Tribunal allows appeal, invalidates revision order, permits deductions for leave encashment & foreign taxes.

The Tribunal allowed the appeal on all grounds. It held that the revision order under Section 263 was invalid as the Assessing Officer had taken a permissible view. The deduction for provision for leave encashment was allowed, contrary to the CIT's direction. Additionally, the deduction for foreign taxes paid in Spain was permitted, and these taxes should not be added back while computing book profit under Section 115JB. The Tribunal's decision was pronounced on 15/04/2019.

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Issues Involved:
1. Validity of the revision order under Section 263 of the Income Tax Act.
2. Deduction of provision for leave encashment.
3. Deduction of foreign taxes paid in Spain.
4. Addition of foreign taxes paid in Spain while computing book profit under Section 115JB.

Detailed Analysis:

1. Validity of the Revision Order under Section 263:
The first ground of appeal contends that the Commissioner of Income Tax (CIT) erred in holding that the assessment order passed by the Assessing Officer (AO) under Section 143(3) read with Section 144C(13) is erroneous and prejudicial to the interest of the revenue. The appellant argues that the AO had taken one of the permissible views, supported by various precedents, including Supreme Court judgments. The CIT should not have revised the order under Section 263 as it is not permissible if two views are possible. The Tribunal agrees with the appellant, noting that the AO had made inquiries and verified facts and documents before passing the order. Therefore, the revision under Section 263 was not justified.

2. Deduction of Provision for Leave Encashment:
The second ground of appeal addresses the CIT's direction to the AO to withdraw the allowance of provision for leave encashment. The appellant claimed a deduction of Rs. 39,03,03,000 for leave encashment, supported by Supreme Court decisions. The CIT held that the AO's allowance was erroneous due to an interim stay by the Supreme Court on the Calcutta High Court's decision in Exide Industries Ltd. The Tribunal finds that the AO had considered the Supreme Court's interim orders and allowed the deduction based on the appellant's compliance with tax payment conditions. The Tribunal concludes that the CIT's direction contradicts the Supreme Court's decision and is unsustainable in law. Therefore, the Tribunal allows the deduction for leave encashment.

3. Deduction of Foreign Taxes Paid in Spain:
The third ground of appeal concerns the CIT's direction to disallow the foreign taxes paid in Spain. The appellant argued that the term 'tax' in Section 40(a)(ii) refers to income tax chargeable under the Act and does not include foreign taxes paid outside India. The Tribunal refers to the Bombay High Court's decision in Reliance Infrastructure Ltd., which allows deduction under Section 37(1) for taxes paid abroad for which no tax relief is available under Section 91. The Tribunal notes that the issue is debatable and has been admitted by the Bombay High Court in Tata Sons. Therefore, the revisionary proceedings under Section 263 are not tenable, and the Tribunal allows the deduction for foreign taxes paid in Spain.

4. Addition of Foreign Taxes Paid in Spain while Computing Book Profit under Section 115JB:
The fourth ground of appeal deals with the CIT's direction to add back the income tax paid in Spain while computing book profit under Section 115JB. The appellant argued that the term 'income tax paid or payable' in Explanation 1 to Section 115JB(2) does not include foreign taxes. The Tribunal refers to the Explanation 2 to Section 115JB and CBDT Circular No. 1/2009, which clarify that only specified taxes (not including foreign taxes) should be added back while computing book profits. The Tribunal cites decisions in Rashtriya Chemicals & Fertilizers Ltd., Reliance Industries Ltd., and Vintage Distilleries Ltd. to support its conclusion. Therefore, the Tribunal allows the deduction of foreign taxes paid in Spain while computing book profit under Section 115JB.

Conclusion:
The Tribunal concludes that the appeal is allowed on all grounds. The revision order under Section 263 is invalid, the deduction for provision for leave encashment is allowed, the deduction for foreign taxes paid in Spain is permitted, and the foreign taxes paid in Spain should not be added back while computing book profit under Section 115JB. The order was pronounced in the open court on 15/04/2019.

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