TMI Blog1994 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany were entitled to encash leave at their credit. The assessee, in its books of account, maintained an entry as accrued leave reserve to which it credited every year liability in respect of leave based on leave entitlement of every employee and having made such provision to meet the liability in regard to payment of leave with wages claimed deduction in respect of that provision. The original assessing authority disallowed the claim. On appeal, the first appellate authority, placing reliance on an order passed in Income-tax Appeal No. 3222340/ (Bang.) of 1980, pertaining to Motor Industries Co. Ltd. v. I. T. O., upheld the contention of the assessee. Aggrieved by the order of the first appellate authority, the Revenue brought the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the above contention, the Revenue contends that provision for leave salary is not an allowable deduction and the said liability is a contingent liability and not a liability in praesenti. It is contended that question of leave salary arises when a person goes on leave and for the particular period leave salary is payable, the person is entitled to avail of leave encashment benefit under the scheme and the same is optional. This will depend on whether he actually avails of the leave or not. If leave is due to a person he has the option either to accumulate the leave or he may avail of the leave. If he avails of the leave, he would be entitled to the leave salary. If he does not, he will be entitled to the benefit of encashment of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility is properly ascertainable and if it is possible to arrive at its discounted present value, even if the liability is a contingent liability, it can be taken into account. That question does not arise here. Counsel for the Revenue invites the attention of the court to the ratio decided in CIT v. Hindustan Aeronautics Ltd. [1988] 174 ITR 340 (Kar), wherein one of us, namely, Rajendra Babu J., was a member, who delivered the judgment wherein it is observed that the provision for accrued leave salary being a contingent liability, the same is not a permissible deduction. Leave salary is payable only when a person goes on leave and during the period of leave, the salary paid to him is known as leave salary. It cannot be ascertained with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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