Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently quashed the order passed by the lower authorities disallowing the claim of the assessee towards leave encashment for the reason that the order of the High Court invalidating Section 43(f) of the Income tax Act 1961 was not stayed by the Supreme Court.
Assessee in the instant case is engaged in the business of purchasing and selling of Molasses, leather goods, handling of liquid cargo and bulk liquid storage, banking, lending etc has filed its return of income for the relevant assessment year and declared the total income of Rs. 38,96,90,480.
During the course of assessment proceedings the Assessing Officer (AO) noticed that the assessee has made provision for leave encashment in the sum of Rs. 86,12,113 and has claimed the same as allowable expenditure in the return of income. After analyzing the material facts the AO has disallowed the claim of assessee under Section 43B (f) of the Income Tax Act. This action of the AO was also upheld by the CIT (A).
After considering the rival submissions of both the parties the tribunal bench comprising of Judicial Member N.V. Vasudevan and Accountant Member M.Balaganesh observed that Calcutta High Court was struck down the provisions of section 43B(f) of the Act as unconstitutional in a previous case. Thereafter the revenue carried the same matter further to the apex court, and the court had not stayed the judgement of the Calcutta High Court during Leave proceedings.
The division bench further observed that the same decision of the apex court is applicable to the assessee in the present case. While allowing the appeal filed by the assessee the bench also quashed the order of disallowing claim towards leave encashment since the order of the High Court invalidating section 43B(f) of the Act and the same is not stayed by the Supreme Court.
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