9911796707
TMI Blog2012 (9) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee at Rs. 29,40,17,881 and in doing so made the following disallowances : i) Amortisation of premium paid on purchase of Govt. Securities. Rs.4,84,11,629 ii) Actuarial Valaution of privilege leave encashment. Rs.52,35,008 iii) Disallowance u/s.40a(ia) Rs.3,15,202 iv) Disallowance of provision for depreciation Rs.60,000 2.2 The assessee carried the matter in appeal before the learned CIT(A), Hubli who disposed the same by order dt.23.12.2010 allowing the assessee partial relief in respect of the assessee's claim for deduction of the amortization of premium paid on Govt. securities amounting to Rs. 4,84,11,629. The learned CIT(A), however, sustained the disallowances made by the Assessing Officer in respect of privilege leave encashment amounting to Rs.52,35,008. 3. Both the assessee and Revenue are in appeal against the order of the CIT(A), Hubli dt.23.12.2010. We will first take up the assessee's appeal. 4. The grounds of appeal raised by the assessee are as under : " 1. On the facts and in the circumstances of the case, the learned CIT(A) grossly erred in upholding the assessment order regarding disallowance of provision made for leave encashment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to our notice the decision of the Hon'ble High Court of Calcutta in the case of Exide Industries Ltd. & Another Vs. UOI & Others reported in (2007) 292 ITR 470 (Cal) wherein the Court struck down the provisions of section 43B(f) holding it to be arbitrary and unconscionable. The Hon'ble Court, it is submitted, held that provision for leave encashment was not a contingent liability and was liable to be allowed depreciation hors the Hon'ble Apex Court's decision in the case of BEML (supra). In these circumstances, the learned counsel for the assessee prayed that its claim for allowing the deduction on account of provision made by the assessee for privilege leave encashment of Rs. 52,35,008. 6.3 The learned Departmental Representative on his part supported the orders of the authorities below and prayed for the order of the CIT(A) to be confirmed on this issue. 6.3.1 We have heard both parties and have carefully perused and considered the material on record including the judicial decisions cited and placed reliance on. It is a matter of record that the assessee in the relevant period had made a provision for encashment of privilege leave amounting to Rs.52,35,008. We find from a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termed as in furtherance to widen the scope of the original section on the identical objects and reasons as disclosed at the time of enacting the original provision. As we find, the original section was incorporated to plug in deductions claimed by not discharging statutory liabilities. We also find that provision was subsequently made to restrict deductions on account of unpaid loan to the financial institutions. Leave encashment is neither statutory liability nor a contingent liability. It was a provision to be made for the entitlement of an employee achieved in a particular financial year. An employee earns certain amount by not taking leave which he or she is otherwise entitled to in that particular year. Hence, the employer is obliged to make appropriate provision for the said amount. Once the employee retires he or she has to be paid such sum on cumulative basis which the employee earns throughout his or her service career unless he or she avails the leave earned by him or her. That, in our view, could not have any nexus with the original enactment. An employer is entitled to deduction for the expenditure he incurs for running his business which includes payment of salary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be discharged is not certain.... Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. 12. With deepest regard we have for his Lordship, we are unable to agree with his Lordship on this issue. 13. The appeal succeeds and is allowed. Section 43B(f) is struck down being arbitrary, unconscionable and de hors the apex Court decision in the case of Bharat Earth Movers (supra)." 6.3.3 In view of the facts and circumstances of the case as discussed above and in accordance with the ratio and reasoning laid down by the Hon'ble Apex Court in the case of BEML (supra) and the fact that the Hon'ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record and the judicial decisions cited of various benches of the Tribunal in respect of the assessee's claim for deduction on account of expenditure incurred on amortization of premium on purchase of Govt. securities amounting to Rs.4,84,11,629. We find from a perusal of the decision of the co-ordinate bench of the Tribunal in the case of Sir M. Vishveswaraya Co-op. Bank Ltd. (supra) that the Tribunal had occasion to consider a similar issue of amortization of premium on investments exhaustively at paras 4 to 8 thereof after which it held that the assessee was entitled to such deduction. The operative part of the said order at para 8 thereof, is as under: " 08. We have carefully considered the rival submissions and perused the relevant facts and materials on record. We have also considered the findings of the various benches of the Tribunal, as under : (i) Catholic Syrian Bank Ltd v. ACIT - (2010) 38 SOT 553 (Coch) : An identical issue to that of the subject matter under consideration had arisen before the Cochin Bench. After analyzing the issue in depth, the bench has observed that with regard to amortization of premium on purchase of Government securities, it was clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
