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2016 (4) TMI 1138 - AT - Income TaxDisallowance of provision made for leave encashment - Held that:- In view of the amended provisions of section 43B of the Act, wherein clause (f) has been inserted, we find no merit in the claim of assessee in this regard to the provision for leave encashment, which was made by the assessee as on close of the year, since it was following mercantile system of accounting. However, the said amount has not been paid to the employees before due date of filing the return of income and hence, the same is to be disallowed under section 43B(f) of the Act. - Decided against assessee Disallowance made out of sales promotion expenses - Held that:- The nature of expenses have not been gone into by any authorities below and where the same are to be allowed as sales promotion expenses, the first aspect to be kept in mind is that the CIT(A) has allowed the expenditure on gift articles totaling ₹ 41,96,741/-, against which the Revenue is not in appeal, hence, out of total expenditure of ₹ 1,37,93,473/-, expenditure of ₹ 41,96,741/- stands allowed. For adjudication of issue, the expenditure of ₹ 1,37,93,473/- has to be considered and after excluding the expenditure of ₹ 41,96,741/-, the balance is ₹ 95,96,732/-, which is the expenditure to be shared between the assessee and its sister concern SIIL. In view of the admission of learned Authorized Representative for the assessee, we remit this issue back to the file of Assessing Officer to verify the claim of assessee vis-à-vis its allowability in the hands of assessee and / or its sister concern after verifying the nature of expenditure incurred by the assessee to the tune of ₹ 95,96,732/-. The Assessing Officer shall determine the expenditure allowable in the hands of assessee and the amount apportioned to the sister concern SIIL after affording reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes. Claim of deduction under section 80IA(2) - interpretation of ‘initial assessment year’ - Held that:- Initial assessment year would mean the first year opted by the assessee for claiming deduction under section 80IA of the Act. The CBDT has also directed the Assessing Officers to allow deduction under section 80IA of the Act in accordance with this clarification. It has also directed that pending litigation on allowability of deduction under section 80IA of the Act shall not be pursued to the extent it relates to interpreting ‘initial assessment year’ as mentioned in sub-section 5 of section 80IA of the Act. The copy of Circular is placed on record. Further, similar issue of claim of initial assessment year arose before the Tribunal in assessee’s own case relating to assessment years 2004-05 to 2006-07 Tribunal accepted the plea of assessee and held that the assessee has the option in choosing the initial assessment year i.e. 2004-05 in the instant case and held that only the losses of the year beginning from initial assessment year were to be brought forward and not the losses of earlier year which had already been set off against the other income of assessee. It was further held by the Tribunal that the revenue could not notionally bring forward any loss of earlier years which had already been set off against any other income of the assessee and set off the same against the current income of the eligible business. Applying the said decision in assessee’s own case and in view of the Circular of CBDT (supra), we uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue.
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