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of <h1>Tribunal overturns CIT(A) order on leave encashment provision</h1> <h3>Muthoot Vehicles and Asset Finance Ltd., Versus The Assistant Commissioner of Income-tax, Circle-1 (2), Kochi.</h3> Muthoot Vehicles and Asset Finance Ltd., Versus The Assistant Commissioner of Income-tax, Circle-1 (2), Kochi. - TMI Issues:Challenge to disallowance of provision for leave encashment under sec. 43B(f) of the Act.Analysis:The assessee appealed against the disallowance of the provision for leave encashment under sec. 43B(f) of the Act by the Ld CIT(A)-II, Kochi. The assessee argued that the provision for leave encashment is a contractual liability, not a statutory one, and hence should not be covered under sec. 43B. The assessee relied on a decision of the Kerala High Court in a similar case. However, the Ld CIT(A) upheld the disallowance, stating that the facts in the current case were different from the precedent cited by the assessee. The Tribunal had previously considered a similar issue in the case of M/s Kerala Feeds Ltd and had set it aside for reconsideration by the AO. The Tribunal noted that the Rajasthan High Court's decision cited by the assessee was not applicable as sec. 43B(f) was inserted later. The Tribunal also discussed the decision of the Kerala High Court in the Hindustan Latex Ltd case, where it was held that the provision of sec. 43B(f) was unconstitutional. However, the Supreme Court had stayed this judgment, and the Tribunal directed the AO to re-examine the issue in light of the Supreme Court's decision in the case of M/s Exide Industries Ltd.The Tribunal observed that the decision of the Kerala High Court regarding the unconstitutionality of sec. 43B(f) was stayed by the Supreme Court. The Tribunal also mentioned a similar case before the Calcutta Bench of Tribunal, where the matter was remanded to the AO following the decision of the Supreme Court in the Exide Industries Ltd case. Therefore, the Tribunal set aside the Ld CIT(A)'s order and directed the AO to re-evaluate the issue in line with the Supreme Court's decision in the Exide Industries Ltd case. Ultimately, the appeal filed by the assessee was treated as allowed for statistical purposes.
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