Appeal allowed for deduction on provision for leave encashment

The appeal challenging the disallowance of deduction for provision for leave encashment for the assessment year 2018-19 was allowed for statistical purposes. The court found that the reduction in the provision for leave encashment was withdrawn from liability but credited to the actual amount of leave encashment paid, supporting the appellant's accounting method. The Assessing Officer was directed to re-examine the claim to ensure compliance with the law. The judgment was pronounced in Chennai on 28th June, 2023.

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Issues involved:
The appeal challenges the order passed by the Commissioner of Income Tax (Appeals) regarding the disallowance of deduction for provision for leave encashment made by the appellant for the assessment year 2018-19.

Grounds of appeal:
1. The appellant contends that the order of the Commissioner of Income Tax (Appeals) is contrary to law and facts.
2. The disallowance of the deduction for provision for leave encashment is contested by the appellant.
3. The appellant argues that the excess provision for leave encashment was reversed and reduced from the actual expenditure.
4. It is claimed that the excess provision for leave encashment was reduced from the expenditure incurred by the appellant.
5. The actual amount paid for leave encashment was higher than the amount claimed under this head due to the excess provision being reduced.
6. The reduction in the claim of expenditure represented the withdrawal of provision no longer required.
7. The appellant reduced the amount in the memo of income as it did not represent income.
8. The appellant seeks leave to file additional grounds at the time of hearing.

Judgment details:
The assessee, a corporation, filed its return of income for the assessment year 2018-19, declaring total income. The Assessing Officer disallowed the deduction claimed for provision for leave encashment and determined the total income. The appellant's appeal before the first appellate authority was unsuccessful, leading to the current appeal.

The appellant argued that the deduction claimed was not a provision but actual payment, which was credited incorrectly. The issue was whether the deduction was for provision or actual payment.

After hearing both parties and examining the records, it was found that the reduction in the provision for leave encashment was withdrawn from liability but credited to the actual amount of leave encashment paid. The appellant's method of accounting for the deduction appeared correct. However, further verification by the Assessing Officer was deemed necessary.

Therefore, the issue was set aside to the Assessing Officer to re-examine the claim of the appellant and decide in accordance with the law. The appeal by the assessee was allowed for statistical purposes.

The judgment was pronounced in Chennai on 28th June, 2023.

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