TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 1611
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.... not correct without appreciating that the AO has passed the order after enquiring and verifying the facts and documents on record, duly supported by various precedents including the judgements of the Hon'ble Supreme Court which were available at the time of the assessment. 1.3 The Ld. CIT has erred in law and on facts in ignoring the reasons given by the appellant on the proceedings u/s 263 of the Act being invalid and bad in law. 3. It would be apposite to deal with the 2nd, 3rd & 4th ground of appeal along with the 1st ground of appeal separately to appreciate the subject matter in the instant case. The 2nd ground of appeal 2.1 The Ld. CIT has erred in law and on facts in directing the AO to withdraw the allowance of provision for leave encashment for the year under consideration disregarding the fact that the AO has after detailed examination and placing reliance on various rulings in support of the position taken by the assesses, has allowed deduction of provision for leave encashment vide order u/s 143(3) r.w.s 144C of theAct 2.2 The Ld. CIT ought to have appreciated the fact that the appellant had paid the applicable taxes and had correctly claimed the dedu....
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....s submitted before the AO that provision for leave encashment has been made post payment of taxes in line with Supreme Court decision in Exide Industries Ltd. (supra) and (iv) from the computation of income, it is clear that there is refund of Rs. 180.96 crore, whereas tax liability on the aforesaid provision would be Rs. 12-15 crore only. The Ld. counsel submits that pursuant to the above, the AO has allowed the deduction for the same, after considering submissions of the assessee by adopting one of the possible views. It is further submitted that the CIT has adopted another view and made the disallowance on the basis of stay on the operation of the Calcutta High Court order by the Honb'ble Supreme Court in its first interim order dated 08.09.2008 in the case of Exide Industries (supra). The Ld. counsel further argues that the stay given by the Supreme Court was interim stay till further order and thereafter, the Hon'ble Supreme Court has passed a subsequent 2nd interim order dated 08.05.2009, wherein it has laid down condition for claiming deduction for provision for leave encashment and thereby the stay initially granted by it vide first interim order gets vacated. The Supreme....
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.... a subsequent 2nd interim order dated 08.05.2011 which reads as under: "Pending hearing and final disposal of the Civil Appeal, Department is restrained from recovering penalty and interest which has occurred till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns." In the instant case, as mentioned earlier the assessee vide submission dated 10.12.2014 has filed a specific note before the AO regarding deduction on provision for leave encashment along with the decision of the Supreme Court, wherein it was submitted before the AO that provision for leave encashment has been made post payment of taxes in line with the Supreme Court decision in Exide Industries Ltd. (supra). In view of the above facts, we allow the 2nd ground of appeal. 4. The 3rd ground of appeal 3.1 The Ld. CIT has erred in law and on fact....
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....law has been admitted. 4.3 On the other hand, the Ld. DR submits that the CIT has rightly directed the AO to withdraw the allowance by relying on the order of the Tribunal in the case of Elitecore Technologies Pvt. Ltd. (supra). 4.4 We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. On identical facts, the Hon'ble Bombay High Court in Reliance Infrastructure Ltd. (supra) has held that the assessee is entitled for deduction u/s 37(1) of the tax paid in Saudi Arabia for which no tax relief could be claimed. The relevant portion of the said order is produced as under: "(o) Therefore, on the Explanation being inserted in Section 40(a)(ii) of the Act, the tax paid in Saudi Arabia on income which has accrued and/or arisen in India is not eligible to deduction u/s 91 of the Act. Therefore, not hit by Section 40(a)(ii) of the Act. Section 91 of the Act, itself excludes income which is deemed to accrue or arisen in India. Thus, the benefit of the Explanation would now be available and on application of real income theory, the quantum of tax paid in Saudi Arabia, attributable to income arising or accruing ....
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.... that the term 'Income-tax paid or payable' used in Explanation (1) to section 115JB of the Act means Income-lax chargeable under the provision of this Act as per section 2(43) of the Act and that since, the said Income-tax is paid outside India, i.e. in Spain, it is not covered within the ambit of section 40(a)(ii) of the Act. 4.3 The Ld. CIT ought to have appreciated the fact that the appellant has rightly claimed Income-tax paid in Spain while computing book profit u/s 115JB of the Act. 5.1 During the proceedings u/s 263, it was the contention of the assessee that foreign tax paid is not the income tax payable under the Act and hence it is not required to be added back while calculating tax liability u/s 115JB of the Act. The CIT observed that in respect of foreign sourced income on which taxes have been paid abroad, government provides relief by treating them as income tax paid under the Act by incorporating foreign tax paid in the Income Tax Act by virtue of section 90 and 91 and CBDT has notified Rule 128 for claiming foreign tax credit vide Notification S.O. 2213E dated 27.06.2016. Accordingly, the CIT directed the AO to withdraw the allowance made in this regar....