The Highland Produce Co. Ltd, Alappuzha v. DCIT, Alappuzha

ITA 7/COCH/2010 | 2005-2006
Pronouncement Date: 02-02-2012 | Result: Allowed

Appeal Details

RSA Number 721914 RSA 2010
Assessee PAN AAACT8099H
Bench Cochin
Appeal Number ITA 7/COCH/2010
Duration Of Justice 2 year(s) 26 day(s)
Appellant The Highland Produce Co. Ltd, Alappuzha
Respondent DCIT, Alappuzha
Appeal Type Income Tax Appeal
Pronouncement Date 02-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 02-02-2012
Date Of Final Hearing 17-01-2012
Next Hearing Date 17-01-2012
Assessment Year 2005-2006
Appeal Filed On 07-01-2010
Judgment Text
1 ITA NO.07/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI SANJAY ARO RA (AM) I.T.A. NO. 07/COCH/2010 (ASSESSMENT YEAR 2005-06) THE HIGHLAND PRODUCE CO LTD VS THE DY.C.I.T. CIR .1 W-21/674 BEACH ROAD ALAPPUZHA ALAPPUZHA PAN : AAACT8099H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P VENUGOPAL RESPONDENT BY : SMT. T.R PRASANNAKUMARI DATE OF HEARING : 17-01-2012 DATE OF PRONOUNCEMENT : 02-02-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX(A)-IV KOCHI DATED 29-10-2009 AND PERTAI NS TO ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS. 2 74 000 TOWARDS PROVISION FOR LEAVE ENCASHMENT. 3. SHRI P VENUGOPAL THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE PROVISION FOR LEAVE ENCASHMENT CANNOT BE CONSIDERED TO BE A CONTINGENT LIABILITY IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF BH ARAT EARTH MOVERS LTD VS COMMISSIONER OF INCOME-TAX 245 ITR 428 (SC). THERE FORE ACCORDING TO THE LD.REPRESENTATIVE THE PROVISION MADE FOR LEAVE ENC ASHMENT HAS TO BE ALLOWED AS 2 ITA NO.07/COCH/2010 CLAIMED. REFERRING TO THE JUDGMENT OF THE APEX COU RT IN THE CASE OF APOLLO TYRES LTD VS COMMISSIONER OF INCOME-TAX (2002) 255 ITR 273 THE LD.REPRESENTATIVE SUBMITTED THAT ONCE THE INCOME WAS COMPUTED UNDER SECTION 115JB AN D THE PROFIT & LOSS ACCOUNT WAS CERTIFIED BY THE AUDITOR THE ASSESSING OFFICER CAN NOT GO BEYOND THE ACCOUNTS CERTIFIED BY THE AUDITORS. AT THE BEST ACCORDING TO THE LD.REP RESENTATIVE THE ASSESSING OFFICER CAN SCRUTINIZE THE ACCOUNTS AS TO WHETHER IT IS CERTIFI ED AS REQUIRED BY THE STATUTE. 4. ON THE CONTRARY SMT. T.R. PRASANNAKUMARI THE L D.DR SUBMITTED THAT BOOK PROFIT COMPUTED U/S 115JB HAS TO BE ADJUSTED AS PROVIDED I N SECTION 115JB. PROVISION FOR LEAVE ENCASHMENT IS A CONTINGENT LIABILITY. THEREFORE I T IS TO BE ADDED / INCREASED TO THE PROFIT COMPUTED. ACCORDING TO THE LD.DR EVEN THOU GH A PROVISION WAS MADE THE LIABILITY TO PAY THE LEAVE ENCASHMENT COMES WHEN TH E EMPLOYEES EXERCISE THEIR OPTIONS TO ENCASH THE LEAVE. SO LONG AS THE EMPLOYEES HAVE NOT EXERCISED THEIR OPTION THERE IS NO QUESTION OF ANY PAYMENT TOWARDS LEAVE ENCASHMENT . THEREFORE ACCORDING TO THE LD.DR IT IS ONLY A CONTINGENT LIABILITY. ACCORDIN GLY AS PROVIDED IN SECTION 115JB IT HAS TO BE ADDED TO THE INCOME COMPUTED U/S 115JB OF THE AC T. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY CONTENTION OF THE LD.DR IS THAT PROVISION FOR LEAVE ENCASHMENT IS A CONTINGENT LIABILITY. THIS ISSUE W AS EXAMINED BY THE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS LTD (SUPRA). THE APEX COURT AFTER CONSIDERING THE JUDICIAL PRONOUNCEMENT ON THE SUBJECT FOUND THAT MEETING THE LIABILITY INCURRED BY THE COMPANY UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WIT H ENTITLEMENT EARNED BY EMPLOYEES OF THE COMPANY INCLUSIVE OF OFFICERS AND THE STAFF SUBJECT TO CEILING OF ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE IS ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPT FOR THE ACCOUNTING YEAR DURING WHICH THE PR OVISION IS MADE FOR THE LIABILITY. THE APEX COURT SPECIFICALLY OBSERVED THAT THE LIABILITY IS NOT A CONTINGENT LIABILITY. IN VIEW OF THE JUDGMENT OF THE APEX COURT THE PROVISION MADE FOR LEAVE ENCASHMENT CANNOT BE CONSIDERED TO BE A CONTINGENT LIABILITY. THEREFORE THERE IS NO QUESTION OF ANY ADDITION. 3 ITA NO.07/COCH/2010 BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS LTD (SUPRA) THE ORDERS OF THE LOWER AUTHORI TIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 2 74 000 IS DELETED. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF FEBRUARY 2012. SD/- SD/- (SANJAY ARORA) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 02 ND FEBRUARY 2012 PK/- COPY TO: 1. THE HIGHLAND PRODUCE CO LTD W-21/674 BEACH ROAD ALAPPUZHA 688 012 2. THE DY.CIT CIR.1 ALAPPUZHA 3. THE COMMISSIONER OF INCOME-TAX(A)-IV KOCHI 4. THE COMMISSIONER OF INCOME-TAX KOTTAYAM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH