2019 (1) TMI 1206 - AT - Income Tax

Disallowance of provisions made in the accounts for leave salary payable - Held that - We find an identical issue had come up for consideration before this Tribunal in the case of Muthoot Vehicles and Asset Finance Ltd vs. ACIT 2013 (12) TMI 1662 - ITAT COCHIN as held Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns. We set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in accordance with the decision rendered by Hon ble Supreme Court in the case of M/s Exide Industries Ltd COMMR. OF INCOME TAX & ORS Versus M/s EXIDE INDUSTRIES LTD. & ANR. - 2009 (5) TMI 894 - SUPREME COURT - Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues:
Disallowance of provisions made in the accounts for leave salary payable.

Analysis:
The appeals were against three orders of the CIT(A) for the assessment years 2009-2010, 2010-2011, and 2011-2012, all dated 31.03.2017. The main issue raised was the justification of confirming the disallowance of provisions made in the accounts for leave salary payable. The assessee, a Co-operative Society engaged in banking, had filed returns for the mentioned years, and subsequent assessments were carried out. The Assessing Officer disallowed provisions for leave salary, leading to appeals to the CIT(A), who confirmed the disallowance following a judgment of the jurisdictional High Court. The assessee then appealed to the Tribunal.

The Tribunal considered a similar issue in a previous case and referred to judgments by the Kerala High Court and the Rajasthan High Court regarding the deduction of provision for leave encashment. The Tribunal noted that the Supreme Court had stayed a judgment of the Calcutta High Court on the matter. Citing various legal precedents and interim orders, the Tribunal decided to set aside the CIT(A)'s orders and remit the issue to the Assessing Officer for fresh examination in line with the decisions of the higher courts.

Ultimately, the Tribunal allowed the appeals filed by the assessee for statistical purposes, remitting the issue back to the Assessing Officer for reconsideration. The orders were pronounced on January 22, 2019, in favor of the assessee.