2015 (7) TMI 984 - AT - Income Tax

Disallowance on account of provision for leave encashment under section 43B - Held that - It will be proper to dispose of this appeal in the light of the order of the Hon ble Supreme Court in the case of CIT vs. Exide Industries Ltd. (2009 (5) TMI 894 - SUPREME COURT. We therefore dispose of the present appeal with a direction that the assessee will pay the tax as if section 43B(f) is on the statute book, however, till the decision of the Hon ble Supreme Court in the case of CIT vs. Exide Industries Ltd. (supra), the Revenue will not recover the penalty and interest which may accrue till the decision of the appeal by the Hon ble Supreme Court in the case of Exide Industries Ltd. It would be open to the Department to recover the outstanding interest demand in case the Civil Appeal of the Department in the case of Exide Industries Ltd. (supra) is allowed by the Hon ble Supreme Court. Subject to our above observations, the matter is restored to the file of the AO to be adjudicated afresh as per the decision of the Hon ble Supreme Court in the case of Exide Industries Ltd. (supra). - Decided partly in favour of assessee for statistical purposes.

Summary

Issues involved:
Disallowance on account of provision for leave encashment under section 43B of the Income Tax Act.

Analysis:

Issue 1: Disallowance on account of provision for leave encashment under section 43B of the Income Tax Act.

The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the disallowance of provision for leave encashment under section 43B of the Income Tax Act for the assessment year 2010-11. The assessee contended that the provision for leave encashment was a liability of the company and should not be covered under section 43B, citing the decision of the Hon'ble Kolkata High Court in the case of "Exide Industries Ltd." The Assessing Officer (AO) disagreed, stating that the amount remained unpaid, thus falling under section 43B. The CIT(A) upheld the AO's decision. The assessee referred to a Tribunal decision in a similar case and requested restoration to the AO for fresh adjudication based on the pending decision of the Hon'ble Supreme Court in the case of "Exide Industries Ltd."

The Tribunal considered the stay granted by the Hon'ble Supreme Court on the decision of the Hon'ble Kolkata High Court in the case of "Exide Industries Ltd." The Tribunal directed that the assessee should pay tax as if section 43B(f) was applicable, but the Revenue should not recover penalty and interest until the Supreme Court's decision. The matter was restored to the AO for fresh adjudication in line with the Supreme Court's decision in the case of "Exide Industries Ltd." The appeal was partly allowed for statistical purposes.

This detailed analysis of the judgment outlines the legal arguments, Tribunal's considerations, and the final decision regarding the disallowance on account of provision for leave encashment under section 43B of the Income Tax Act for the specified assessment year.