ACIT, CHENNAI V. Wardex Pharmaceuticals Ltd., CHENNAI

ITA 2147/CHNY/2014

• Counselvise Citation: 214721714 RSA 2014
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: J CHANDRASEKARAN
• Section: 28; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.2146 & 2147/MDS/2014 / ASSESSMENT YEARS : 2007-08 & 2008-09 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE III(3) CHENNAI VS. M/S WARDEX PHA RMACEUTICALS LTD. NO.55, NELSON MANICKAM ROAD AMINJIKARAI CHENNAI 600 029 [PAN AAACW 1036 D ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI J. CHANDRASEKARAN, CA / DATE OF HEARING : 17 - 08 - 2015 ! / DATE OF PRONOUNCEMENT : 11 - 09 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-III, CHENNAI, DATED 22.1.2014 AND PERTAIN TO ASSESSMEN T YEARS 2007-08 AND 2008-09. SINCE COMMON ISSUE ARISES FOR CONSIDE RATION IN BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSE OF BY T HIS COMMON ORDER. ITA NOS.2146 & 2147/14 :- 2 -: 2. SHRI A.V. SREEKANTH, LD. DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED LEA VE LIABILITY TO THE EXTENT OF ` 30,84,000/- FOR ASSESSMENT YEAR 2007-08 AND TO TH E EXTENT OF ` 57,70,000/- FOR ASSESSMENT YEAR 2008-09. ACCORDIN G TO THE LD. DR, LEAVE LIABILITY IS A CONTINGENT LIABILI TY. THE ASSESSEE HAS MADE A MERE PROVISION IN ITS BOOKS OF ACCOUNT. THE ASSESSING OFFICER, BY PLACING RELIANCE ON THE DECISION OF THE MUMBAI B ENCH OF THIS TRIBUNAL IN ITO VS EMCO TRANSFORMERS LTD, MADE THE ADDITION. HOWEVER, THE CIT(A) DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN INDIAN OVERSEAS BANK. ACCORDING TO THE LD. DR, THE LIABILITY IS A CONTINGENT LIABILITY, THEREFORE, IT CANNOT BE ALLOWED. 3. ON THE CONTRARY, SHRI J. CHANDRASEKARAN, LD. REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL IN T HE CASE OF INDIAN OVERSEAS BANK IN I.T.A.NO.99/MDS/2010 DATED 19.3.20 13, PLACED ITS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN BHARA T EARTH MOVERS LTD VS CIT 245 ITR 428, WHEREIN THE APEX COURT FOUND TH AT LIABILITY INCURRED UNDER LEAVE ENCASHMENT SCHEME PROPORTIONAT E WITH THE ENTITLEMENT EARNED BY THE ASSESSEES EMPLOYEES, IS ENTITLED TO DEDUCTION. THE APEX COURT FURTHER FOUND THAT THE LI ABILITY IS NOT A CONTINGENT LIABILITY. THIS TRIBUNAL BY FOLLOWING TH E JUDGMENT OF THE APEX COURT IN BHARAT EARTH MOVERS LTD.(SUPRA) AND T HE JUDGMENT OF ITA NOS.2146 & 2147/14 :- 3 -: THE MADRAS HIGH COURT IN CIT VS PANASONIC HOME APPL IANCES, 323 ITR 344, FOUND THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMI NG THE LEAVE ENCASHMENT LIABILITY. THE CIT(A), BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN INDIAN OVERSEAS BANK (SUPRA)HAS ALLOWED THE CLAIM OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. LE AVE ENCASHMENT LIABILITY WAS SUBJECT MATTER OF ADJUDICATION BEFORE THE APEX COURT IN BHARAT EARTH MOVERS LTD. (SUPRA). THE APEX COURT FOUND THAT THE LEAVE ENCASHMENT LIABILITY IS NOT A CONTINGENT LIAB ILITY. THIS JUDGMENT OF THE APEX COURT WAS FOLLOWED BY THE MADRAS HIGH C OURT IN PANASONIC HOME APPLIANCES (SUPRA). THIS TRIBUNAL IN THE CASE OF INDIAN OVERSEAS BANK (SUPRA), BY FOLLOWING THE JUDGMENT OF THE APEX COURT IN BHARAT EARTH MOVERS LTD. (SUPRA) AND THE JUDGMENT OF MADRA S HIGH COURT IN PANASONIC HOME APPLIANCES (SUPRA), ALLOWED THE CLAI M OF THE ASSESSEE. IN FACT, THE CIT(A) HAS FOLLOWED THE DEC ISION OF THIS TRIBUNAL IN INDIAN OVERSEAS BANK (SUPRA). WE FIND THAT THE PARLIAMENT BY FINANCE ACT, 2001, WITH EFFECT FROM 1.4.2002 INTROD UCED SEC.43B(F) WHICH READS AS FOLLOWS: CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF ITA NOS.2146 & 2147/14 :- 4 -: (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORD ING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN CO MPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON O R BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIO US YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WIT H SUCH RETURN: 5. THE APEX COURT AND THE HIGH COURT HAVE NO OCCASION TO CONSIDER THE PROVISIONS OF SEC. 43B(F) AS INTRODUCE D BY FINANCE ACT, 2001. IN VIEW OF SEC.43B(F)OF THE ACT, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE PROVISION FOR LEAVE ENC ASHMENT CANNOT BE ALLOWED. ACCORDINGLY, THE ORDER OF THE CIT(A) IS S ET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OF SEPTEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 11 TH SEPTEMBER, 2015 RD ITA NOS.2146 & 2147/14 :- 5 -: &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF