2021 (12) TMI 105 - HC - Income Tax

Disallowance u/s 43B - provision for leave encashment written back - tribunal upholding the order of the Commissioner of Income Tax (Appeals) in deleting the disallowances - HELD THAT - The tribunal had re-appreciated the factual position and examined the consistent practice followed by the assessee in obtaining valuation report for ascertaining the incremental leave encashment liability and after taking note of the entire facts, came to the conclusion that the final statements drawn by the assessee are in compliance with the statutory requirements, such as, the Companies Act and the computation of the total income has been done in accordance with the Act - tribunal rightly noted that the liability was contingent in nature and has not crystallised into actual liability and will not be allowed as deduction while computing the total income. Thus the tribunal after re-examining the facts upheld the finding of the CIT(A). Thus, we find that no substantial question of law arising therefrom. Disallowance on account of foreign exchange fluctuation - ITAT deleted the addition - HELD THAT - Tribunal perused the facts, the profit and loss accounts of the assessee and upheld the finding rendered by the tribunal by taking note of the decision of the Hon'ble Supreme Court in Commissioner of Income Tax, Delhi vs. Woodward Governor India (P). Ltd. 2009 (4) TMI 4 - SUPREME COURT . Thus, there is no error in the finding rendered by the tribunal. Characterization of income - sale of factory land at Guindy, Chennai - capital gain OR business profit - HELD THAT - On this issue, the tribunal after noting the finding rendered by the assessing officer, as to how the CIT(A) reversed the same, on its part, re-examined the factual position and elaborately considered the matter, took note of the decision of the Hon'ble Supreme Court in CIT vs. G. Venkataswami Naidu 1958 (11) TMI 5 - SUPREME COURT wherein held that the question whether gain made out of purchase and sale of the land, is an accretion or capital profit which may depend on particular facts and circumstances. After noting the said decision, the tribunal on facts, held that the view taken by the CIT(A) was fully justified. Thus, we find that there is no error in the manner in which the tribunal has approached the matter on all the aforementioned issues and we find that there is no question of law much less substantial questions of law arising for consideration in this appeal.

Summary

Issues involved:
1. Disallowances under Section 43B of Income Tax Act
2. Disallowances of obsolete stocks, expenses for shifting Chennai Plant, and upfront fees
3. Treatment of sale of factory land at Guindy, Chennai as capital gains

Analysis:

Issue 1: Disallowances under Section 43B of Income Tax Act
The appeal raised questions regarding disallowances made by the Assessing Officer under Section 43B of the Income Tax Act. The Tribunal re-evaluated the factual position and observed that the liability was contingent and had not crystallized into an actual liability, thus not eligible for deduction while computing total income. The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) after considering the consistent practices followed by the assessee and statutory requirements. The Court concluded that no substantial question of law arose from this issue.

Issue 2: Disallowances of obsolete stocks, expenses for shifting Chennai Plant, and upfront fees
The Tribunal examined three issues together: disallowance of obsolete stock written off, expenses for shifting the Chennai Plant, and upfront fees paid to ICICI Bank. After detailed discussions and analysis of facts, the Tribunal affirmed the views taken by the Commissioner of Income Tax (Appeals). The Court found no question of law, let alone substantial question of law, arising for consideration on these issues.

Issue 3: Treatment of sale of factory land at Guindy, Chennai as capital gains
The final issue concerned the treatment of the sale of factory land at Guindy, Chennai as capital gains instead of business profit. The Tribunal reviewed the factual position, considered the decision of the Supreme Court, and found the view taken by the Commissioner of Income Tax (Appeals) to be justified. The Court concluded that there was no error in the Tribunal's approach to this issue and no substantial questions of law arose for consideration. Consequently, the appeal was dismissed along with the stay petition.

In summary, the High Court of Calcutta upheld the Tribunal's findings on various issues related to disallowances under the Income Tax Act, treatment of expenses, and the characterization of gains, finding no substantial questions of law in the appeal.