Dy. Commissioner of Income Tax, Circle-1(1), Hyderabad V. M/s. AP STate Seeds Development Corpn. Ltd., Hyderabad

ITA 1459/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74675 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SATYANARAYANA
• Section: 43B; 260A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1459/HYD/2013 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), HYDERABAD. VS. M/S AP STATE SEEDS DEVELOPMENT CORPORATION LTD., PAN AABCA6539F APPELLANT RESPONDENT REVENUE BY: SRI JEEVAN LAL LAVIDIYA ASSESSEE BY: SRI K. SATYANARAYANA DATE OF HEARING: 04/03/2014 DATE OF PRONOUNCEMENT: 04/03/2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE CIT(A)-II, HYDERABAD DATED 16/08/2013 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE REVENUE HAS RAI SED THE FOLLOWING SUBSTANTIAL GROUNDS: 2 )THE CIT(A) OUGHT TO HAVE APPRECIATED THE ADDITION OF THE ASSESSING OFFICER WITH REGARD TO THE DISALLOWANCE O F EL ENCASHMENT OF RS. 1,02,98,507/- U/S 43B(F) OF THE I T ACT, 1961 AS IT WAS ACTUALLY PAID BEFORE THE DUE DATE FOR FIL ING THE RETURN OF INCOME. 3) THE LD. CIT(A) OUGHT TO HAVE NOTICED THAT THE HO NBLE SUPREME COURT OF INDIA ADMITTED SLP FILE AGAINST KO LKATA HIGH COURT DECISION IN THE CASE OF EXIDE INDUSTRIES AND ANOTHER 292 ITR 470 AND HENCE SHOULD HAVE UPHELD THE DISALLOWAN CE U/S 43B(F) OF THE IT ACT. 4) THE LD. CIT(A) OUGHT TO HAVE NOTICED THAT THE MA TTER HAS NOT REACHED FINALITY AND HENCE SHOULD HAVE KEPT THE ISS UE PENDING. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE DEBITED AN AMOUNT OF RS. 1,02,98,507/- TO THE P&L A/C UNDER TH E HEAD EARNED 2 ITA NO.1459/H/2013 M/S AP STATE SEEDS DEVELOPMENT CORPN.LTD. LEAVE ENCASHMENT. DURING THE ASSESSMENT PROCEEDING S, IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT THIS WAS AN ASCERTAINED LIABILITY AND THE SAME WAS NOT PAID. THE ASSESSEE F URTHER BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE FOR THE AYS 2005-06 AND 2006 -07 BY THE HONBLE ITAT, HYDERABAD. HOWEVER, THE ASSESSING OFF ICER DISALLOWED THE EARNED LEAVE ENCASHMENT OF RS. 1,02,98,507/- ON THE FOLLOWING GROUNDS: A) THE HONBLE ITAT ALLOWED THE ASSESSEES APPEAL F OLLOWING CALCUTTA HIGH COURT DECISION IN THE CASE OF EXIDE I NDUSTRIES AND ANOTHER VS. UNION OF INDIA AND OTHERS, 292 ITR 470. HOWEVER, THE APEX COURT ADMITTED SLP AGAINST THE SAID DECISI ON; B) THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF HONBLE ITAT AND THE APPEAL U/S 260A IS PENDING BEFORE THE HONBLE HIGH COURT OF ANDHRA PRADESH. 3. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES CASE FOR THE AYS. 2005-06 AND 2006-07 VI DE ORDER DATED 07/08/2009 AND THE DECISION OF HIS PREDECESSOR FOR AY 2008-09 VIDE ORDER DATED 11/07/2011, ALLOWED THE APPEAL OF THE A SSESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN ASSESSEE S OWN CASE FOR AY 2008-09 IN ITA NO. 1624/HYD/2011 (REVENUE APPEAL ) DATED 19/11/2012 WHEREIN THE TRIBUNAL DISMISSED THE APPEA L OF THE REVENUE FOLLOWING THE DECISION OF THE ANOTHER COORDINATE BE NCH DECISION ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO. 1442/ HYD/09. THE RELEVANT FINDINGS OF THE COORDINATE BENCH IN AY 200 5-06 ARE AS FOLLOWS: '5. WE HAVE GONE THROUGH ABOVE JUDGMENT AND IT WAS OBSERVED IN THIS JUDGEMENT THAT THE ORIGINAL SECTION 43B IN IT ACT 1961, 3 ITA NO.1459/H/2013 M/S AP STATE SEEDS DEVELOPMENT CORPN.LTD. THE INTENTION OF WHICH WAS TO CURB UNREASONABLE DED UCTION ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNT WITHOUT D ISCHARGING STATUTORY LIABILITY. IT WAS OBSERVED BY THE LEGISLA TURE, THAT SUCH ENACTMENT WAS NECESSARY AS THERE HAD BEEN TREND TO EVADE STATUTORY LIABILITY ON ONE HAND AND CLAIM APPROPRIA TE BENEFIT UNDER THE ACT ON THE OTHER. UNDER CLAUSE (F) OF 43B , ANY SUM PAYABLE BY THE EMPLOYER TO HIS EMPLOYEES AS LEAVE E NCASHMENT SHALL BE DEDUCTIBLE ONLY IN COMPUTING THE INCOME RE FERRED TO IN S. 28 OF THAT PREVIOUS YEAR IN WHICH SUM IS ACTUALL Y PAID BY THE EMPLOYER TO ITS EMPLOYEES. WHILE INSERTING CLAUSE ( F) NO SPECIAL REASONS WERE DISCLOSED. ALTHOUGH SUCH DISCLOSURE WA S NOT MANDATORY YET THE SUBJECT AMENDMENT WIDEN THE SCOPE OF THE ORIGINAL SECTION. LEAVE ENCASHMENT IS NEITHER A STA TUTORY LIABILITY NOR A CONTINGENT LIABILITY. IT IS PROVISI ON TO BE MADE FOR THE ENTITLEMENT OF AN EMPLOYEE ACHIEVED IN A PARTIC ULAR FINANCIAL YEAR. AN EMPLOYEE EARNS CERTAIN AMOUNT BY NOT TAKIN G LEAVE WHICH HE OR SHE IS OTHERWISE ENTITLED DURING THE P ARTICULAR YEAR. HENCE, THE EMPLOYER IS OBLIGED TO MAKE APPROPRIATE PROVISION FOR THE SAID AMOUNT. ONCE THE EMPLOYEE RETIRES HE/S HE HAS TO BE PAID SUCH SUM ON CUMULATIVE BASIS WITH THE EMPLO YEE EARNS THROUGHOUT HIS/HER SERVICE CAREER UNLESS HE/SHE AVA ILS OF THE LEAVE EARNED BY HIM OR HER. THAT DOES NOT HAVE ANY NEXUS WITH THE ORIGINAL ENACTMENT. AN EMPLOYER IS ENTITLED FOR DEDUCTION FOR THE EXPENDITURE HE INCURS FOR RUNNING HIS BUSINESS WHICH INCLUDES PAYMENT OF SALARY AND OTHER PERQUISITES TO HIS EMPLOYEES. HENCE, IT IS TRADING LIABILITY. AS SUCH HE IS OTHERWISE ENTITLED TO DEDUCTION OF SUCH AMOUNT BY S HOWING IT AS A PROVISIONAL EXPENDITURE IN HIS ACCOUNT. THE LEGIS LATURE BY WAY OF AMENDMENT RESTRICT SUCH DEDUCTION IN THE CAS E OF LEAVE ENCASHMENT UNLESS IT IS ACTUALLY PAID IN THAT PARTI CULAR FINANCIAL YEAR. THE LEGISLATURE IS FREE TO DO SO AFTER IT DIS CLOSES REASONS THERE FOR AND SUCH REASONS ARE NOT INCONSISTENT WIT H THE MAIN OBJECT OF THE ENACTMENT. WITHOUT SUCH REASON THE EN ACTMENT IS INCONSISTENT WITH THE ORIGINAL PROVISION. THE LEGIS LATURE MUST DISCLOSE REASONS WHICH WOULD BE CONSISTENT FOR THE PROVISION OF THE CONSTITUTION AND THE LAWS OF THE LAND AND NOT F OR THE SOLE OBJECT OF NULLIFYING THE JUDGMENT IN THE CASE OF BH ARAT EARTH MOVERS VS. CIT (245 ITR 428) (SC). 6. AS DISCUSSED ABOVE, SECTION 43B(F) ALREADY STRUC K DOWN BY THE CALCUTTA HIGH COURT IN THE JUDGEMENT CITED SUPR A AND AS PER JUDGMENT OF THE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LTD. (SUPRA), THE PROVISIONS MADE ON ACCOUNT OF LEAVE ENCASHMENT SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE'. 5.1 AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL T O THAT OF AY 2005- 06, RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH IN THAT 4 ITA NO.1459/H/2013 M/S AP STATE SEEDS DEVELOPMENT CORPN.LTD. YEAR, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE ASSESSEES CLAIM AND, THEREFORE, THE ORDER OF T HE CIT(A) IS HEREBY UPHELD AND DISMISS THE GROUNDS RAISED BY THE REVENU E IN THIS REGARD. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 04/03/2014. KV COPY FORWARDED TO: 1. DCIT, CIRCLE 1(1), HYDERABAD 2. M/S AP STATE SEEDS DEVELOPMENT CORPORATION LTD., 2 ND FLOOR, HACE BHAVAN, OPP. TO PUBLIC GARDENS, HYDERABAD. 3. CIT(A)-II, HYDERABAD 4. CIT-I, HYDERABAD. 5. THE DR, ITAT, HYDERABAD