Tribunal allows appeals on premium payments for Leave Encashment Liability, deems them allowable pending verification.

The Tribunal allowed the appeals, directing the AO to verify premium payments for Leave Encashment Liability and internal accretions by LIC. Premium payments to LIC for Employees Group Leave Encashment Scheme were deemed allowable, pending verification if income was received or accrued. Internal accretions were to be assessed based on whether they constituted real income or were for future liability discharge. The Tribunal upheld the principle that such premium payments are allowable expenditures if income is not received but accumulated for future liabilities.

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Issues Involved:
1. Disallowance of Insurance Premium paid to LIC regarding Leave Encashment Liability.
2. Enhancement of assessment by treating internal accretions by LIC as income.

Detailed Analysis:

Disallowance of Insurance Premium paid to LIC regarding Leave Encashment Liability:
The primary issue in both appeals is the disallowance of the Insurance premium paid to LIC for Leave Encashment Liability. The Assessing Officer (AO) disallowed the claim on the basis that the payment was made to the Insurance Company and not directly to the employees. The CIT (A) upheld this disallowance, referencing an earlier decision in the assessee's own case for the assessment year 2014-15.

The assessee argued that the Tribunal had previously accepted the principle that premium paid to LIC for leave encashment liability is an allowable claim, citing the Tribunal's earlier decision in Jhalawar Kendriya Sahakari Bank Ltd. vs. ACIT. The assessee contended that remanding the issue back would cause hardship due to the loss of interest on the funds held by the department.

The Tribunal noted that in the earlier case for the assessment year 2014-15, the issue had been remitted to the AO for fresh adjudication due to multiple policies and a substantial premium amount. However, for the assessment years 2009-10 and 2010-11, the premium amounts were smaller and paid solely to LIC. The Tribunal reiterated that the claim is allowable if it pertains to a policy taken from LIC for Employees Group Leave Encashment Scheme. The Tribunal directed the AO to verify whether the income accruing on the policy was actually received by the assessee or merely an accounting treatment, and to allow the claim accordingly.

Enhancement of assessment by treating internal accretions by LIC as income:
The second issue pertains to the enhancement of the assessment by an income of Rs. 31,88,791, treating internal accretions by LIC as income. The assessee argued that these accretions, ascertained by Annual Actuarial Valuation, had neither been received nor accrued to the appellant.

The Tribunal referenced the CIT (A)'s observation that the assessee had shown the payment as an investment in LIC and other companies, with the interest accrued credited to the Profit & Loss account. The Tribunal directed the AO to verify whether the income from the policy was actually received or if it was merely an accounting entry. If the benefit accrued on the policy was only accumulating within the fund for future liability discharge, it would not constitute real income. The AO was instructed to verify these facts and allow the claim accordingly.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the AO to verify the facts concerning the premium payments and the treatment of internal accretions, and to allow the claims based on the verification. The Tribunal upheld the principle that premium payments for a policy taken from LIC for Employees Group Leave Encashment Scheme are allowable expenditures, provided the income from such policies is not actually received by the assessee but is accumulated for future liability discharge.

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