2019 (9) TMI 1182 - HC - Income Tax

TDS u/s 194A - non-deduction of tax at source on interest payable to Prasar Bharti by the appellant assessee - HELD THAT - Admit for consideration of the common questions framed. Disallowance towards leave encashment expenditure - HELD THAT -As the decision of the Hon'ble Calcutta High Court EXIDE INDUSTRIES LIMITED 2007 (6) TMI 175 - CALCUTTA HIGH COURT based on which the assessee has claimed deduction of the leave encashment expenditure has been stayed by the Hon'ble Supreme Court. As the provisions of section 43B (f) of the income tax act is very clear. Therefore, we upheld the disallowances of leave encashment expenditure under section 43B of the income tax act. no question of law arises in respect of the said disallowance. So far as the plea of the appellant that the Tribunal has not considered the fact that the appellant has not claimed the said allowance even in the assessment years when the leave encashment amounts were actually paid i.e. during the years 2012-13 to 2018-19, we find that the appellant did not raise any such plea before the Tribunal. In any event, even if such a plea were to be raised, there is little that the Tribunal could have done about it since it was for the appellant to claim the said allowance in the years in which actually the leave encashment amounts were paid to the employees - no question of law arises in relation to the plea founded upon Section 43B(f).

Summary

Issues Involved:
1. Interpretation of disallowance under section 40(a)(ia) of the Income Tax Act on interest payable.
2. Disallowance of leave encashment expenditure for assessment years 2009-10 and 2010-11.

Analysis:
1. The High Court addressed the common questions of law arising in three appeals regarding the disallowance made under section 40(a)(ia) of the Income Tax Act. The issue was whether the Income Tax Appellate Tribunal correctly upheld the disallowance concerning non-deduction of tax at source on interest payable to Prasar Bharti by the appellant assessee. The appellant argued that the provisions were made in the books of accounts for unforeseen future liability, and thus, there was no obligation to deduct TDS under the Income Tax Act. The Court considered the submissions made by both parties and admitted the questions for consideration.

2. The Court delved into the disallowance of leave encashment expenditure for the assessment years 2009-10 and 2010-11. The Tribunal upheld the disallowance based on the judgment of the Calcutta High Court, which was subsequently stayed by the Supreme Court. The appellant contended that the final verdict of the Supreme Court was awaited, and the leave encashment amount was paid during subsequent assessment years. The Court noted that the legal effect of the stay order prevented reliance on the Calcutta High Court judgment. The appellant's claim of leave encashment on an accrual basis conflicted with Section 43B(f) of the Income Tax Act. The Court observed that the appellant did not raise the plea regarding the actual payment of leave encashment amounts in subsequent years before the Tribunal. Consequently, the Court found no legal question arising from the disallowance under Section 43B(f) and admitted the common questions framed for consideration.

3. In conclusion, the High Court analyzed the issues related to the disallowance under section 40(a)(ia) and the leave encashment expenditure. The Court considered the arguments presented by the appellant and the department, addressing the legal implications of the judgments cited and the applicability of relevant provisions of the Income Tax Act. The Court's detailed analysis provided clarity on the interpretation of the law in these matters, ensuring a comprehensive understanding of the legal reasoning behind the judgment.