2010 (9) TMI 1139 - AT - Income Tax

Summary

Issues Involved:
1. Deleting the addition in respect of provision for gratuity.
2. Allowing set off of brought forward losses as per Form No. 29B.
3. Confirming the disallowance of interest paid to IFCI and ICICI u/s 43B.
4. Confirming the disallowance on account of provision for diminution in the value of long-term investments.
5. Charging of interest u/s 234B.

Summary:

1. Deleting the Addition in Respect of Provision for Gratuity:
The first issue for consideration relates to deleting the addition in respect of provision for gratuity for asst. yrs. 2005-06 and 2006-07. The AO added amounts for provision for gratuity and leave encashment under cl. (c) of Expln. 1 to s. 115JB(2). The CIT(A) allowed the relief, observing that the provision was made on an actuarial basis and was allowable as per the jurisdictional High Court's decision in DCM Shri Ram Consolidated Ltd. The Tribunal upheld this view, citing similar decisions in CIT vs. Hewlett Packard India (P) Ltd. and other cases, concluding that no adjustment can be made for computation of book profit u/s 115JB.

2. Allowing Set Off of Brought Forward Losses as per Form No. 29B:
The next issue involves directing the AO to allow set off of brought forward losses as per the chartered accountant's report in Form No. 29B. The AO allowed a lower set off amount based on the tax audit report. The Tribunal found that under cl. (iii) of Explanation to s. 115JB(2), the loss brought forward or unabsorbed depreciation as per books of accounts should be reduced, not as per the tax audit report. Thus, the CIT(A)'s direction to adopt the figure in Form No. 29B was upheld.

3. Confirming the Disallowance of Interest Paid to IFCI and ICICI u/s 43B:
The issue relates to confirming the disallowance of Rs. 136.10 lakhs on account of interest paid to IFCI and ICICI u/s 43B. The AO disallowed the claim as it was not made in the original or revised return, relying on Goetze (India) Ltd. vs. CIT. The CIT(A) upheld this view. The Tribunal, however, noted that the Supreme Court's decision in Goetze (India) Ltd. does not impinge upon the Tribunal's powers u/s 254. Therefore, the matter was remanded back to the AO to examine the claim on merits.

4. Confirming the Disallowance on Account of Provision for Diminution in the Value of Long-Term Investments:
The issue involves confirming the disallowance of Rs. 951.57 lakhs for diminution in the value of long-term investments in computing book profits u/s 115JB. The AO added this amount, and the CIT(A) upheld it, citing the retrospective amendment by Finance (No. 2) Act, 2009. The Tribunal agreed, referencing the Delhi High Court's decision in CIT vs. Ilpea Paramount (P) Ltd., which supported the retrospective application of the amendment.

5. Charging of Interest u/s 234B:
The final issue pertains to charging interest u/s 234B. The Tribunal upheld the CIT(A)'s order, noting that charging interest u/s 234B is mandatory as per the Supreme Court's decision in CIT vs. Anjum M.H. Ghaswala & Ors.

Conclusion:
Both the appeals filed by the Revenue are partly allowed, and the appeal filed by the assessee is partly allowed for statistical purposes.