2015 (12) TMI 1819 - AT - Income Tax

Disallowance of provision for leave encashment payable to its employees claimed as deduction - HELD THAT - In the light of the decision of the Hyderabad Bench of the Tribunal in the case of Suryavanshi Spinning Mills 2015 (9) TMI 1670 - ITAT HYDERABAD we set aside the order of the CIT(A) on this issue and direct the Assessing Officer to reconsider the matter in the light of the directions of the Tribunal in para-3 thereof extracted hereinabove. This ground of the assessee is accordingly allowed for statistical purposes. Disallowance referable to employees share of Provident Fund and ESI paid beyond the due date under the respective statutes - HELD THAT - As decided in VBC INDUSTRIES LTD. AND OTHERS VERSUS DY. COMMISSIONER OF INCOME-TAX CIRCLE 3 (3) HYD. AND OTHERS 2015 (6) TMI 1 - ITAT HYDERABAD we set aside the impugned order of the CIT(A) on this issue and set aside the matter to the file of the Assessing Officer for reconsideration of the disallowance under S.43B in the light of the above decision of the Tribunal in the case of VBC Industries noted above and with a direction that insofar as the payments made before the due date for the filing of the return u/s 139(1) no disallowance may be made under S.43B. AO is accordingly directed to verify the actual date of remittance of the employees contribution to PF land ESI and redecide this issue accordingly after giving reasonable opportunity of hearing to the assessee. This ground of the assessee is also treated as allowed for statistical purposes.

Summary

Issues:

1. Disallowance of provision for leave encashment.
2. Disallowance of employees' share of PF and ESI under section 36(1)(va).

Issue 1: Disallowance of provision for leave encashment

The appeal challenged the order of the Commissioner of Income-tax (Appeals) regarding the disallowance of provision for leave encashment. The appellant contended that the liability to pay leave encashment is a trading and ascertained liability, not a contingent liability, citing a decision of the Hon'ble Calcutta High Court. The appellant argued that the disallowance was erroneous and contrary to law. The Tribunal referred to a previous case involving a similar issue and directed the Assessing Officer to reconsider the matter in light of the Tribunal's directions, allowing the appellant's ground for statistical purposes.

Issue 2: Disallowance of employees' share of PF and ESI under section 36(1)(va)

The appellant contested the disallowance of employees' share of PF and ESI under section 36(1)(va) on the grounds that the payments were made beyond the due dates under the respective Acts. The appellant relied on a decision of the Hon'ble Apex Court and a previous case before the ITAT 'A' Bench, Hyderabad, to support their argument that payments made before the due date for filing the return should be allowable as deductions. The Tribunal acknowledged the consistent favorable view of the Hyderabad Benches of the Tribunal on this matter and directed the Assessing Officer to reexamine the disallowance under section 43B, emphasizing that no disallowance should be made if payments were made before the due date for filing the return. The Assessing Officer was instructed to verify the actual date of remittance and decide the issue accordingly, granting the appellant's ground for statistical purposes.

In conclusion, the Appellate Tribunal ITAT Hyderabad allowed the appeal for statistical purposes on both issues related to the disallowance of provision for leave encashment and the employees' share of PF and ESI, directing the Assessing Officer to reconsider the matters in accordance with the Tribunal's directions and relevant legal precedents.