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2022 (2) TMI 1036 - HC - Income TaxDeduction of liability on account of the provision of leave encashment which has not fallen due within the financial year 1995-1996 corresponding to AY 1996-1997 - deduction of Voluntary Retirement Scheme (VRS) payments which is payable in future years and not crystallized expenditure of this year is in the nature of provision to meet the future liability - HELD THAT - Tribunal rightly took note of the decision of the Hon ble Supreme Court in Metal Box Company of India Ltd. Vs. Workmen 1968 (8) TMI 53 - SUPREME COURT which was followed by the Hon ble Supreme Court in Bharat Earth Movers 2000 (8) TMI 4 - SUPREME COURT . Therefore, we find there is no error in the order passed by the Tribunal. Hence, question Nos. 1 and 2 are decided against the Revenue. Short term or long term capital gain - whether Consideration received on sale proceeds of assessee s chemical undertaking is not liable to tax as short term capital gain under Section 50 of the Income Tax Act or as long term capital gain? - HELD THAT - As in assessee s own case in 2021 (12) TMI 143 - CALCUTTA HIGH COURT we have dismissed the Revenue s appeal and decided the question in favour of the respondent/assessee. Thus, following the said decision, the substantial question No. 3 is also answered against the Revenue.
Issues:
1. Deduction of liability on account of provision of leave encashment 2. Deduction of Voluntary Retirement Scheme (VRS) payments 3. Tax liability on sale proceeds of chemical undertaking Analysis: Issue 1: Deduction of liability on account of provision of leave encashment The Revenue appealed against the order of the Income Tax Appellate Tribunal regarding the deduction of liability on account of the provision of leave encashment for the assessment year 1996-97. The Tribunal referred to the decisions of the Hon'ble Supreme Court in Metal Box Company of India Ltd. Vs. Workmen and Bharat Earth Movers Vs. CIT, stating that the deduction was permissible. The High Court upheld the Tribunal's decision, finding no error in the order. Therefore, the first substantial question of law was decided against the Revenue. Issue 2: Deduction of Voluntary Retirement Scheme (VRS) payments Similarly, the Revenue challenged the allowance of deduction for Voluntary Retirement Scheme (VRS) payments, arguing that it was a future liability and not crystallized expenditure of the year. The High Court, following previous decisions, dismissed the Revenue's appeal, stating that the deduction was justified as a provision to meet the future liability. Hence, the second substantial question of law was also decided against the Revenue. Issue 3: Tax liability on sale proceeds of chemical undertaking Regarding the consideration received on the sale proceeds of the assessee's chemical undertaking, the Revenue contended that it should be liable to tax either as short term or long term capital gain under the Income Tax Act. However, the High Court referred to a previous decision in the assessee's own case and ruled in favor of the respondent/assessee. Consequently, the third substantial question of law was answered against the Revenue. As a result, the appeal filed by the Revenue was dismissed, and all three substantial questions of law were decided against the Revenue. The stay application was also dismissed accordingly.
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