2011 (7) TMI 1372 - AT - Income Tax

Summary

Issues involved:
The judgment deals with the assessment year 2004-05 and the application of sec.115JB in MAT assessment regarding provisions made for gratuity and bonus in the profit and loss account.

Details of the judgment:

1. The Revenue filed an appeal against the order of the Commissioner of Income-tax (Appeals) regarding the addition of provisions for gratuity and bonus to the book profit of the assessee company under sec.115JB.

2. The Assessing Officer added back the provisions for gratuity and bonus as unascertained liabilities, but the Commissioner of Income-tax (Appeals) held that these provisions were made against ascertained liabilities, allowing the appeal filed by the assessee.

3. The only ground raised by the Revenue was the deletion of provision for bonus amounting to &8377;1,00,52,647 for the computation of book profit under sec.115JB.

4. The Tribunal found that the provision made towards bonus was not an unascertained liability as the assessee was obligated to pay the bonus to its employees, which was eventually paid after the close of the previous year.

5. Referring to the case of Bharat Earth Movers v. CIT, the Tribunal emphasized that while the exact quantum of the liability may not be ascertainable, the liability itself is not unascertained. In this case, the quantum of bonus had been determined by the assessee, and the provision was made because the payment was delayed, not due to uncertainty.

6. Consequently, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal filed by the Revenue.

Separate Judgment:
No separate judgment was delivered by the judges in this case.