Dy.CIT, Circle-1(1), Hyderabad v. M/s. AP Seeds Development Corpn Ltd.,, Hyderabad

ITA 1512/HYD/2013 | 2010-2011
Pronouncement Date: 31-07-2014 | Result: Dismissed

Appeal Details

RSA Number 151222514 RSA 2013
Bench Hyderabad
Appeal Number ITA 1512/HYD/2013
Duration Of Justice 8 month(s) 12 day(s)
Appellant Dy.CIT, Circle-1(1), Hyderabad
Respondent M/s. AP Seeds Development Corpn Ltd.,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-07-2014
Date Of Final Hearing 17-07-2014
Next Hearing Date 17-07-2014
Assessment Year 2010-2011
Appeal Filed On 18-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA.NO.1512/HYD/2013 ASSESSMENT YEAR 2010-11 DCIT CIRCLE 1(1) HYDERABAD. VS. M/S. AP SEEDS DEVELOPMENT CORPORATION LTD. HYDERABAD. PAN AABCA-6530-F (APPELLANT) (RESPONDENT) FOR REVENUE MR. SOLGY JOSE T. KOTTARAM FOR ASSESSEE MR. K. SATYANARAYANA DATE OF HEARING 17.07.2014 DATE OF PRONOUNCEMENT 31.07.2014 ORDER PER B. RAMAKOTAIAH A.M. THIS IS REVENUE APPEAL AGAINST THE ORDERS OF LD. CIT(A)-II HYDERABAD DATED 16.09.2013. THE ISSUE IN APPEAL IS WITH REFERENCE TO DISALLOWANCE MADE UNDER SECTION 4 3B(F) ON ACCOUNT OF LEAVE ENCASHMENT CLAIM OF RS.2 11 77 970 /-. 2. ASSESSEE IS A STATE GOVERNMENT UNDERTAKING ENGAGED IN THE BUSINESS OF PROCURING AND SUPPLY OF SEEDS TO FARMERS. IT FILED RETURN OF INCOME ON 04.10.2010 DE CLARING INCOME OF RS.6 06 61 170/-. WHILE MAKING THE ASSESS MENT A.O. DISALLOWED AN AMOUNT OF RS.2 11 77 970/- DEBIT ED TO P & L ACCOUNT TOWARDS PROVISION FOR E.L. ENCASHMENT. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT WAS ACCR UED LIABILITY AND THEREFORE THE SAME WAS CLAIMED AS DE DUCTION. 2 ITA.NO.1512/HYD/2013 M/S. A.P. SEEDS DEVELOPMENT CORPN. LTD. HYDERABAD. A.O. WAS OF THE VIEW THAT THE AMOUNT WAS COVERED BY THE PROVISIONS OF SECTION 43B(F) AND THEREFORE BEING A PROVISION MADE FOR LEAVE ENCASHMENT THE SAME WAS NOT ALLOWAB LE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) AND LD. CIT(A) FOLLOWING THE DECISION OF THE HONBL E KOLKATA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES AND ANOT HER VS. UNION OF INDIA 292 ITR 470 ALLOWED ASSESSEES CONTE NTION. IN DOING SO LD. CIT(A) RELIED ON THE COORDINATE BENCH DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2007-08 AN D 2008- 09 IN ITA.NO.1530/HYD/2001-02 DATED 22.01.2013 AND ITA. NO. 1624/HYD/2011 DATED 19.11.2012. REVENUE IS AGGR IEVED ON THE ISSUE AND RAISED THE GROUND THAT THE HONBLE SUPREME COURT HAS ADMITTED THE SLP FILED AGAINST THE HONBL E KOLKATA HIGH COURT DECISION IN THE CASE OF EXIDE INDUSTRIES AND ANOTHER (SUPRA) AND THE AMOUNT SHOULD HAVE BEEN DIS ALLOWED AS THE MATTER HAS NOT REACHED FINALITY. 4. HAVING CONSIDERED THE RIVAL ARGUMENTS WE ARE O F THE OPINION THAT THERE IS NO NEED TO DISTURB THE OR DER OF THE LD. CIT(A). IN FACT LD. CIT(A) FOLLOWED THE COORDINATE BENCH DECISION IN ASSESSEES OWN CASE FOR AY 2007-08 BY H OLDING AS UNDER : '3. AS ON DATE THE SLP (CL NO. 22889/2008 FILED BY THE GOVERNMENT OF INDIA AGAINST THE KOLKATA HIGH COURT DECISION IN THE CASE OF EXIDE INDUSTRIES AND ANOTHER VS. UNION OF INDIA & OTHERS WAS ADMITTED BY ORDER DATED 08.05.2009 AND IS PENDING. THE HNN'BLE ITAT HYDERABAD HAD DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT FOR THE A.Y. 2007-08 VIDE ORDER IN ITA NO.1530/HYDJ012 DATED 22.0L.2013 AND FOR THE A.Y. 2008-09 IN ITA NO. 1624/ HYD /2011 DATED 19.11.2012 BY HOLDING AS UNDER: 3 ITA.NO.1512/HYD/2013 M/S. A.P. SEEDS DEVELOPMENT CORPN. LTD. HYDERABAD. '5. WE HAVE GONE THROUGH ABOVE JUDGMENT AND IT WAS OBSERVED IN THIS JUDGEMENT THAT THE ORIGINAL SECTI ON 43B IN IT ACT 1961 THE INTENTION OF WHICH WAS TO CURB UNREASONABLE DEDUCTION ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNT WITHOUT DISCHARGING STATUTORY LIABILITY . IT WAS OBSERVED BY THE LEGISLATURE THAT SUCH ENACTMENT W AS NECESSARY AS THERE HAD BEEN TREND TO EVADE STATUTO RY LIABILITY ON ONE HAND AND CLAIM APPROPRIATE BENEFI T 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 T HE INCOME REFERRED TO IN S. 28 OF THAT PREVIOUS YEAR IN WHICH SUM IS ACTUALLY PAID BY THE EMPLOYER TO ITS EMPLOY EES. WHILE INSERTING CLAUSE (F] NO SPECIAL REASONS WERE DISCLOSED. ALTHOUGH SUCH DISCLOSURE WAS NOT MANDAT ORY YET THE SUBJECT AMENDMENT WIDEN THE SCOPE OF THE O RIGINAL SECTION. LEAVE ENCASHMENT IS NEITHER A STATUTORY L IABILITY NOR A CONTINGENT LIABILITY. IT IS PROVISION TO BE MADE FOR THE ENTITLEMENT OF AN EMPLOYEE ACHIEVED IN A PARTICULA R FINANCIAL YEAR. AN EMPLOYEE EARNS CERTAIN AMOUNT B Y NOT TAKING LEAVE WHICH HE OR SHE IS OTHERWISE ENTITLED DURING THE PARTICULAR YEAR. HENCE THE EMPLOYER IS OBLIGE D TO MAKE APPROPRIATE PROVISION FOR THE SAID AMOUNT. ON CE 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 F OR 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 SHOWING IT AS A PROVISIONAL EXPENDITURE IN HIS ACCOUNT. THE LEGISLATURE BY WAY OF AMENDMENT RESTRICT SUCH DEDUCTION IN THE CASE OF L EAVE ENCASHMENT UNLESS IT IS ACTUALLY PAID IN THAT P ARTICULAR FINANCIAL YEAR. THE LEGISLATURE IS FREE TO DO SO ALTER IT DISCLOSES REASONS THERE FOR AND SUCH REASONS ORE NOT INCONSI STENT WITH THE MAIN OBJECT OF THE ENACTMENT. WITHOUT SUCH REASON THE ENACTMENT IS INCONSISTENT WITH THE ORIGINAL PROVISION. THE LEGISLATURE MUST DISCLOSE REASONS WHICH WOULD BE CONSISTENT FOR THE PROVISION OF THE CONSTITUTION AND THE LAWS OF THE LAND AND NOT FOR THE SOLE OBJECT OF NULLIFYING THE JUDG MENT IN THE CASE OF BHARAT EARTH MOVERS VS. CLT (245 ITR 428) (SC). 6. AS DISCUSSED ABOVE SECTION 43B(F) ALREADY STRU CK DOWN BY THE CALCUTTA HIGH COURT IN THE JUDGEMENT CITED SUP RA AND AS 4 ITA.NO.1512/HYD/2013 M/S. A.P. SEEDS DEVELOPMENT CORPN. LTD. HYDERABAD. PER JUDGMENT OF THE SUPREME COURT IN THE CASE OF B HARAT EARTH MOVERS LTD. (SUPRA) THE PROVISIONS MADE ON ACCOUNT OF LEAVE ENCASHMENT SHOULD BE ALLOWED ALTHOUGH THE LIABILIT Y MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE'. 4.1. IN VIEW OF THIS WE DO NOT FIND ANY MERIT IN REVENUE GROUNDS AND ACCORDINGLY APPEAL OF THE REVE NUE IS DISMISSED. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD DATED 31 ST JULY 2014 VBP/- COPY TO 1. DCIT CIRCLE 1(1) 4 TH FLOOR AAYAKAR BHAVAN BASHEERBAGH HYDERABAD. 2. M/S. AP SEEDS DEVELOPMENT CORPORATION LTD. 2 ND FLOOR HACA BHAVAN OPP. PUBLIC GARDEN HYDERABAD. 3. CIT(A)-II HYDERABAD 4. CIT-I HYDERABAD 7. D.R. B BENCH ITAT HYDERABAD.