2011 (8) TMI 1345 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of scheme expenses.
2. Deletion of disallowance on account of leave encashment.

Summary:

Issue 1: Deletion of disallowance of scheme expenses of Rs. 8,32,75,381/-
The assessee company, engaged in asset management for Tata Mutual Fund, claimed scheme-related expenses totaling Rs. 8,32,75,381/- under marketing, advertisement, brokerage, and incentives. The Assessing Officer disallowed these expenses, stating that the department had not accepted the Tribunal's decisions cited by the assessee. On appeal, the CIT(A) deleted the disallowance, noting that no reasons were provided by the Assessing Officer, similar expenses were allowed in previous years, and the assessee provided detailed justification. The Tribunal upheld the CIT(A)'s decision, referencing consistent Tribunal rulings that such expenses are allowable u/s 37(1) of the Act, as they are incurred under a contractual obligation for mutual fund promotion.

Issue 2: Deletion of disallowance of Rs. 4,06,140/- on account of leave encashment
The assessee claimed a deduction for leave encashment of Rs. 4,06,140/- via a letter, which was disallowed by the Assessing Officer for not being claimed in the original or revised return, citing the Supreme Court decision in Goetze (India) Ltd. On appeal, the CIT(A) allowed the deduction, emphasizing its legal admissibility u/s 43B, the CBDT Circular advising against exploiting assessee's ignorance, and the equity principle since the assessee had offered additional income of Rs. 5.25 crores. The Tribunal, referencing multiple decisions and CBDT Circulars, held that the legal claim should be allowed, and remanded the matter to the Assessing Officer for fresh consideration, ensuring the assessee is given a reasonable opportunity to be heard.

Conclusion:
The Tribunal upheld the CIT(A)'s deletion of the scheme expenses disallowance and remanded the leave encashment issue to the Assessing Officer for reconsideration, thus partly allowing the Revenue's appeal for statistical purposes.