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TMI Blog2014 (12) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2001 to 31.3.2004 and it was required to submit its application before CERC for revision in tariff rates after the tariff period 2004-09. The assessee filed its revised tariff application for two projects to the tune of Rs. 51.80 crore. The AO held that the quantification of reduction in sales was based the on assessee's pending application before CERC and as such this was not an ascertained liability. He, therefore, added back the provision of Rs. 51.80 crore to the book profit u/s 115JB of the Act. The ld. CIT(A) reversed the action of the AO by relying on his order for the immediately preceding year. 3. After considering the rival submissions and perusing the relevant material on record it is observed that similar issue was raised before the tribunal by the Revenue in its appeal for assessment year 2005-06. Vide order dated 30.9.2014, a copy of which is available on record, the Tribunal has confirmed the deletion of this addition. The ld. DR could not point out any distinguishing feature in the facts for the assessment year 2005-06 and the instant year. Respectfully following the precedent for the immediately preceding assessment year, we approve the impugned order on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and restored the assessee's point of view. 7. After considering the rival submissions and perusing the relevant material on record, it is noticed that the Hon'ble Supreme Court in the aforenoted case of Bharat Earth Movers (supra) has held that the liability incurred by the assessee under the Leave Encashment Scheme determined on actuarial valuation is an ascertained liability and cannot be considered as a contingent liability. However, it is significant to note that the legislature has stepped in by inserting clause (f) to Section 43B mandating that any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee cannot be allowed as deduction unless this amount is paid by the assessee on or before the due date for furnishing the return of income u/s 139(1) of the Act. In view of this legislative amendment nullifying the ratio of the decision in the case of Bharat Earth Movers (supra), the amount of such provision can be claimed as deduction only on actual payment and not on the simple creation of provision. However, when we peruse the mandate of Explanation 1 to section 115JB, it becomes clear that clause (c) talks of making addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a revenue receipt. Relying on the decision rendered by the Authority for advance ruling against the assessee on this issue, the AO treated it as a revenue receipt and accordingly added the same to the total income. The ld. CIT(A) upheld the assessment order in this issue. The assessee is aggrieved against the action of the ld. CIT(A) in this regard. 11. After considering the rival submissions and perusing the relevant material on record it is observed that similar issue has been decided by the Tribunal in assessee's favour by relying on the Supreme Court judgment rendered in assessee's own case overturning the view taken by the Authority for advance ruling on the question of taxability of the advance amount of depreciation. The ld. AR, on being called upon to explain the nature of this amount, stated that the excess amount of sale received for few earlier years, also including the year in question, is liable to tax later on under CERC Scheme. In view of the orders passed by the Tribunal in assessee's own case for earlier years on this issue, we hold that the Advance against depreciation cannot be treated as a revenue receipt. However, the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of appeal. 17. The next ground is against the deletion of addition of Rs. 22,99,80,552/- on account of provision for loss in hedged transaction for the purposes of computation of book profit u/s 115JB of the Act and also the income under the normal provisions of the Act. 18. Briefly stated the facts of this ground are that the assessee provided for a loss of Rs. 22.99 crore on derivative exposure. On being called upon to explain as to why this provision be not added in computation of book profit and also in the normal computation of income, the assessee stated that it availed loan facilities from syndicate of overseas bankers, which were sanctioned under the automatic route of RBI's External Commercial borrowing (ECB). The assessee entered into hedging/swap agreement with Barclays Bank and Standard Chartered Bank to cover/protect from market volatility in spot exchange currency rates for payment of interest and repayment of principal amount of loan in foreign currency. The differential amount, being the adverse impact on the company on account of total hedged amount, worked out at Rs. 22.99 crore, which was claimed as deduction. The Assessing Officer did not get convinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the rival submissions and perusing the relevant material on record it can be seen from the assessee's balance sheet as on 31.03.2008 that the amount of Share capital with Reserves and surplus stands at Rs. 17,275.83 crore. As against this, the Assessing officer has himself determined the amount invested in securities yielding exempt income at Rs. 1014.78 crore. Thus, it can be seen that the amount of Share-holders funds is far in excess of the amount of Investment yielding exempt income. Recently, the Hon'ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) has held that no disallowance of interest can be made u/s 14A if the assessee's own capital is more than the investments fetching exempt income. Similar view has been taken by the Hon'ble Gujarat High Court in CIT Vs. Suzlon Energy Ltd. (2013) 354 ITR 630 (Guj). In view of these precedents, it becomes ostensible that there can be no question of disallowance of interest u/s 14A in this case because the amount of Shareholders fund is much higher than the amount of Investments yielding exempt income. If we peruse the computation of disallowance made by the Assessing Officer under Rule 8D, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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