2013 (11) TMI 963 - AT - Income Tax

Appeal dismissed on deduction for leave salary provision without actual payment in Assessment Year 2008-09

The appeal regarding the sustenance of an addition under section 43B(f) for the provision of leave salary for Assessment Year 2008-09 was dismissed. The ... Provision for leave salary – Held that:- SC has stayed the decision of CIT Vs. Exide Industries Ltd [2007 (6) TMI 175 - CALCUTTA High Court] wherein it was held that, the amendment to section 43B by way of insertion of clause (f), as unconstitutional. - The deduction u/s 43B(f) cannot be allowed on the making of a mere provision unless the amount is actually paid - The assessee has admittedly not made the payment of the amount – Deduction cannot be allowed – Decided against assessee. Issues:Sustenance of addition under section 43B(f) on account of provision for leave salary.Analysis:The appeal revolves around the sustenance of an addition of Rs.25,81,185 under section 43B(f) concerning the provision for leave salary for the Assessment Year 2008-09. The assessee claimed a deduction for the provision made in its Profit & Loss account, which the Assessing Officer disallowed, citing section 43B(f) as the basis for his decision. The ld. CIT (A) upheld the AO's view, leading to the appeal.Upon examination, it was noted that the Hon'ble Supreme Court decision in Bharat Earth Movers vs. CIT allowed a deduction for provision of leave salary. However, the Finance Act 2001 introduced clause (f) to section 43B, specifying that deductions for sums payable by the employer for leave could only be claimed upon actual payment, nullifying the Supreme Court's ruling. The amendment was applicable from the Assessment Year 2002-03 onwards, impacting the present case for the Assessment Year 2008-09.The ld. AR contended that the amendment was unconstitutional, citing a judgment from the Hon'ble Calcutta High Court. However, the Hon'ble Supreme Court stayed the operation of the Calcutta High Court judgment, allowing the assessee to pay tax as per the amended provision while retaining the right to make claims in returns. Another judgment from the Hon'ble Kerala High Court was deemed irrelevant as it relied on the Calcutta High Court decision, which was stayed by the Supreme Court.In light of the legal framework and the Supreme Court's intervention, the Tribunal concluded that the deduction under section 43B(f) could not be allowed solely based on a provision without actual payment. As the assessee had not made the payment in question but claimed a deduction based on the provision, the ld. CIT (A)'s decision was upheld, resulting in the dismissal of the appeal.In conclusion, the Tribunal's decision emphasized adherence to the statutory provisions post-amendment, highlighting the importance of actual payment for claiming deductions under section 43B(f) related to leave salary provisions.