2013 (9) TMI 1239 - AT - Income Tax

Summary

Issues Involved: Deletion of disallowance of (1) excise duty paid in advance, (2) provision for leave encashment, and (3) payment in foreign currency.

Issue 1: Deletion of Disallowance of Excise Duty Paid in Advance

Assessing Officer (AO) made an addition of Rs. 3,74,78,548/- on account of excise duty paid by the assessee in advance, stating that the Income Tax Act does not warrant allowing expenses of subsequent years unless debited to the profit and loss account of the year in which it has been claimed. The CIT(A) directed the AO to allow the claim of the assessee, referencing section 43B and decisions in CIT Vs. Modipon Ltd. (334 ITR 106) and DCIT Vs. Glaxo Smithkline Consumer Healthcare Ltd. (299 ITR (AT) 001). The Tribunal upheld the CIT(A)'s order, citing the Jurisdictional High Court's decision in CIT Vs. Maruti Suzuki India Ltd. (2012-TIOL-1038-HC-DEL-IT) which held that the deduction should be allowed in the year it is adjusted against liability to pay excise duty on manufactured goods.

Issue 2: Deletion of Disallowance of Provision for Leave Encashment

AO disallowed Rs. 2,05,85,815/- on account of provision for leave encashment, stating it had not been actually paid till the due date for filing the return and section 43B(f) mandates allowing such expenses only on an actual payment basis. CIT(A) allowed the claim, referencing the Calcutta High Court decision in Exide Industries Ltd. (299 ITR 470) which struck down section 43B(f) as unconstitutional. The Tribunal remitted the matter back to the AO for re-deciding the issue afresh, considering the precedents and giving due opportunity to the assessee.

Issue 3: Deletion of Disallowance of Payment in Foreign Currency

AO disallowed Rs. 22,69,523/- on account of payment in foreign currency due to the assessee's failure to provide concrete details/bills/vouchers/justification. CIT(A) allowed the claim, stating that payments made to employees for TA/DA and to the Government of India were not covered by section 40(a) and no TDS was required as per section 196. The Tribunal set aside the orders of the authorities below and restored the matter back to the AO for re-examination, directing the assessee to furnish all necessary details and documents to justify the claim.

General Ground: Ground No.4 was general in nature and required no adjudication.

Appeal for Assessment Year 2009-10: The issues were the same as for the assessment year 2008-09, and the Tribunal's decisions for that year applied here as well.

Conclusion: The appeal of the department was partly accepted for statistical purposes.

Order pronounced in open court on 30.09.2013.