Mumbai Port Authority Vs ACIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, decided cross appeals filed by the assessee and the Revenue for Assessment Years (AYs) 2009-10 and 2012-13 arising from orders of the Commissioner of Income Tax (Appeals). The assessee, Mumbai Port Authority (formerly Mumbai Port Trust), challenged certain additions and disallowances, while the Revenue contested relief granted by the CIT(A).
For AY 2009-10, the assessee’s challenge to the validity of reassessment proceedings under sections 147/148 was treated as not pressed, and the issue was left open.
The principal issue concerned the disallowance of ₹80 crore contributed to SBI Life Insurance Co. Ltd. towards a Leave Encashment Fund. The Assessing Officer and the CIT(A) held that the contribution was not allowable under section 43B(f), treating it as funding of a future liability rather than actual payment. The assessee argued that the amount had been actually paid to the insurer under a leave encashment scheme, resulting in an irrevocable transfer of funds and constituting business expenditure rather than a mere provision.
The Tribunal observed that the payment was not based on a book provision but represented an actual outflow of funds to SBI Life Insurance Co. Ltd., over which the assessee retained no control. Relying on the Kerala High Court decision in CIT v. Hindustan Latex Ltd., the Tribunal held that payment made to an insurer under a leave encashment scheme is distinguishable from a provision for future liability. It concluded that the contribution represented actual business expenditure allowable under section 37 and directed deletion of the ₹80 crore disallowance.
