Tribunal Grants Partial Relief in Assessee's Appeal on Deductions

The Tribunal partially allowed the assessee's appeal regarding the disallowance of certain deductions under different sections, including the provision for leave encashment and exclusion of certain amounts in computing book profit under Section 115JB. The Tribunal disagreed with the AO and CIT(A) on various issues, such as the treatment of subsidies and profits on the sale of fixed assets. The Tribunal directed the AO to allow credit for tax paid by adjusting the refund for the previous assessment year and to compute interest under Section 234C based on the returned income. The Tribunal also upheld the deletion of the addition of sales tax subsidy under the normal computation of income.

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Issues Involved:
1. Disallowance of provision for leave encashment.
2. Exclusion of sales tax incentive and state capital investment subsidy in computing book profit u/s 115JB.
3. Exclusion of prior period interest on income tax refund in computing book profit u/s 115JB.
4. Exclusion of profit on sale of fixed assets in computing book profit u/s 115JB.
5. Credit for tax paid by way of adjustment of refund for AY 2011-12.
6. Computation of interest u/s 234C on assessed income rather than on returned income.
7. Deletion of addition of sales tax subsidy under normal computation of income.

Detailed Analysis:

1. Disallowance of Provision for Leave Encashment:
The assessee created a provision for leave encashment amounting to Rs. 1,37,80,734, which was not paid within the due date of filing the return of income as specified u/s 139(1). The AO disallowed the deduction citing Section 43B(f), which mandates that such deductions are allowable only on a payment basis. The CIT(A) upheld the AO's decision, referencing the Supreme Court's interim order in the Exide Industries case, which stayed the Calcutta High Court's decision that struck down Section 43B(f). The Tribunal restored the matter to the AO, directing to await the Supreme Court's final decision.

2. Exclusion of Sales Tax Incentive and State Capital Investment Subsidy in Computing Book Profit u/s 115JB:
The assessee claimed exclusion of sales tax remission (Rs. 3,98,70,574) and state capital investment subsidy (Rs. 59,75,000) from book profit u/s 115JB, arguing they were capital receipts. The AO disallowed this, stating there is no provision under the Act for such exclusions. The CIT(A) upheld the AO's decision, emphasizing that book profit adjustments are strictly governed by the Explanation to Section 115JB. However, the Tribunal reversed the CIT(A)'s decision, relying on the co-ordinate Bench's ruling in Sicpa India (P) Ltd. and the Supreme Court's judgment in Chaphal Kar Brothers, which held that subsidies not in the nature of income should not be included in book profits.

3. Exclusion of Prior Period Interest on Income Tax Refund in Computing Book Profit u/s 115JB:
This ground was dismissed as not pressed by the assessee during the hearing.

4. Exclusion of Profit on Sale of Fixed Assets in Computing Book Profit u/s 115JB:
The assessee argued that profit on the sale of fixed assets (Rs. 61,063) should not be included in book profit u/s 115JB. The AO included this profit, supported by the Supreme Court's judgment in Apollo Tyres Ltd. The CIT(A) upheld the AO's decision, stating that the profit was part of the audited profit and loss account. The Tribunal, following its earlier reasoning on similar issues, allowed the assessee's claim.

5. Credit for Tax Paid by Way of Adjustment of Refund for AY 2011-12:
The assessee claimed that the AO did not give credit for tax of Rs. 8.48 lakh paid by adjusting the refund for AY 2011-12. The CIT(A) rejected this claim. The Tribunal directed the AO to allow the credit for the adjustment of the refund as per the law.

6. Computation of Interest u/s 234C on Assessed Income Rather Than on Returned Income:
The AO charged interest u/s 234C on assessed income. The Tribunal directed the AO to levy interest on the income declared in the return as per the provisions of law, after providing the assessee an opportunity to be heard.

7. Deletion of Addition of Sales Tax Subsidy Under Normal Computation of Income:
The AO added the sales tax subsidy (Rs. 3,98,574) to the total income. The CIT(A) deleted this addition, following the jurisdictional High Court's judgment in CIT vs. Rasoj Ltd., which held such subsidies as capital in nature. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Conclusion:
- Assessee's appeal (ITA No. 439/Kol/2016) is partly allowed for statistical purposes.
- Revenue's appeal (ITA No. 478/Kol/2016) is dismissed.

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