2023 (8) TMI 1251 - AT - Income Tax

Disallowance u/s 14A - on finding that no exempt income has been earned, ld. CIT (A) deleted the addition as relying on case of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT HELD THAT - We find that the issue is squarely covered in favour of the assessee by the aforesaid decisions referred to by the ld. CIT (A). Hence, we affirm the order of ld. CIT (A) on this issue. Deduction for provision of post-retirement medical benefits - HELD THAT - As the appellant's claim of deduction towards provision for post-retirement medical benefits in respect of its serving and retired employees is albeit a provision in its books of account and not incurred during the relevant PY, yet this provision is based upon the actuarial certificate as prescribed in the relevant Accounting Standard (AS 15) of ICAI, required to be followed mandatorily in accordance with the accrual system of accounting as prescribed by the Companies Act. Accordingly, in view of the above as well as in due deference to the decision of Bharat Earth Movers 2000 (8) TMI 4 - SUPREME COURT . the disallowance made on this issue in the impugned order is deleted correctly. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves cross appeals by the Revenue and assessee against the order of the ld. CIT (Appeals)-9, New Delhi dated 19.09.2019 pertaining to the assessment year 2016-17.

Assessee's Appeal:
The assessee raised grounds challenging the disallowance of provision for leave salary and the admissibility of a claim for deduction of Rs. 130.95 crore. The ITAT held that the issue of deduction was to be examined by the Assessing Officer as the claim was not made before the AO or considered by the CIT(A), and thus, the issue was restored to the file of the AO for fresh adjudication.

Revenue's Appeal:
The Revenue appealed against the deletion of an addition made under section 14A of the Income-tax Act, 1961 and the disallowance of provision for post-retirement medical benefits. The ITAT upheld the decision of the CIT(A) in deleting the addition under section 14A based on precedents of the Hon'ble Delhi High Court. Regarding the provision for post-retirement medical benefits, the ITAT affirmed the CIT(A)'s decision to allow the deduction based on the mandatory nature of the provision in the company's books of accounts and the actuarial valuation, in line with the decision of the Hon'ble Supreme Court in Bharat Earth Movers vs. CIT.

The judgment pronounced on August 23, 2022, partly allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal.