Birla Sun Life Asset Management Co Ltd, ... vs Assessee

M/s. Birla Sun Life Asset Dy. Comm. of Income Tax, Management Company Range-8(1), Limited, Room No.209, 2nd Floor, One India Bills Centre, Aayakar Bhavan, Tower 1, 17th Floor, Vs. M.K. Road, Jupiter Mill Compound, Mumbai - 400020 841 Senapati Bapat Marg, Elphinstone Road, Mumbai - 400 013 PAN: AAACB 6134D (Appellant) (Respondent)

Present for: Assessee by : Shri Yogesh Thar, A.R. Revenue by : Shri Yogesh Kamat, Sr. A.R.

Date of Hearing : 02.06.2015 Date of Pronouncement : 30.06.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 20.06.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

2. The sole issue raised in this appeal is relating to the disallowance on account of provision for leave encashment of Rs.74,61,261/- under section 43B of the Income Tax Act. The assessee claimed that the provision for leave encashment was ascertained liability of the company and the same should not be construed as the item covered by section 43B of the Income Tax Act in view of the decision of the Hon'ble Kolkata High Court in the case of "Exide 2 ITA No.5457/M/2013 M/s. Birla Sun Life Asset Management Company Limited

Industries Ltd." 292 ITR 470. The AO however, held that the said amount was remained unpaid and therefore the provision for leave encashment was squarely covered under the provisions of section 43B. In appeal, the Ld. CIT(A) also upheld the finding of the AO.

3. Before us, the Ld. A.R. of the assessee has brought our attention to the decision of the co-ordinate Bench of the Tribunal dated 23.01.2015 in the case of "Aaditya Birla Finance Ltd. Vs. ACIT" ITA No.6630/M/2010 wherein the Tribunal, while relying upon various other decisions of the Tribunal and adopting the same line, has restored the matter to the file of the AO observing that since the matter in the case of Exide Industries Ltd. (supra) was pending before the Hon'ble Supreme Court, the AO to adjudicate the issue afresh in the light of the decision of the Hon'ble Supreme Court as may come in the case of "Exide Industries Ltd." (supra). The relevant part of the decision of the co- ordinate Bench in the case of "Aaditya Birla Finance Ltd. Vs. ACIT" (supra) for the purpose of reference is reproduced as under:

"4.2 At the outset Ld. AR of the assessee has produced before us a copy of order of the Tribunal in the case of the sister concern of the assessee M/s. Birla Insurance Advisory & Broking Services Ltd., in ITA No.7531/Mum/2010. The Tribunal in the said case has restored the matter on the identical issue to the file of the AO while relying upon the decision in the case of Essar Exploration and Production India Ltd. vs. ACIT in ITA No.6189/Mum/2011 order dated 8/8/2012. The operating part of the order for the sake of convenience is reproduced as under:

"3. At the outset Ld. AR of the assessee has produced before us a copy of order of the Tribunal dated 8/8/2012 in ITA No.6189/Mum/2011 in the case of Essar Exploration & Production India Ltd. vs. ACIT, order dated 8/8/2012 , in which similar issue came up for consideration of ITAT. Before ITAT reference was made to the aforementioned decision in the case of M/s. Universal Medicare Pvt. Ltd. vs. ACIT(supra), and after hearing both the parties and considering the issue that in another matter in the case of Exide Industries Ltd. vs. Union of India, 292 ITR 470 (Cal), where provisions of section 43B(f) were held to be arbitrary and in Special Leave Petition before Hon'ble Apex Court vide order dated 8/9/2008 the judgment of Hon'ble Culcutta High has been stayed and also the fact that Hon'ble Bombay High Court has admitted the issue in consideration in the appeal 3 ITA No.5457/M/2013 M/s. Birla Sun Life Asset Management Company Limited

filed by the department in the case of M/s. Universal Medicare Pvt. Ltd.(supra), the matter was restored back to the file of AO with the following observations:

"7. We observe that Mumbai Tribunal by its order dated 30.3.2009 in the case of Universal Medicare Pvt Ltd. (supra) allowed the claim of provision for leave encashment on the basis of decision of Hon'ble apex Court in the case of Bharat Earth Movers (supra) as the Honble Calcutta High Court in the case of Exide Industries (supra) struck down the provision of section 43B(f) being arbitrary, unconscionable. Further, the department filed SLP before Hon'ble apex Court against the decision of Hon'ble Calcutta High Court in the case of Exide Industries Ltd (supra) by its order dated 8.9.2008 in SLP No.12060/2008 has stayed the operation of judgment of Hon'ble Calcutta High Court. Further, it is also a fact that Hon'ble Bombay High Court has admitted the issue under consideration in the appeal filed by department in the case of Universal Medicare Pvt Ltd (supra). At the time of hearing, Id A.R. submitted that the said appeal is yet to be disposed of. We also observe that ITAT Kolkata Bench by its order dated 30.1.2012 considered the said issue and by following earlier decision on identical issue in the case Ernst & Young Pvt Ltd. (supra) has restored the matter to the file of AC with a direction to adjudicate the same as per decision of Hon'ble apex Court in the case of Exide Industries Ltd (supra), In view of above and respectfully following the earlier decisions (supra), we set aside the orders of authorities below and restore the matter back to the file of AO for adjudication afresh as per the decision of Hon'ble apex Court in the case of Exide Industries Ltd (supra)."

3.1 Referring to the above observation it was pleaded by Ld. A.R that the matter may be restored back to the file of AO with similar directions.

4. Ld. D.R did not have any objection to such request of Ld. A.R.

5. In this view of the situation, after hearing both the parties, respectfully following subsequent decision of the Tribunal on this issue in the case of Essar Exploration & Production India Ltd.,(supra), we restore this issue to the file of A.O with similar directions. The relevant observations have already been reproduced. We direct accordingly".

4.3 The Ld. Representatives of the parties submitted that they have no objection if the matter in this case also be restored to the file of AO with a direction to decide the same in the light of above reproduced directions. This issue 4 ITA No.5457/M/2013 M/s. Birla Sun Life Asset Management Company Limited

is accordingly restored to the file of AO to decide the same as per the directions given in the case of sister concern of the assessee as reproduced above."

4. The Ld. A.R., therefore, while also relying upon various other decisions of the Tribunal wherein the matter is restored to the file of the AO with the direction to decide the same as per the proposition of law that may be laid down by the Hon'ble Supreme Court in the case of "Exide Industries Ltd." (supra) has stressed that the matter in this case be accordingly restored to the file of the AO.

5. The Ld. D.R. has also not raised any objection against restoration of matter to the AO.

6. We have considered the rival submissions. It is correct that the decision of the Hon'ble Kolkata High Court in the case of "Exide Industries Ltd." (supra) has been stayed by the Hon'ble Supreme Court vide order dated 08.09.08 passed in SLP to Appeal (Civil) ...CC 12060/2008 wherein the Hon'ble Supreme Court has made the following observations:

"UPON hearing counsel the Court made the following ORDER

Issue notice.

In the meantime, there shall be stay of the impugned judgment, until further order."

7. We further find that the Hon'ble Supreme Court vide order dated 08.05.2009, passed in SLP (Civil No.22889/2008) while granting the leave to file appeal, has made the following observations:

"ORDER

Delay condoned.

Leave granted.

Pending hearing and final disposal of the Civil Appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear 5 ITA No.5457/M/2013 M/s. Birla Sun Life Asset Management Company Limited

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."

8. A perusal of the above observations reveals that while accepting the petition for leave to file the appeal vide order dated 08.05.2009, the Hon'ble Supreme Court has directed that pending the hearing and disposal of the Civil Appeal, the Department is restrained from recovering penalty and interest which has accrued till date. It has also been made clear that it would be open to Department to recover the amount of outstanding interest demand in case the appeal of the Department is allowed. It has also been directed that during the pendency of the Civil Appeal, the assessee will pay tax as if section 43B(f) is on statute book but at the same time the assessee would be entitled to make a claim in this respect in its returns.

9. In view of the observations of the Hon'ble Supreme Court, in our view, it will be proper to dispose of this appeal in the light of the order of the Hon'ble Supreme Court dated 08.05.2009 passed in the case of "CIT vs. Exide Industries Ltd." (supra). We therefore dispose of the present appeal with a direction that the assessee will pay the tax as if section 43B(f) is on the statute book, however, till the decision of the Hon'ble Supreme Court in the case of "CIT vs. Exide Industries Ltd." (supra), the Revenue will not recover the penalty and interest which may accrue till the decision of the appeal by the Hon'ble Supreme Court in the case of "Exide Industries Ltd." It would be open to the Department to recover the outstanding interest demand in case the Civil Appeal of the Department in the case of "Exide Industries Ltd." (supra) is allowed by the Hon'ble Supreme Court. Subject to our above observations, the matter is restored to the file of the AO to be adjudicated afresh as per the 6 ITA No.5457/M/2013 M/s. Birla Sun Life Asset Management Company Limited

decision of the Hon'ble Supreme Court in the case of "Exide Industries Ltd." (supra).

10. In the result, the appeal of the assessee is therefore partly allowed for statistical purposes.

Order pronounced in the open court on 30.06.2015.

Sd/- Sd/- (G.S. Pannu) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 30.06.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.