tribunal dismissed the Revenue's appeal, upholding the decision of the CIT(A) regarding the disallowance of provision for EL encashment u/s 43B(f) for the assessment year 2007-08. Order pronounced in the court on 22.01.2013.
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