2011 (1) TMI 1308 - HC - Income Tax

Summary

Issues involved: The judgment addresses the following issues:
1. Whether the Tribunal correctly excluded a sum of Rs. 15 lakhs shown as provision while computing book profit under Section 115J of the Income Tax Act, 1961?
2. Whether the Tribunal correctly allowed deduction under Section 80I without considering the deduction under Section 80HH of the Act?
3. Whether the Tribunal correctly allowed 1/7th of the premium amount payable on redemption of debentures after seven years?

Issue 1:
The ITAT found that a sum of Rs. 13,97,672 was paid as an incentive to employees after the relevant financial year, which had already been allowed as a deduction by the AO under the normal provisions of the Act. The ITAT concluded that there was no justification for the AO to adjust this amount while computing the book profit under Section 115J of the Act. The court agreed with this view, stating that it was not an unascertained liability and therefore should not be added back to the net profits. The decision was made in favor of the assessee based on this reasoning.

Issue 2:
The court noted that the question of allowing deduction under Section 80I without considering the deduction under Section 80HH had been settled by previous decisions of both the court and the Supreme Court. Citing cases such as CIT vs S.K.G. Engineering Pvt. Ltd. (2006) 285 ITR 423 and Joint Commissioner of Income Tax vs Mandideep Eng. And Pkg. Ind. P. Ltd. (2007) 292 ITR 1 (SC), the court ruled in favor of the assessee based on the established legal precedents.

Issue 3:
Regarding the allowance of 1/7th of the premium amount payable on debenture redemption after seven years, the court referred to its judgment in CIT vs Jagatjit Industries Ltd. (2006) 287 ITR 46 (Del) and decided in favor of the assessee. The appeal was consequently disposed of in favor of the assessee based on the decisions made for all three issues.