2019 (3) TMI 399 - HC - Income Tax

Substantial question of law - book profit u/s. 115JB - MAT computation - Admitted question regarding addition made in provision for bad and doubtful debts, revenue generated from trial run production and sales tax subsidy in computation of book profit u/s. 115JB. No substantial question of law admitted regarding - provision for Director s Retirement Benefit - excess expenditure on Voluntary Retirement - expenses on VRS pertaining to earlier years - addition made in respect of expenditure debited to P & L account - book profit u/s. 115JB - MAT computation - HELD THAT - The CIT(A) and the Tribunal by concurrent orders deleted such additions on the ground of the liabilities being ascertained contrary to what the Assessing Officer had held and / or on the ground that the Assessing Officer cannot tinker with the assessee s books of accounts while computing income under Section 115JB of the Act by placing reliance on the judgment of the Supreme Court in case of Apollo Tyres Ltd Vs. CIT 2002 (5) TMI 5 - SUPREME COURT . As perused the documents on record, we are broadly in agreement with the view of the Tribunal. The liabilities in question related to the provisions made for directors retirement benefits, liability arising out of voluntary retirement scheme etc. These questions are, therefore, not considered. Addition being expenditure claimed in respect of temporary structure - HELD THAT - Question similar to one considered by this Court in M/S ASSOCIATED CEMENT COMPANY LTD 2015 (12) TMI 1787 - BOMBAY HIGH COURT in which by order dated 9.12.2015, this question was not considered. Addition in respect of provision for deferred tax liability - tribunal deleted addition made by the AO resulted into double disallowance to the assessee - HELD THAT - CIT(A) and the Tribunal both have concurrently held the disallowance amounts to double disallowance and therefore, deleted the same. This additional question, therefore, not considered.

Summary

Issues:
1. Addition of provision for bad and doubtful debts in computation of book profit under Section 115JB of the Income Tax Act, 1961.
2. Deletion of addition made in respect of revenue generated from trial run production in computation of book profit under Section 115JB of the Income Tax Act.
3. Deletion of addition made on account of sales tax subsidy in computing book profit under Section 115JB of the Income Tax Act.
4. Deletion of addition made in respect of provision for Director's Retirement Benefit in computation of book profit under Section 115JB of the Income Tax Act.
5. Deletion of addition made in respect of excess expenditure on Voluntary Retirement in computation of book profit under Section 115JB of the Income Tax Act.
6. Deletion of addition made in respect of expenses on VRS pertaining to earlier years in computation of book profit under Section 115JB of the Income Tax Act.
7. Deletion of addition made in respect of expenditure debited to P & L account in computation of book profit under Section 115JB of the Income Tax Act.
8. Deletion of addition being expenditure claimed in respect of temporary structure.
9. Deletion of addition in respect of provision for deferred tax liability holding that the addition resulted in double disallowance to the assessee.

Analysis:
1. The Tribunal deleted the addition of provision for bad and doubtful debts in the computation of book profit under Section 115JB of the Income Tax Act. The High Court agreed with the Tribunal's view, stating that the liabilities were related to provisions for directors' retirement benefits and voluntary retirement scheme, and therefore upheld the deletion of this addition.

2. The Tribunal also deleted the addition made in respect of revenue generated from trial run production in the computation of book profit under Section 115JB of the Income Tax Act. The High Court did not consider this question, as it had similarities with a previous case where the question was not considered.

3. The Tribunal deleted the addition made on account of sales tax subsidy in computing book profit under Section 115JB of the Income Tax Act. The High Court did not delve into this issue as it was not considered necessary, possibly due to agreement with the Tribunal's decision.

4. The High Court considered questions relating to additions made by the Assessing Officer while computing the assessee's book profit under Section 115JB of the Income Tax Act. The CIT(A) and the Tribunal had deleted such additions, citing that the liabilities were ascertained contrary to the Assessing Officer's view or that the Officer cannot alter the assessee's books of accounts while computing income under Section 115JB.

5. The High Court did not consider questions related to the provision for Director's Retirement Benefit, excess expenditure on Voluntary Retirement, expenses on VRS pertaining to earlier years, expenditure debited to P & L account, expenditure claimed for a temporary structure, and provision for deferred tax liability. The CIT(A) and the Tribunal had concurrently held that certain disallowances amounted to double disallowance, leading to the deletion of these additions.

6. The High Court directed the Registry to communicate the order to the Tribunal for further proceedings related to the appeal. The respondent's counsel waived service, indicating agreement with the decision.