COMMISSIONER OF INCOME TAX Vs. BHAGWATI FOUNDERIES LTD

JUDGEMENT

(1.) Heard Mr.Tanvish U.Bhatt, learned Counsel for the Revenue, at whose instance, the following questions has been referred to this Court for our opinion :

(2.) The Assessee is a Limited Company manufacturing iron castings. The Income Tax Officer (ITO) noted that during the year under consideration, the assessee made provision for encashable privilege leave amounting to Rs.79,711/-. The ITO was of the opinion that the claim of deduction was not acceptable as it was a mere provision, which makes an employee to claim encashment of his leave, which he may encash or avail depending upon particular circumstances. The ITO was also of the opinion that the payment had not become due as it would become due only when the employee makes an application and seeks to get encashment of unutilised leave. The ITO observed that the assessee could not foresee a situation wherein all the employees or some employee would make an application seeking encashment of the unutilised leave. He, accordingly, disallowed the claim.

(3.) Mr.Tanvish U.Bhatt, learned Counsel for the Revenue, submitted that there is a sharp conflict in the judgements of the Supreme Court in the matter of Indian Molasses Co. (Private) Ltd. vs. Commissioner of Income-Tax, West Bengal [37 I.T.R. 66] and Metal Box Company of India Ltd. vs. Their Workmen [73 I.T.R. 53]. He, however, also referred to a judgement of the Supreme Court in the matter of Bharat Earth Movers vs. Commissioner of Income-Tax [245 I.T.R. 428].