2019 (4) TMI 866 - AT - Income Tax

Allowability of taxes and duties u/s43B - being expenses incurred on account of taxes and duties pertaining to earlier year - mercantile system of accounting and has no provision for the expenses - HELD THAT - The Tribunal dismissed the said ground of appeal in assessee s own case 2016 (1) TMI 1407 - ITAT PUNE placing reliance on the decision DCIT Vs. Glaxo Smithkline Consumer Healthcare Ltd 2007 (7) TMI 334 - ITAT CHANDIGARH . It is not disputed by the Revenue that the facts in the assessment year under appeal are identical to assessment years 2006-07 to 2009-10. No contrary decision has been placed before us by the Revenue.- Decided against revenue Disallowance of prior year expenditure - HELD THAT - As decided in own case 2018 (7) TMI 1916 - ITAT PUNE this issue should be remanded to file of AO. AO is directed to examine the details furnished by the assessee regarding the genuineness of expenditure and the reasons for not receiving the bills in time, and not including the expenses in the returns of income for the A.Yrs. 2010-11 and 2011-12, as the case may be. Addition on account of expenditure on free service to customers - HELD THAT - Tribunal in assessee s own case 2016 (1) TMI 1407 - ITAT PUNE wherein the issue was decided in favour of the assessee by further placing reliance on the judgment in the case of Bharat Earth Movers Vs. Commissioner of Income Tax reported 2000 (8) TMI 4 - SUPREME COURT has allowed the claim of assessee. There is no contrary material before us to take a different view. - Decided against revenue. Provision for leave encashment - year of assessment - HELD THAT - A perusal of impugned order shows that the Commissioner of Income Tax (Appeals) has allowed the claim of assessee by following the decision in the case of Bharat Earth Movers Vs. Commissioner of Income Tax 2000 (8) TMI 4 - SUPREME COURT . AR fairly admitted that the relief has already been granted to the assessee in assessment year 2003-04 and while giving effect to the order of Commissioner of Income Tax (Appeals), the Assessing Officer has not granted relief to the assessee. AR has also furnished the copy of order giving effect to the order of CIT (Appeals) u/s. 250 dated 06-02-2017. A perusal of same reveals that the Assessing Officer has not given the benefit of provision for leave encashment in the assessment year 2001-02 as the relief has already been allowed in assessment year 2003-04. CIT(Appeals) in the impugned order has erred in granting relief to the assessee in assessment year under appeal without ascertaining the fact that the relief with respect to deduction has already been allowed to the assessee in assessment year 2003-04.

Issues Involved:
1. Disallowance of expenses incurred on taxes and duties not pertaining to the year under consideration.
2. Disallowance of prior year expenditure.
3. Disallowance of expenditure on free service to customers.
4. Allowance of provision for leave encashment.

Analysis:

Issue 1: Disallowance of expenses incurred on taxes and duties not pertaining to the year under consideration
The Revenue challenged the deletion of disallowance of expenses amounting to ?6,21,500, arguing that the assessee did not make provisions for these expenses in the Profit & Loss Account. The Tribunal noted that a similar issue had been decided in favor of the assessee in previous assessment years. Relying on past decisions, including a Special Bench decision, the Tribunal dismissed the Revenue's appeal, stating that the facts were identical to previous years, and no contrary evidence was presented.

Issue 2: Disallowance of prior year expenditure
The Revenue contested the deletion of disallowance of prior year expenditure amounting to ?1,52,98,935. The Tribunal referred to similar cases for assessment years 2010-11 and 2011-12, where the issue was remanded back to the Assessing Officer for further examination. Considering the identical nature of the issue, the Tribunal decided to remand this issue back to the Assessing Officer for fresh adjudication, following the directions given in previous cases.

Issue 3: Disallowance of expenditure on free service to customers
The Revenue challenged the deletion of disallowance of ?4,95,495 made on account of expenditure on free service to customers. The Tribunal, after reviewing past decisions and the judgment of the Supreme Court, upheld the assessee's claim, as there was no contradictory material presented by the Revenue. The Tribunal dismissed the Revenue's appeal based on the precedent set in the assessee's own case.

Issue 4: Allowance of provision for leave encashment
The Revenue disputed the allowance of ?1,01,51,654 for leave encashment, arguing that the relief had already been granted to the assessee in a previous assessment year. The Tribunal found that the Assessing Officer had not granted the relief in line with the previous order. Therefore, the Tribunal reversed the findings of the Commissioner of Income Tax (Appeals) and allowed the Revenue's appeal on this issue.

In conclusion, the Tribunal partly allowed the Revenue's appeal concerning the provision for leave encashment, while dismissing the other grounds raised by the Revenue.

This detailed analysis provides a comprehensive overview of the judgment, addressing each issue raised in the appeal and the Tribunal's decision on each matter.

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