2021 (12) TMI 1435 - AT - Income Tax

Addition on account of consumption debtors - HELD THAT - This Tribunal in the 2019 (4) TMI 204 - ITAT DELHI for Assessment Years 2008 09 and 2009 10 has considered a similar quarrel on identical set of facts and has decided the issue in favour of the assessee. Disallowance u/s 14A - HELD THAT - The undisputed fact is that the assessee has earned exempt dividend income of Rs.18 521/ only. But when the assessee filed return of income the decision of the Hon ble Delhi High Court 2015 (3) TMI 155 - DELHI HIGH COURT was not available with the assessee. The Hon ble High Court has restricted the disallowance to the extent of exempt income. Similar view was taken in the case of Caraf Builders and Construction 2018 (12) TMI 410 - DELHI HIGH COURT . Since now we have the binding decision of the Hon ble Jurisdictional High Court of Delhi we direct the Assessing Officer to restrict the disallowance to the extent of exempt income - Ground of the assessee is allowed. Disallowance towards leave and encashment u/s 43B - assessee claimed that claim of leave encashment on accrual basis - HELD THAT - We have carefully perused the orders of this Tribunal in 2021 (12) TMI 441 - ITAT DELHI as relying on Apex Court in case of Exide Industries 2020 (4) TMI 792 - SUPREME COURT held that the claim with regard to leave encashment has to be allowed on cash basis i.e. actual payment basis and not on accrual basis. we direct the Assessing Officer to verify and allow the deduction u/s 43B on actual payment basis as held in the decision of the Hon ble Apex Court. Ground allowed for statistical purposes.

Summary

Issues:
1. Deletion of addition made on account of consumption debtors.
2. Deletion of disallowance u/s 14A and restriction of the same.
3. Disallowance of leave and encashment amount.

Analysis:

Issue 1: Deletion of addition made on account of consumption debtors
The Tribunal dismissed the revenue's appeal regarding the deletion of an addition of Rs. 4,48,09,454 made on account of consumption debtors. The Tribunal noted that similar disputes had been decided in favor of the assessee in previous years. Referring to previous cases, the Tribunal confirmed that the expenditure in question was an incentive to advertisers and not an asset or liability. As a result, the Tribunal upheld the decision in favor of the assessee and dismissed Ground No. 1 of the revenue's appeal.

Issue 2: Deletion of disallowance u/s 14A and restriction of the same
The Tribunal addressed the disallowance of Rs. 33,48,749 under section 14A of the Act and its restriction to Rs. 27,07,333. The Tribunal considered that the assessee had earned only Rs. 18,521 as exempt dividend income. Citing relevant High Court decisions, the Tribunal directed the Assessing Officer to restrict the disallowance to the extent of the exempt income. Consequently, Ground No. 2 of the revenue's appeal was dismissed, while that of the assessee was allowed.

Issue 3: Disallowance of leave and encashment amount
The Tribunal discussed the disallowance of Rs. 37,81,531 towards leave and encashment. The Assessing Officer had disallowed this amount based on section 43B(f) of the Act. The assessee relied on a judgment from the Hon'ble Calcutta High Court, but the Assessing Officer made the disallowance due to a Supreme Court stay order. The Tribunal referred to a previous decision in the assessee's case and directed the Assessing Officer to verify and allow the deduction on an actual payment basis. Therefore, the Tribunal partly allowed the assessee's appeal for statistical purposes.

In conclusion, the Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal for statistical purposes. The decision was pronounced on 03.12.2021.