Tax Appeal Allowed for Re-examination: Section 43B(f), 14A, 115JB, 32(1)(iia)

The appeal of the assessee was allowed for statistical purposes. The Tribunal directed the AO to re-examine and re-compute the disallowances under Section 43B(f) for leave encashment, Section 14A read with Rule 8D for normal provisions and Section 115JB, and the disallowance of the remaining 50% of additional depreciation under Section 32(1)(iia) based on relevant judicial precedents. The order was pronounced on 24.08.2018.

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Issues Involved:
1. Disallowance of leave encashment under Section 43B(f) of the Income Tax Act.
2. Disallowance under Section 14A read with Rule 8D for normal provisions and under Section 115JB of the Income Tax Act.
3. Disallowance of remaining 50% of additional depreciation under Section 32(1)(iia) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of Leave Encashment under Section 43B(f) of the Income Tax Act:
The first issue pertains to whether the CIT(A) was justified in upholding the disallowance of leave encashment under Section 43B(f). The assessee had made a provision for leave encashment amounting to Rs. 38,50,798/- and claimed it as a deduction based on the Calcutta High Court's decision in Exide Industries Ltd. The AO disallowed this provision as it was not paid within the due date of filing the return, referring to the Supreme Court's stay on the Calcutta High Court's decision. The Tribunal noted that the Supreme Court had not stayed the Calcutta High Court's judgment but had only passed an interim order. Therefore, the Tribunal remanded the issue back to the AO to pass orders based on the Supreme Court's final decision on the matter. This ground was allowed for statistical purposes.

2. Disallowance under Section 14A read with Rule 8D:
The second issue concerns the disallowance under Section 14A read with Rule 8D both under normal provisions and Section 115JB. The AO observed that the assessee earned tax-exempt dividend income of Rs. 46,42,000/- and disallowed Rs. 24,000/- under Section 14A. However, the AO computed a disallowance of Rs. 6,41,255/- under Rule 8D(2)(iii), which was upheld by the CIT(A). The Tribunal directed the AO to re-compute the disallowance considering only those investments that yielded dividend income, as per the REI Agro Ltd. decision. This ground was allowed for statistical purposes.

Regarding the disallowance under Section 14A while computing book profits under Section 115JB, the Tribunal referred to the Special Bench decision in ACIT vs. Vireet Investment Pvt. Ltd., which held that the computation under clause (f) explanation (1) to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. The AO was directed to examine the assessee's accounts and the basis for the Rs. 24,000/- disallowed under Section 14A and decide the issue afresh. This ground was also allowed for statistical purposes.

3. Disallowance of Remaining 50% of Additional Depreciation under Section 32(1)(iia):
The third issue is whether the CIT(A) was justified in upholding the disallowance of the remaining 50% of additional depreciation on plant and machinery used for less than 180 days in the financial year 2008-09. The AO disallowed the claim of Rs. 1,43,24,748/- for the assessment year 2010-11, which was upheld by the CIT(A). The Tribunal referred to the Madras High Court's decision in CIT vs. Shri T.P. Textiles Pvt. Ltd., which held that the balance 50% of additional depreciation could be claimed in the succeeding assessment year. The Tribunal granted relief to the assessee for the additional depreciation claim. This ground was allowed.

General Grounds:
Grounds 3(b) and 4 raised by the assessee were general in nature and did not require specific adjudication.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, with specific directions for re-examination and re-computation by the AO based on the Tribunal's findings and relevant judicial precedents. The order was pronounced in the Court on 24.08.2018.

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