DCIT, Circle-1(1), Hyderabad V. M/s.Andhra Pradesh State Seeds Development Corporation Ltd, Hyderabad

ITA 1624/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66439 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: J J VARUN
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1624/HYD/2011 ASSESSMENT YEAR 2008-09 DEPUTY CIT CIRCLE-1(1) HYDERABAD VS. M/S. ANDHRA PRADESH STATE SEEDS DEVELOPMENT CORPORATION LTD. HYDERABAD PAN: AABCA6530F APPELLANT RESPONDENT APPELLANT BY: SRI T. DIWAKAR PRASAD RESPONDENT BY: SRI J.J. VARUN DATE OF HEARING: 19.11.2012 DATE OF PRONOUNCEMENT: 19.11.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, HYDERABAD DATED 11.7.2011 FOR ASSESSMENT YEAR 2008-09. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSESSING OFFICER RIGHTLY DISALLOWED PROVI SION FOR EL ENCASHMENT OF RS. 40,79,506 U/S. 43B(F) OF T HE INCOME-TAX ACT, 1961 AS IT WAS NOT ACTUALLY PAID BE FORE THE DUE DATE FOR FILING THE RETURN OF INCOME. 3. THE LEARNED CIT(A) OUGHT TO HAVE NOTICED THAT THE HONBLE SUPREME COURT OF INDIA ADMITTED SLP FILED AGAINST KOLKATA HIGH COURT DECISION IN THE CASE OF EXIDE INDUSTRIES & OTHERS VS. UNION OF INDIA AND OTHERS (2 92 ITR 470) AND HENCE SHOULD HAVE UPHELD THE DISALLOWANCE U/S. 43B(F) OF THE INCOME-TAX ACT, 196 1. 4. THE LEARNED CIT(A) OUGHT TO HAVE NOTICED THAT THE MATTER HAS NOT REACHED FINALITY AND HENCE SHOULD HA VE KEPT THE ISSUE PENDING. ITA NO. 1624/HYD/2011 M/S. APSSDC LTD. ================= 2 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT THIS ISSUE CAME BEFORE THIS TRIBUNAL FOR CONSIDERATION IN ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 IN ITA NO. 1442/HYD/09. TH E TRIBUNAL VIDE ORDER DATED 7.8.2009 HELD AS FOLLOWS: '5. WE HAVE GONE THROUGH ABOVE JUDGMENT AND IT WAS OBSERVED IN THIS JUDGEMENT THAT THE ORIGINAL SECTIO N 43B IN IT ACT 1961, THE INTENTION OF WHICH WAS TO CURB UNREASONABLE DEDUCTION ON THE BASIS OF MERCANTILE S YSTEM OF ACCOUNT WITHOUT DISCHARGING STATUTORY LIABILITY. IT WAS OBSERVED BY THE LEGISLATURE, THAT SUCH ENACTMENT WA S NECESSARY AS THERE HAD BEEN TREND TO EVADE STATUTOR Y LIABILITY ON ONE HAND AND CLAIM APPROPRIATE BENEFIT UNDER THE ACT ON THE OTHER. UNDER CLAUSE (F) OF 43B, ANY SUM PAYABLE BY THE EMPLOYER TO HIS EMPLOYEES AS LEAVE ENCASHMENT SHALL BE DEDUCTIBLE ONLY IN COMPUTING TH E INCOME REFERRED TO IN S. 28 OF THAT PREVIOUS YEAR I N WHICH SUM IS ACTUALLY PAID BY THE EMPLOYER TO ITS EMPLOYE ES. WHILE INSERTING CLAUSE (F) NO SPECIAL REASONS WERE DISCLOSED. ALTHOUGH SUCH DISCLOSURE WAS NOT MANDATORY YET THE SUBJECT AMENDMENT WIDEN THE SCOPE OF THE ORIGINAL S ECTION. LEAVE ENCASHMENT IS NEITHER A STATUTORY LIABILITY N OR A CONTINGENT LIABILITY. IT IS PROVISION TO BE MADE FO R 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 DURING THE PARTICULAR YEAR. HENCE, THE EMPLOYER IS OBLIGED TO MAKE APPROPRIATE PROVISION FOR THE SAID AMOUNT. ONCE THE EMPLOYEE RETIRES HE/SHE HAS TO BE PAID SUCH SUM ON CUMULATIVE BASIS WITH THE EMPLOYEE EARNS THROUGHOUT HIS/HER SERVICE CAREER UNLESS HE/SHE AVAILS 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 SU CH AMOUNT BY SHOWING IT AS A PROVISIONAL EXPENDITURE IN HIS A CCOUNT. THE LEGISLATURE BY WAY OF AMENDMENT RESTRICT SUCH DEDUCTION IN THE CASE OF LEAVE ENCASHMENT UNLESS IT IS ACTUALLY PAID IN THAT PARTICULAR FINANCIAL YEAR. TH E LEGISLATURE IS FREE TO DO SO AFTER IT DISCLOSES REA SONS THERE FOR AND SUCH REASONS ARE NOT INCONSISTENT WITH THE MAIN OBJECT OF THE ENACTMENT. WITHOUT SUCH REASON THE ENACTMENT IS INCONSISTENT WITH THE ORIGINAL PROVISION. THE LEGISL ATURE MUST DISCLOSE REASONS WHICH WOULD BE CONSISTENT FOR THE PROVISION OF THE CONSTITUTION AND THE LAWS OF THE L AND AND ITA NO. 1624/HYD/2011 M/S. APSSDC LTD. ================= 3 NOT FOR THE SOLE OBJECT OF NULLIFYING THE JUDGMENT IN THE CASE OF BHARAT 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 S UPRA AND AS PER JUDGMENT OF THE SUPREME COURT IN THE CAS E OF BHARAT EARTH MOVERS LTD. (SUPRA), THE PROVISIONS MA DE ON ACCOUNT OF LEAVE ENCASHMENT SHOULD BE ALLOWED ALTHO UGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHAR GED AT A FUTURE DATE'. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME I S UPHELD. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 19 TH NOVEMBER, 2012 COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE - 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. M/S. ANDHRA PRADESH STATE SEEDS DEVELOPMENT CORPORA TION LTD., 2 ND FLOOR, HACA BHAVAN, OPP. PUBLIC GARDENS, HYDERABAD . 3. THE CIT(A) - II, HYDERABAD. 4. THE CIT - I, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD. TPRAO