2011 (9) TMI 1105 - AT - Income Tax

Summary

Issues involved: Disallowance u/s 14A r.w. r. 8D, Disallowance u/s 43B(f) for leave encashment, Addition u/s 2(24)(x) r.w.s. 36(1)(va) for PF/ESIC contribution.

Issue 1 - Disallowance u/s 14A r.w. r. 8D:
The appellant contested the disallowance of &8377; 6,70,976 u/s 14A r.w. r. 8D. The Counsel argued that Rule 8D is not retrospective, citing the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. The DR acknowledged the non-applicability of Rule 8D for the assessment year 2006-2007. The Tribunal directed the Assessing Officer to recompute the disallowable amount u/s 14A.

Issue 2 - Disallowance u/s 43B(f) for leave encashment:
A sum of &8377; 3,49,606 was disallowed u/s 43B for unpaid leave encashment. The CIT(A) rejected the plea based on the decision of the Kolkata High Court, which was stayed by the Apex Court. Both parties agreed that as per section 43B(f), the amount unpaid for leave encashment should be disallowed. The Tribunal upheld the CIT(A)'s decision and rejected the appellant's ground.

Issue 3 - Addition u/s 2(24)(x) r.w.s. 36(1)(va) for PF/ESIC contribution:
The Assessing Officer added back the PF/ESIC contribution as the payment was made beyond the prescribed date. The CIT(A) confirmed this action. However, the appellant relied on a decision of the ITAT, Mumbai, Special Bench to argue that payments made before the closure of the previous year are not covered u/s 2(24)(x). The Tribunal accepted this plea and set aside the addition of &8377; 59,325. Consequently, the appeal by the assessee-company was partly allowed.

Separate Judgement: None.