Appeal allowed for VRS payment deduction based on precedent.

The Tribunal allowed the appeal, directing the deduction of Rs. 2.86 crore towards VRS payment for the assessment year 1998-99. This decision was based on the similarity in circumstances with a precedent set by the Bombay High Court for a subsequent assessment year, leading to the reversal of the earlier decision disallowing the deduction as capital expenditure.

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Issues:
Deduction of payment on account of Voluntary Retirement Scheme (VRS) not granted.

Analysis:
The appeal pertains to the assessment year 1998-99, where the only issue raised is the disallowance of a deduction amounting to Rs. 2.86 crore towards VRS payment for employees of the Calcutta unit. The Assessing Officer treated this expenditure as capital expenditure, a decision upheld by the CIT(A)-13, Pune, leading the assessee to approach the Tribunal for redressal.

Upon review, it was established that the assessee company is involved in the manufacturing and sale of foundry fluxes, foundry chemicals, and profax. The Tribunal noted that a similar issue had been addressed in the assessee's case for the subsequent assessment year, where the Tribunal ruled in favor of the assessee. The Revenue had appealed this decision to the Bombay High Court, which subsequently dismissed the appeal on 08-03-2013, with the judgment available on record.

The Tribunal observed that the Finance Act, 2001 introduced section 35DDA for amortization of VRS expenditure, but since the assessment year in question predates this provision, the earlier regulations apply. The Departmental Representative (DR) acknowledged the similarity between the current case and the one decided by the Bombay High Court for the assessment year 1999-2000, leading the Tribunal to reverse the impugned order and direct the allowance of the deduction for the year under consideration.

Consequently, the Tribunal allowed the appeal, emphasizing the similarity in circumstances with the precedent set by the Bombay High Court, thereby granting the deduction of Rs. 2.86 crore towards VRS payment. The order was pronounced in the open court on 06th July 2020.

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