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2012 (6) TMI 713 - HC - Income TaxValidity of revisionary order passed u/s 263 - alleged erroneous deduction u/s 37 given in respect of premium to LIC for the policy under Group Leave Encashment Scheme - Revenue contended that leave encashment is an allowable deduction u/s 43B(f) only and the same can be availed of only with respect to payments made on that account in the previous year - Held that:- In the instant case it was not a provision for future liability which was claimed as a deduction. The assessee, a Government Company had insured itself against the liabilities that may arise on account of the claims made by the employees towards leave encashment. The assessee being covered by a valid insurance policy and premium being regularly paid, incurs no liability towards leave encashment. The liability; being covered by a valid insurance policy, is solely that of the insurer. Even if Section 43 B(f) stands, in the case of the assessee, where the liability is borne by the insurer, there can be no situation wherein assessee could make a valid claim for deduction u/s 43B(f) since the actual liability is not incurred in any of the years. However, premium paid towards the renewal and continued validity of the insurance policy necessarily becomes business expenditure wholly and exclusively incurred for the business purpose and allowable as a deduction u/s 37. Therefore, order passed u/s 263 is not valid. Also, Revenue having accepted the decision of the High Court in case of Exide Industries Ltd. And another v. Union of India (2007 (6) TMI 175 (HC)) holding Section 43B(f) to be unconstitutional cannot press into service Section 43B(f) - Decided in favor of assessee.
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