Case Law Details
Foseco India Limited Vs DCIT (ITAT Pune)
The issue under consideration is whether the payment made by the company to its employees under the Voluntary Retirement Scheme (VRS) is allowed as deduction?
In the present case, the assessee, a company engaged in the business of manufacture and sale of foundry fluxes, foundry chemicals, and pro fax, they paid some amount towards payment on account of Voluntary Retirement Scheme (VRS) relating to employees and filed the return claiming deduction of the said amount. The Assessing Officer, in the assessment completed u/s.143(3), did not allow deduction incurred on payment of VRS by treating the same as a capital expenditure.
ITAT state that, the instant case is pertains to AY 1998-99. Further, it is seen that section 35DDA has been inserted by the Finance Act, 2001 providing for amortization of expenditure incurred on Voluntary Retirement Scheme. The assessment year under consideration is prior to the insertion of section 35DDA and hence cannot rule the position. The instant year would be governed by the earlier provisions. Hence, by following the same, ITAT reverse the impugned order on this score and direct to allow the deduction in the year under consideration.
Accordingly, the appeal filed by the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee arises out of the order passed by the CIT(A)-13, Pune on 18-10-2019 in relation to the assessment year 1998-99.
2. The only issue raised herein is against not granting deduction of Rs.2.86 crore towards payment on account of Voluntary Retirement Scheme (VRS) relating to employees of its Calcutta unit.
3. Succinctly, the facts of the case are that the assessee is a company engaged in the business of manufacture and sale of foundry fluxes, foundry chemicals and profax. The assessee filed the return declaring total income at Rs.6,10,08,690/-. The Assessing Officer, in the assessment completed u/s.143(3), did not allow deduction of Rs.2,86,86,055/- incurred on payment of VRS by treating the same as a capital expenditure. The ld. first appellate authority countenanced the view of the Assessing Officer. Aggrieved thereby, the assessee has approached the Tribunal.
4. We have heard both the sides through Virtual Court and gone through the relevant material on record. It is undisputed that the assessee paid the above sum towards VRS of certain employees of Calcutta unit. It is noticed that similar issue came up for consideration before the Tribunal in assessee‟s own case for the immediately succeeding assessment year. Vide order dated 26-03-2010 (ITA No.4667/M/2005), the Tribunal has decided it in favour of the assessee. The Revenue carried the matter before the Hon‟ble Bombay High Court against the said order of the Tribunal. Vide judgment dated 08-03-2013, the Hon‟ble Bombay High Court dismissed the appeal of the Revenue. A copy of the judgment is available on record.
5. It is seen that section 35DDA has been inserted by the Finance Act, 2001 providing for amortization of expenditure incurred on Voluntary Retirement Scheme. The assessment year under consideration is prior to the insertion of section 35DDA and hence cannot rule the position. The instant year would be governed by the earlier provisions.
6. The ld. DR fairly admitted that the facts and circumstances of the case for the year under consideration are similar to those of the assessment year 1999-2000, which has been considered and decided by the Hon‟ble Bombay High Court. Respectfully following the same, we reverse the impugned order on this score and direct to allow the deduction in the year under consideration.
7. In the result, the appeal is allowed.
Order pronounced in the open Court on 06th July, 2020.
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