TATA SERVICES LTD, MUMBAI V. ACIT 2(3), MUBMAI

ITA 158/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54838 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: BURZIS TARAPOREVALA
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER. ITA NO.158/MUM/09 (ASSESSMENT YEAR : 2004-05) M/S. TATA SERVICES LTD., 24, BOMBAY HOUSE, HOMI MODY STREET, FORT, MUMBAI-400 001 PAN AAACT3991J VS. ASST. COMMISSIONER OF INCOME TAX 2(3), MUMBAI. APPELLANT. RESPONDENT. APPELLANT BY :SHRI BURZIS TARAPOREVALA. RESPONDENT BY : SHRI G.P. TRIVEDI. DATE OF HEARING : 08.08.2011. DATE OF PRONOUNCEMENT : O R D E R PER SHRI R.S. SYAL : THIS APPEAL FILED BY THE ASSESSEE ARI SES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX, DT.17.10. 2008 IN RELATION TO THE ASSESSMENT YEAR 2004-05. 2. THE FOLLOWING TWO EFFECTIVE GROUNDS HAVE BEEN RA ISED IN THIS APPEAL : 1. THE COMMISSIONER OF INCOME TAX (APPEALS) -XXX ERRED IN NOT ADMITTING THE ALTERNATE GROUND RAISED BY THE AP PELLANT BY WHICH IT CONTENDED THAT DISALLOWANCE UNDER SECTION 43B(F) OF THE ITA NO.158/MUM//09 - 2 - INCOME TAX ACT, 1961 BEING THE PROVISION FOR LEAVE ENCASHMENT OF RS.24,71,000 BE DELETED AND THE SAME BE ALLOWED AS AN EXPENDITURE FOR THE PURPOSE OF BUSINESS. 2. THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX ERRED IN REJECTING THE APPELLANTS CONTENTION THAT THE DISAL LOWANCE OF RS.24,71,000 UNDER SECTION 43B(F) BEING THE PROVISI ON FOR LEAVE ENCASHMENT BE DELETED AND THE SAME BE ALLOWED AS AN EXPENDITURE FOR THE PURPOSE OF BUSINESS. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT WHILE FILING THE RETURN OF INCOME, THE ASSESSEE VOLUNTARILY DISALLOWED A SUM OF RS.24, 71,000 UNDER SECTION 43B(F), BEING THE PROVISION FOR LEAVE ENCASHMENT. DURING T HE PENDENCY OF APPEAL BEFORE THE CIT(A), JUDGMENT IN THE CASE OF EXIDE IN DUSTRIES LIMITED AND ANOTHER VS. UNION OF INDIA AND OTHERS (292 ITR 470) (CAL) CAME IN STRIKING DOWN THE PROVISIONS OF SECTION 43B(F). IN THE LIGH T OF SAID JUDGMENT, THE ASSESSEE TOOK ADDITIONAL GROUND BEFORE THE CIT(A) C ONTENDING THAT THE DEDUCTION BE ALLOWED IN RESPECT OF LEAVE ENCASHMENT . THE CIT(A) VIDE PARA 10 OF THE IMPUGNED ORDER REFUSED TO ADMIT THIS ADDITIO NAL GROUND ON THE SCORE THAT THE ASSESSEE HAD VOLUNTARILY DISALLOWED THE SAID SU M UNDER SECTION 43B(F). APART FROM THAT, HE ALSO VENTURED TO DISCUSS THE ME RITS OF THE GROUND AND EVENTUALLY REJECTED THIS ADDITIONAL GROUND. ITA NO.158/MUM//09 - 3 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HON'BLE SUPREME COURT IN THE CASE O F BHARAT EARTH MOVERS LTD. VS. CIT (2000) 245 ITR 428 (SC) HELD THAT LIABILITY INCURRED BY THE ASSESSEE UNDER THE LEAVE ENCASHMENT SCHEME APPLICABLE TO ITS EMPLOYEES PROPORTIONATE TO THE ENTITLEMENT EARNED BY EMPLOYEES SUBJECT TO THE CEILING ON ACCUMULATION, NOT BEING A CONTINGENT LIABILITY, IS DEDUCTIBLE. THE F INANCE ACT, 2001 INSERTED CLAUSE (F) TO SECTION 43B W.E.F. 1.4.2002 PROVIDING THAT ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL NOT BE ALLOWED AS DEDUCTION UNLESS IT IS ACTUALLY P AYABLE. THE INSERTION BY THE FINANCE ACT, 2001 WAS AIMED AT NULLIFYING THE JUDGM ENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LT D. (SUPRA). IN THE LIGHT OF THIS PROVISION WHICH IS APPLICABLE IN THE INSTANT Y EAR, THE ASSESSEE VOLUNTARILY MADE DISALLOWANCE OF RS.24.71 LAKHS UNDER SECTION 4 3B(F). IT IS NOTICED THAT THEREAFTER EXIDE INDUSTRIES LTD. (SUPRA) CHALLENGED THE CONSTITUTIONAL VALIDITY OF SEC. 43B(F) BEFORE THE HON'BLE CALCUTTA HIGH C OURT. BY THE AFORESAID JUDGMENT, THE HON'BLE CALCUTTA HIGH COURT HELD THE AMENDMENT TO BE NOT VALID. THE REVENUE AGITATED THIS JUDGMENT IN EXIDE INDUSTRIES LTD. (SUPRA) BEFORE THE HON'BLE SUPREME COURT . ON 8.9.2008, THE HON'BLE S UPREME COURT PASSED THE FOLLOWING ORDER : IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUG NED ITA NO.158/MUM//09 - 4 - JUDGMENT, UNTIL FURTHER ORDERS. ON 8.5.2009 WHEN THIS PETITION WAS CALLED FOR HEARING, THE HON'BLE SUPREME COURT PASSED THE FOLLO WING ORDER: WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, DURING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTIO N 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED TH AT NO FINAL JUDGMENT HAS BEEN PASSED BY THE HON'BLE SUPREME COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) TILL DATE. IT IS, THEREFORE, VIVID THAT THE JUDG MENT OF HONBLE CALCUTTA HIGH COURT HOLDING THE PROVISIONS OF SECTION 43B(F) AS INVALID HAS BEEN STAYED BY THE HON'BLE SUPREME COURT AND FURTHER IT HAS BEE N HELD THAT DURING THE PENDENCY OF THE CIVIL APPEAL THE ASSESSEE IS REQUIR ED TO PAY TAX AS IF SECTION 43B (F) IS ON THE STATUTE BOOK. 5. THE SUM AND SUBSTANCE OF THE ENTIRE EP ISODE IS THAT SECTION 43B(F) IS A VALID PIECE OF LEGISLATION AS ON DATE. IN SUCH A S ITUATION THERE CANNOT BE ANY QUESTION OF KEEPING THE APPEAL OF THE ASSESSEE PEND ING UNTIL ETERNITY TILL THE JUDGMENT OF THE HON'BLE SUPREME COURT IS FINALLY DE LIVERED. FROM THE ORDER IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) IT IS MANIFEST THAT THE HON'BLE SUPREME COURT HAS ITSELF HELD THAT THAT ASSESSEE IS REQUIRE D TO PAY TAX AS IF SECTION 43B(F) ITA NO.158/MUM//09 - 5 - IS ON THE STATUTE BOOK. IT IS NOT THE CASE OF THE ASSESSEE THAT IT HAS ALSO CHALLENGED THE VALIDITY OF SECTION 43B(F) BEFORE TH E HON'BLE HIGH COURT IN THE INSTANT YEAR AND THE FURTHER THE HONBLE COURT HAS , IN THE MEANTIME, PUT ANY BAR ON THE AUTHORITIES TO KEEP SUCH MATTERS PENDING OR TREAT THIS PROVISION AS IF NOT ON STATUE BOOK. RESPECTFULLY FOLLOWING THE ABO VE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) GRANTING RELIEF TO THE REVENUE AND STAYING THE OPERATION OF THE JUDGMENT O F THE HONBLE CALCUTTA HIGH COURT IN EXIDE INDUSTRIES LTD. (SUPRA) , WE HOLD THAT DISALLOWANCE UNDER SECTION 43B(F) VOLUNTARILY MADE BY THE ASSESSEE IS IN ORDER AND THERE IS NO SCOPE FOR CLAIMING ALLOWANCE IN RESPECT OF SUCH DISALLOWA NCE. 6. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2011. SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUN TANT MEMBER MUMBAI, DT.10-08-2011. *GPR ITA NO.158/MUM//09 - 6 - TRUE COPY COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, MUMBAI. 6. GUARD FILE. BY ORDER DY./ASST.REGISTRAR, ITAT, MUMBAI