Commissioner Of Income-Tax vs Delton Sales P. Ltd.
1990 Latest Caselaw 69 Del

JUDGMENT

Kirpal, J.

1. In respect of the assessment year 1983-84, the petitioner is seeking reference with regard to the claim of the respondent-assessed which was allowed by the Tribunal regarding leave encashment. The case of the petitioner was that it was a contingent liability, but the Tribunal has allowed the same by holding that the answer to the question is self evident. In coming to this conclusion, the Tribunal has relied upon the decision of the Supreme Court in the case of Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53. That decision, however, did not pertain to leave encashment, but was with regard to payment of gratuity under a statutory enactment.

2. Learned counsel for the petitioner has brought to our notice the decision of the Calcutta High Court in the case of CIT v. Bharat General and Textile Industries Ltd., [1986] 157 ITR 158, where the High Court has held that the provision for leave encashment is an contingent liability. The view of the Calcutta High Court is contrary to the one which has been taken by the Tribunal. The Tribunal, however, has not referred to the Calcutta High Court judgment.

3. In view of the aforesaid, a question of law does not arise and, therefore, we direct the Tribunal to state the case and refer the following question of law to this court :

BDEF"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in allowing the claim of the assessed for the assessment year 1983-84 in respect of the provision of Rs. 2,06,541.30 made by the assessed being the leave encashment payable to its employees by ignoring the material fact that the provision was in the nature of a contingent liability which the assessed may or may not be called upon to discharge ?"

4. There will be no order as to costs.