TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1897
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....nder Section 36/37. Honorable High Court, Uttarakhand in ITA No. 39 of 2009 CIT vs. M/s. The Nainital Bank Limited & Honorable ITAT, Delhi in Hero Moto Corp Ltd. vs. CIT (2013) 60 SDT 25 (Delhi) has allowed similar contribution to LIC as deductible expenditure. 2. That the ld. CIT (A), Ajmer has erred in enhancement of assessment by an income of Rs. 31,88,791/- treating the internal accretions by LIC & Others to our contributions regarding Leave Encashment Liability, ascertained by Annual Actuarial Valuation (which is arrived by deducting the till date accretions). The same has neither been received nor accrued to the Appellant." 2. The solitary common issue in both the appeals pertains to the disallowance of Insurance premium paid to the LIC regarding Leave Encashment Liability. The AO disallowed the claim of premium paid by the assessee for leave encashment liability to the LIC on the ground that the payment was not made to the employees but it was paid to the Insurance Company. On appeal, the ld. CIT (A) has confirmed the order of the AO by following the order in the assessee's own case for the assessment year 2014-15. 3. Before us, the ld. A/R of the assessee has submitt....
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....furnish the information relating to the amount of leave encashment and confirm as to whether the amount of leave encashment shown in P&L a/c is actually paid to the employees. If the same is paid to the employees then the assessee bank shall furnish the documentary proof for the same. The assessee bank submitted reply of the above query vide letter No. 18028 dated 29-12-2016 which has been considered by the AO. However, the AO did not find the assessee bank's reply acceptable on the following grounds:- (i) It is seen that the assessee bank has been claiming this deduction on the basis of investment made for this purpose with the LIC, Bajaj Allianz, future generali, Aviva, HDFC, India first and Birla. Any payment for leave encashment in future has to be made out of that fund. However, no such deduction is allowable under any of the provisions of the Income Tax Act and deduction if any has to be allowed only on the actual payment made to the employees. (ii) The contention of the assessee bank was duly considered but was not acceptable for the reason that section 37(1) provides for the allowing of any expenditure laid out or expended wholly and exclusively for the purpose of the....
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....ount of leave encashment was allowed as deducting relying on the decision of the Supreme Court in the case of CIT vs Textool Company Ltd (262 iktr 257) and the decision in the case of Associated Electrical Industries (India) Pvt. Ltd. I have gone through the decision of the Supreme Court in the case of Textool Company Ltd. carefully. The issue decided by the Hon'ble Supreme Court in that case was admissibility of deduction of the payment made to LIC towards gratuity fund u/s 36(1)(v) of the I.T. Act, 1961. The issue of allowability of deduction u/s 43(B)(f) of leave encashment was not there before the Hon'ble Supreme Court. The Hon'ble Supreme Court allowed the claim of the appellant observing as under:- ''Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act (....
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....such funds was credited to the Profit & Loss Account under the head ''Other income''. Therefore, I find no justification for claiming investment of same nature as expenditure in the A.Y. 2014-15. 4.14 As per information furnished by the appellant, the actual amount paid towards leave encashment to employees through LIC was Rs. 99,76,056/-, therefore, in view of the discussion made above, the deduction of Rs. 99,76,056/- is held to be allowable u/s 43B(f) because this was the sum payable and actually paid by the assessee as employer in lieu of any leave at the credit of his employee, as specified u/s 43B(f). Accordingly, out of the total disallowance of Rs. 35,19,00,000/- disallowance of Rs. 99,76,056/- is deleted and the remaining disallowance of Rs. 34,19,23,944/- (Rs. 35,19,00,000 - Rs. 99,76,056) is hereby confirmed. 4.3 We have heard the rival contentions and perused the materials available on record. During the course of hearing, the ld.AR of the assessee drew our attention to the decision of ITAT Jaipur Bench in the case Jhalawar Kendriya Sahakari Bank Ltd vs ACIT (ITA No.1032/JP/2011 and ITA No. 1051/JP/2011 in the case of ACIT vs Jhalawar Kendriya Sahakari Bank Ltd wh....