TMI Blog2019 (6) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for gratuity and leave encashment should be added to book profits while computing the book profit u/s 115JB - HELD THAT:- Though the actual payment of gratuity may be made at a later point of time upon periodical release of the employees from service, it is provision having been made on actuarial basis, it cannot be stated to be an unascertained liability so as to add it back in terms of Clause (c) to Explanation 1 to Section 115JB It is not emanating from the assessment order as to whether the assessee has furnished the actuarial calculations of the ascertained liability for exclusion from adding the same to its book profit. The assessee is required to furnish before AO the actuarial calculations of the ascertained liabilities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITR 470]. Since the expenditure was in the nature of contingent liability and the actual payment was not made during the assessment year, the Assessing Officer disallowed the claim made under section 43B of the Act and brought to tax. 3. On appeal, after considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance of provisions for leave encashment by observing as under: 7.2.3 I have carefully considered the observation of the AO and the submissions of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced 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 of the judgment of the High Court of Calcutta in Excide Industries case (supra) and the SLP stated above is still pending. Therefore, the opinion of the Tribunal so far as disallowance claimed in respect of leave encashment under Section 43B(f) of the Act, as on today, the provision seems to be in force in the light of the stay order granted by the Apex court in the SLP. Therefore, as long as Section 43B(f) is on Statute, the said disallowance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 own case for the assessment years 2008-09, 2010-11 2014-15 in I.T.A. Nos. 3165 to 3167/Chny/2017 dated 30.05.2018, the Tribunal remitted the matter back to the file of Assessing Officer by holding as under: 8. The AO/assessee shall follow the directions issued by the Hon ble Supreme Court in the case of M/s. Exide Industries Ltd. Anr. Vs. Union of India Ors. in Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 service, it is provision having been made on actuarial basis, it cannot be stated to be an unascertained liability so as to add it back in terms of Clause (c) to Explanation 1 to Section 115JB of the Act. However, if the assessee has established that the provisions for payments of ascertained liabilities were made on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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