Phoenix Conveyor Belt India Private Ltd., Kolkata V. DCIT, Cir. 11, Kolkata, Kolkata

ITA 136/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1427 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Keywords: Business expenditure
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NOS. 136 & 137/ KOL/2017 ASSESSMENT YEARS : 2009- 10 & 2010-11 PHOENIX CONVEYOR BELT INDIA (P)LTD. -VS.- D.C.I.T., CIRCLE-11, KOLKATA KOLKATA [PAN : AABCP 5595 P] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : NONE FOR THE RESPONDENT : SHRI ARINDAM BHATTACHARJ EE, ADDL. CIT DATE OF HEARING : 27.02.2018. DATE OF PRONOUNCEMENT : 01.03.2018. ORDER PER N.V.VASUDEVAN, JM THESE ARE APPEALS BY THE ASSESSEE AGAINST TWO ORDER S BOTH DATED 25.11..2016 OF C.I.T.(A)-18, KOLKATA RELATING TO A.Y.2009-10 & 20 10-11. 2. THE COMMON ISSUE INVOLVED IN BOTH THESE APPEAL I S AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PROVISION OF LEAVE ENCASHMENT. THE DISP UTED ADDITION FOR A.Y.2009-10 IS A SUM OF RS.1,01,85,975/- AND IN A.Y.2010-11 IS A SUM OF RS.13,44,964/-. 3. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS OF A SUM OF PROVISION FOR LEAV E ENCASHMENT U/S 43B(F) OF THE INCOME TAX ACT, 1961. CLAUSE (F) TO SEC 43B PROVIDE S THAT ANY SUM PAYABLE BY AN EMPLOYER IN LIEU OF LEAVE AT THE CREDIT OF HIS EMPL OYEE SHALL BE ALLOWED ONLY ON ACTUAL PAYMENT AND NOT ON MERE PROVISION. THIS CLAUSE WAS INSERTED BY THE FINANCE ACT, 2001, W.E.F 1/4/2002, I.E., A.Y. 2002-03. 2 ITA NOS.136 & 137/KOL/2017 PHOENIX CONVEYOR BELT INDIA PRIVATE LIMITED A.YR.2009-10 & 2010-11 2 4. IN THE CASE OF EXIDE INDUSTRIES LTD V. UOI (2007 ) 292 ITR 470 (CAL), THE HONBLE CALCUTTA HIGH COURT HELD THAT THE PROVISION FOR LEA VE ENCASHMENT CANNOT BEEN DISALLOWED UNDER SEC 43B(F) OF THE ACT. THE CALCUTT A HIGH COURT AFTER REFERRING TO THE DECISION OF BHARAT EARTH MOVERS V. CIT (2000) 245 I TR 428 (SC) HELD THAT AMENDMENT TO SEC 43B(F) WAS NOT CONSTITUTIONALLY VALID. THE C ALCUTTA HIGH COURT HELD THE PROVISION TO BE ARBITRARY AND VULNERABLE, BECAUSE THERE WAS N O DISCLOSURE OF REASONS FOR THE AMENDMENT. THE HIGH COURT RULED THAT, WHILE THE LEG ISLATURE WAS FREE TO MAKE SUCH AMENDMENTS, REASONS THEREFORE SHOULD BE INFERABLE A ND SUCH REASONS SHOULD BE CONSISTENT WITH THE PROVISIONS OF THE CONSTITUTION AND THE LAWS OF THE LAND. WHEN LEGITIMATE BUSINESS EXPENDITURE IS DENIED WITHOUT R EASON, WHEN REASON WAS AVAILABLE FOR OTHER DISALLOWANCES UNDER SEC 43B, CLAUSE (F) OF SE C 43B IS ARBITRARY AND UNCONSCIONABLE AS THE AMENDMENT IS TO NULLIFY THE SUPREME COURT DE CISION IN THE CASE OF BHARAT EARTH MOVERS V. CIT (SUPRA).THE CALCUTTA HIGH COURT FURTH ER HELD THAT LEAVE ENCASHMENT IS NEITHER A STATUTORY LIABILITY NOR A CONTINGENT LIAB ILITY AND IT IS A PROVISION TO BE MADE FOR THE ENTITLEMENT OF AN EMPLOYEE ACHIEVED IN A PARTIC ULAR FINANCIAL YEAR. TESTING CLAUSE (F) WITH THE OBJECTS SOUGHT TO BE ACHIEVED BY THE INTRO DUCTION OF SEC 43B, IT WAS HELD THAT THE SAME COULD NOT HAVE ANY NEXUS WITH THE OBJECT S OUGHT TO BE ACHIEVED BY THE ORIGINAL ENACTMENT. SEC 43B WAS ORIGINALLY INSERTED TO PLUG EVASION OF STATUTORY LIABILITIES AND THE INTRODUCTION OF CLAUSE (F) WAS FOUND TO BE INCO NSISTENT WITH THE SAID OBJECT. THE JUDGES HELD THAT THE AMENDMENT BROUGHT IN COULD NOT HAVE NULLIFIED THE DICTUM LAID DOWN IN BHARAT EARTH MOVERS CASE (SUPRA). 5. THE DEPARTMENT FILED SLP AGAINST THE DECISION OF THE HONBLE CALCUTTA HIGH COURT AND WHILE ADMITTING THE SAME, T HE HONBLE SUPREME COURT VIDE ITS JUDGMENT DATED 08.09.2008 STAYED THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT UNTIL FURTHER ORDERS. B Y ANOTHER INTERIM ORDER PASSED BY THE HONBLE SUPREME COURT ON 08.05. 2009, WHICH IS AS FOLLOWS: 3 ITA NOS.136 & 137/KOL/2017 PHOENIX CONVEYOR BELT INDIA PRIVATE LIMITED A.YR.2009-10 & 2010-11 3 PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL AP PEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDI NG INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTME NT TO RECOVER THE AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS AL LOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD DU RING 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. 6. THE ASSESSING OFFICER ADDED BACK THE PROVISION F OR LEAVE ENCASHMENT BY INVOKING PROVISIONS OF SEC.43B(F) OF THE ACT. ON APPEAL BY THE ASSESSEE, THE CIT(A) UPHELD THE ORDER OF THE AO. AGGRIEVED BY THE ORDER S OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. NONE APPEARED FOR THE ASSESSEE. HOWEVER WE NOTI CE THAT IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF BIRLA C ORPORATION LTD. IN ITA NO.971/KOL/2012, 942/KOL/2013, 298 & 329/KOL/2013 F OR A.Y.2008-08 AND 2009-10 DATED 25.8.2017. THIS TRIBUNAL ON THE IDENTICAL ISS UE HELD IT COULD BE INFERRED THAT THE HONBLE SUPREME COURT HAD NOT STAYED THE JUDGMENT O F THE CALCUTTA HIGH COURT DURING LEAVE PROCEEDINGS. BUT THE HONBLE SUPREME COURT H AD ONLY PASSED AN INTERIM ORDER ON THE IMPUGNED ISSUE. HENCE THE TRIBUNAL THOUGHT I T FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO T HE FILE OF THE LD AO TO PASS ORDERS BASED ON THE OUTCOME OF THE MAIN APPEAL ON MERITS BY THE HONBLE SUPREME COURT AS STATED SUPRA. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL, WE SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO THE AO TO PASS ORDER BASED ON THE OUTCOME IN THE PROCEEDINGS PENDING BEFORE THE HONBLE SUPREME COUR T IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA). THUS THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 4 ITA NOS.136 & 137/KOL/2017 PHOENIX CONVEYOR BELT INDIA PRIVATE LIMITED A.YR.2009-10 & 2010-11 4 9. IN THE RESULT, THE APPEALS ARE ALLOWED FOR STATI STICAL PURPOSE. ORDER PRONOUNCED IN THE COU RT ON 01.03.2018. SD/- SD/- [WASEEM AHMED] [ N.V.VAS UDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01.03.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. PHOENIX CONVEYOR BELT INDIA PRIVATE LIMITED, IDE AL PLAZA, 4 TH FLOOR, 11/1, SARAT BOSE ROAD, KOLKATA-700020. 2. D.C.I.T., CIRCLE-11, KOLKATA. 3. C.I.T.(A)-18, KOLKATA 4. C.I.T-4, KO LKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES