Asstt.C.I.T Circle-2, Nagpur V. M/s Manganese Ore (I) Ltd, Nagpur

ITA 45/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1717 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: HIMESH DEMBLE
• Keywords: Business expenditure
• Section: 43B; 263

Judgement Text

1 ITA NO.45/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.45/NAG/2013 ASSESS MENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX, MANGANESE ORE (INDIA) LTD., CIRCLE-2, NAGPUR. V/S. 1A, MOIL BHAVAN, KATOL ROAD, NAG PUR. PAN AAACM8952A. APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI HIMESH DEMBLE. DATE OF HEARING : 09-07-2015 DATE OF PRONOUNCEMENT : 21 ST AUGUST, 2015 O R D E R PER SHAMIM YAHYA, A.M. . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS)-I, NAGPUR DATED 15-11-2012 AND PERTAIN S TO ASSESSMENT YEAR 2005- 06. THE GROUND RAISED IS AS UNDER : WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE TRAN SFER OF FUND OF ` .4,24,60,970/- TO LIC IN LIEU OF UN-AVAILED LEAVE I S NOT ACTUALLY PAID TO THE EMPLOYEES AS PER SEC. 43B(F) OF THE I.T. ACT, 1961 AND HENCE PATENTLY DISALLOWABLE. 2 ITA NO.45/NAG/2013 2. IN THIS CASE THE ASSESSEE COMPANY MADE PAYMENT O F ` .4,24,60,970/- TO THE LIC AS PREMIUM TO INSURE ITSELF AGAINST ANY LIABILI TY AGAINST UNAVAILED LEAVE TO LIC. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GR OUND THAT THE SAID SUM IS ACTUALLY NOT PAID TO THE EMPLOYEES AS PER PROVISION S OF SECTION 43BC(F) OF THE I.T. ACT. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) OBS ERVED THAT THE AMOUNT CLAIMED AS DEDUCTION IS THE AMOUNT ACTUALLY PAID BY THE ASSESSEE TO THE LIC. THIS IS IN THE NATURE OF CONSTRUCTIVE PAYMENT TO THE EMPLOY EES. THE CIT(APPEALS) OBSERVED THAT IDENTICAL ISSUE WAS CONSIDERED BY HON BLE KERALA HIGH COURT IN THE CASE OF HINDUSTAN LATEX LTD. 209 TAXMAN 42. ACCORD INGLY, FINDING THAT THE RATIO OF THE ABOVE DECISION IS SQUARELY APPLICABLE, LEAR NED CIT(APPEALS) ALLOWED THE ASSESSEES CLAIM. 4. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL B EFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE AS TO HOW THE SAID DECISION RELIED UPON BY THE LEARNED CIT(APPEALS) IS NOT APPLICABLE ON THE FACTS OF THE CASE. LEARNED COUNSEL OF THE ASSESSEE IN THIS REGARD HAS SUMMARIZED HIS ARGU MENTS AS UNDER : A) CLAIM IS MADE FOR THE INSURANCE PREMIUM PAID, THE SAME IS NOT A PROVISION FOR THE FUTURE LIABILITY BUT A PAYMENT F OR THE ASCERTAINED LIABILITY. B) ONCE THE ASSESSEE HAS PAID THE PREMIA, IT INCUR S NO LIABILITY TOWARDS LEAVE ENCASHMENT. THE LIABILITY IS SOLELY ON INSURER. C) THE PREMIA PAID IS A BUSINESS EXPENDITURE INCUR RED FOR THE BUSINESS PURPOSE & ALLOWABLE AS DEDUCTION U/S 37. I) (2012) CIT V/S. HINDUSTAN LATEX LTD. (KER HC). 3 ITA NO.45/NAG/2013 II) (2014) CIT V/S. NAINITAL BANK LTD. (UTTARAKHA ND HC) TAX HC) 8 TAX CORP (DT) 56471. III) (2015) DCIT V/S. ANDHRA PRADESH HANDICRAFTS DEVELOPMENT CORPORATION LTD. ITA NO. 915 & 916/HYD/2014. IV) (2014) DCIT V/S. ANDHRA BANK ITA NO. 167, 168 & 169/HYD/2014 V) (2012) ACIT V/S. THE NAINITAL BANK LTD. ITA N O. 3606/DEL/2011 C) ALTERNATIVELY, SEC. 43B WAS INTRODUCED TO DISS UADE TAX PAYERS FROM CLAIMING DEDUCTION ON THE BASIS OF PROVISION FOR D ISCHARGING STATUTORY LIABILITIES, WITHOUT ACTUALLY DISCHARGING THEM. LE AVE ENCASHMENT IS NOT A STATUTORY LIABILITY AND PROVISION ITSELF IS ALLOWA BLE AS BUSINESS EXPENDITURE. I) (2000) BHARAT EARTH MOVERS V/S. CIT (SC). II) (2007) EXIDE INDUSTRIES LTD. V/S. UNION OF I NDIA (CAL HC). 6. PER CONTRA LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. UPON CAREFUL CONSIDERATION WE FIND THAT THE ASSE SSEE HAD PAID INSURANCE PREMIUM TO THE LIC TO TAKE CARE OF ITS LIABILITY IN FUTURE AGAINST THE LEAVE ENCASHMENT CLAIM OF THE EMPLOYEES. THE INSURANCE PR EMIUM INVOLVED HAS BEEN DULY PAID. THERE IS NO CASE THAT THE SAID PAYMENT IS AGAINST UNASCERTAINED LIABILITY. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE AO'S INVOKING OF THE PROVISIONS OF SECTION 43B(F) IS NOT SUSTAINABLE. TH E ARGUMENTS OF THE LEARNED COUNSEL OF THE ASSESSEE AS MENTIONED ABOVE THAT THE AMOUNT INVOLVED IS THE INSURANCE PREMIUM PAID AND IT IS NOT AN ASCERTAINED LIABILITY IS QUITE COGENT. FURTHER MORE THE CASE LAWS MENTIONED AS ABOVE DO SU PPORT THE CASE OF THE ASSESSEE. 4 ITA NO.45/NAG/2013 WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY HON BLE KERALA HIGH COURT IN THE CASE OF CIT V/S. HINDUSTAN LATEX LTD. 209 TAXMAN 42 . ALTHOUGH THE APPEAL WAS PREFERRED UNDER SECTION 263 OF THE I.T. ACT, THE HO NBLE HIGH COURT HAS DULY CONSIDERED THE PROVISIONS OF SECTION 43B(F) AND HAS EXPOUNDED THAT THE ASSESSEES CLAIM WITH RESPECT TO PAYMENT OF PREMIUM TO LIC FOR THE POLICY UNDER GROUP B ENCASHMENT SCHEME WAS ALLOWABLE AS EXPENDITURE INCU RRED FOR THE PURPOSE OF BUSINESS. THE HONBLE HIGH COURT HAS ALSO FOUND THE APPLICATION OF SECTION 43B(F) IN SUCH CASES AS NOT SUSTAINABLE. ACCORDINGLY IN TH E BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF AUGUST, 2015. SD/- SD/- (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 21 ST AUGUST, 2015. 5 ITA NO.45/NAG/2013 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. T RUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR