TMI Blog2005 (6) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Income-tax Appellate Tribunal, Ahmedabad Bench "B", under section 256(1) of the Income-tax Act, 1961 ("the Act") at the instance of the Commissioner of Income-tax, Baroda, for the opinion of this court: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of leave salary paid to the retiring employees did not constitute salary as defined in Explanation 2 to section 40A(5) for the purpose of limiting the expenditure under that section? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of statutory liability of sales tax, ESI contribution, P.F. contribution, etc., paid after the close of the previous year but before the due date for filing of return of income under section 139(1) of the Act was an allowable deduction in the assessment year 1984-85 when the proviso to section 43B was inserted w.e.f. 1st April, 1988?" The assessment year is 1984-85, and the relevant accounting period is the calendar year 1983. The assessee, a limited company, filed its return of income on 30th July, 1984. It appears that, from the balance-sheet accomp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of Tribunal shows that the said decision is reported at [1986] 18 ITD 213 the correct citation of the report is Volume 3 of Selected Orders of the Income-tax Appellate Tribunal 517). The Tribunal has confirmed this decision of the Commissioner of Income-tax (Appeals). Assailing the order of the Tribunal, Mr. M.R. Bhatt, learned senior standing counsel for the Revenue, submitted that the Commissioner of Income-tax (Appeals) and the Tribunal have wrongly read the provisions of section 40A(5) of the Act with special reference to the definition of "salary" in Explanation 2 to the said sub-section. Elaborating on this, it was submitted that "salary" has the same meaning assigned to it as defined in section 17(1) read with section 17(3) of the Act. That as per section 17(1)(va), any payment received by an employee in respect of any period of leave not availed of by the employee is included in the definition of "salary" and hence, for the purposes of determining the limit under sub-section (5) of section 40A of the Act, such amount of leave salary paid to an employee had to be included. That such payment would fulfil the conditions stipulated in section 40A(5)(a)(i) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture in sub-clause (i) of clause (a) of section 40A(5) of the Act: "(i) the value of any travel concession or assistance referred to in clause (5) of section 10; (ii) passage moneys or the value of any free or concessional passage referred to in sub-clause (i) of clause (6) of section 10; (iii) any payment referred to in clause (iv) or clause (v) of sub-section (1) of section 36; (iv) any expenditure referred to in clause (ix) of sub-section (1) of section 36." Explanation 2 to sub-section (5) states that, for the purposes of section 40A(5) of the Act, "salary" would have the same meaning as assigned to it under section 17(1) read with section 17(3) of the Act subject to the specified modifications. It is an admitted position that the said modifications are not relevant for the present. Section 17(1)(va) of the Act states that "salary" would include any payment received by an employee in respect of any period of leave not availed of by the employee. Section 17(1)(iv) states that any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages, shall be included in "salary". The phrase "profits in lieu of salary" is defined by an inclusive d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch payment is the cash equivalent of the leave salary in respect of the period of earned leave at the credit of the employee at the time of retirement, whether on superannuation or otherwise. Therefore, it is apparent that the said provision can come into play only in the hands of the recipient employee. Such payment is not included in the total income while computing the total income of the recipient employee. The said provision, therefore, cannot be projected while computing the income under the head "Profits and gains of business or profession" in the hands of the employer when the limit of disallowable expenditure is to be worked out under section 40A(5) of the Act. As already noticed hereinbefore, section 10(10AA) of the Act does not fall within section 17(3)(ii) of the Act, nor does it find place in the second proviso under section 40A(5)(a) of the Act. In the circumstances, the conclusion of the Tribunal is not supported by the provisions of law. Learned senior standing counsel for the applicant-Revenue has placed on record the Special Bench decision in the case of IAC v. Kodak Ltd. rendered on April 28, 1981, in the light of the fact that both the Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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