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TMI Blog2019 (6) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) erred in confirming disallowance of provision of Rs..9,41,721/- made towards leave encashment for the year ended 31.03.2007 and (ii) the ld. CIT(A) erred in confirming that the provision for gratuity and leave encashment should be added to book profits while computing the book profit under section 115JB of the Income Tax Act, 1961 ["Act" in short]. 2. Brief facts of the case are that the assessee is engaged in the business of software development and consultancy services. The assessee has debited Rs..9,41,721/- as provision for leave encashment for the year ended 31.03.2007 as business expenditure based on the decision of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd. & Anr. V. Union of India & Ors. [292 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim in its returns." 7.2.4 The Supreme Court though restrained the department from the recovery of the interest and the penalty but had made it clear that the assessee would during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book. Subsequently, the Kerala High Court in the case of Smith Indian Bank Ltd., 45 taxmunn.com 428 held that the said payment must be allowed on actual payment basis and the relevant portion is reproduced as under: "6. Then coming to the second issue, it pertains to the provision made for leave encashment and the disallowance claimed was under Section 43B(f). As already stated above, the opinion of the CIT (Appeals) was set aside by the Tribunal in the light of the stay order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Union of India & Ors. (supra) is pending before the Hon'ble Supreme Court, this issue may be remitted back to the Assessing Officer with the same condition imposed by the Hon'ble Supreme Court in the case of M/s. Exide Industries Ltd. & Anr. V. Union of India & Ors. (supra) and when the decision on the question of law in that case becomes final, it shall be applied to the assessee's case. On the other hand, the ld. DR fairly conceded to the submissions of the ld. Counsel. 5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Against the disallowance of provision for leave encashment, the ld. CIT(A) confirmed the disallowance as reproduced hereinabove. In assessee's ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in computing the book profit under section 115JB of the Act. During the course of appellate proceedings, the assessee has submitted that the provision was made on the report of actuary and hence, it is an ascertained liability. After considering the submissions of the assessee, the ld. CIT(A) has observed that since the assessee has not established that the provision is an ascertained liability, he held that the Assessing Officer has correctly added the same as per clause (c) of Explanation 1 of section 115JB(2) of the Act. 8. After considering the rival submissions, we are of the considered opinion that even though the actual payment of gratuity may be made at a later point of time upon periodical release of the employees from servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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