9911796707
TMI Blog2017 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. Expenditure incurred on issue of debentures - Nature of expenditure - Held that:- The debentures whether convertible or non convertible are in the nature of loan at the time of their issuance and any expenditure incurred on issue of such debentures or bonds had to be regarded as part of the borrowing cost and have to be allowed as a deduction and as a revenue expenditure. This expenditure cannot be regarded as capital. We do not find any infirmity in the order of CIT(A) and accordingly ground raised by the revenue is dismissed. Treatment to loss - loss incidental to the business or capital loss - Held that:- As the Assessee did not acquire any capital asset and merely paid advance for acquiring capital asset. CIT(A) was of correct view that the loss in question was a loss incidental to the business and was not a capital loss. Disallowance made by the AO cannot be sustained Exclusion of retention money in computing total income under normal provision as well as in computing Book Profit u/s. 115JB - MAT - Held that:- As on the date when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for deduction on account of write off of these sums had to be considered as allowable expenditure u/s 28 r.w.s. 37(1) of the Act. As far as the advance written off of Kumardhubi division is concerned, these advances were given for business purpose to various parties for purchase of goods , consumable stores and electrical installation. These advances had nexus with the business of the assessee and their write off in the books of accounts has to be considered as allowable deduction u/s 28 r.w.s. 37(1) of the Act. We therefore are of the view that CIT(A) was fully justified in allowing deduciton claimed by the assessee. We also find that the arguments advanced by the assessee before us clearly supports the conclusion arrived at by CIT(A). Provision for doubtful debt added back while computing Book Profit u/s 115JB - whether the debit in the profit and loss account under the head “provision for doubtful debts is really a provision for doubtful debts or write off of doubtful debts as bad debts? - Held that:- It is clear from a perusal of the Schedule-9 to the Balance Sheet as well as profit and loss account and debtors on the asset side of the balance sheet that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.09.2010 of CIT(A)-I, Kolkata relating to A.Y 2006-07. The assessee has filed a Cross Objection against the very same order of CIT(A) which is C.O. 13/Kol/11. 3. Ground No.1 raised by the revenue in its appeal and the only ground of cross objection raised by the assessee in its Cross Objection can be conveniently disposed off together. These grounds read as follows :- Ground of appeal of the Revenue: 1. That on the facts and in the circumstances of the case Ld. CIT ( Appeals) is not justified and erred in allowing leave encashment of ₹ 13,82,121/- u/s. 43B of the IT Act. Ground of appeal in C.O.No.13/Kol/2011 1. That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and erred in disallowing provision for leave encashment amounting to ₹ 44,57,282/- u/s 43B of the Act. 4. The Assessee is a company. It is engaged in the business of manufacture and sale of metallurgical machinery, materials handling and conveying plant/machinery/spares and coal washing plant on a turnkey contract basis. For A.Y.2006-07 the assessee filed return of income on 28.11.2006 declaring total income of Nil as per the normal provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) allowing deduction to the extent of ₹ 13,82,121/- the revenue has raised ground No.1 before the Tribunal. Aggrieved by the order of CIT(A) sustaining the addition of the remaining sum which was the provision made for leave encashment the assessee has filed the cross objection. 6. We have considered the rival submissions. As far as the ground of appeal of the revenue is concerned, we do not find any merits in the grounds of appeal raised by the revenue. The proviso to section 43B clearly lays down that nothing contained in section 43B(f) shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 of the Act, in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. It is no doubt true that the assessee in the present case did not file the evidence regarding payment of ₹ 13,82.121/- before the due date of filing the return of income u/s 139(1) of the Act by the assessee for the relevant assessment year along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was rejected by the AO for the reason that the proviso to section 43B of the Act cannot be read into the provision of section 36(1)(va) of the Act. 10. On appeal by the assessee, the CIT(A) directed the AO to allow the claim of the assessee for deduction and in doing so, the CIT(A) followed the decision of the Hon ble Delhi High Court in the case of CIT vs AIMIL Ltd. Ors. 229 CTR 418 (Del) wherein it was held that employees contribution to PF should be allowed as deduction which is paid on or before the due date of filing the return of income u/s 139 of the Act. Aggrieved by the order of CIT(A) the revenue has raised ground no.2 before the Tribunal. 11. At the time of hearing it was brought to our notice that the Hon ble Calcutta High Court has also taken the view that employees contribution to PF paid on or before the due date of filing the return of income u/s 139(1) of the Act should be allowed as deduction. In this regard the decision of the Hon ble Calcutta High Court in the case of M/s. Akzo Nobel India Ltd. Vs CIT in ITA 110 of 2011 order dated 14.06.2016 and in the case of CIT vs Vijayshree Ltd., of the Hon ble Calcutta High Court in GA No.2607 of 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said query, the Assessee filed detailed reply vide its letter dated 08-10-2009 contending that since expenditure has been incurred for raising debts to be utilized for the purposes of business, the expenditure has to be considered as revenue in nature and allowable as deductible expenditure in computing total income. 15. Disregarding the above submission, the AO. in the order u/s 143(3) disallowed the expenditure incurred on issue of FCCB on the basis that since the expenses does not represent interest expenses, the same are not allowable. The AO further observed that since FCCBs are convertible into equity share, expenses incurred for such issue is in the nature of capital expenditure and not allowable as deduction in computing Total Income. 16. Before CIT(A) the assessee primarily placed reliance on the decision of the Hon ble Rajasthan High Court in the case of CIT vs Secure Meters Ltd. (2010) 321 ITR 611 (Raj.) wherein it was held that debentures when issued are loans and whether it is convertible or non convertible does not militate against the nature of the debenture being in the nature of the loan and therefore expenditure incurred would be admissible as revenue expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of their issuance and any expenditure incurred on issue of such debentures or bonds had to be regarded as part of the borrowing cost and have to be allowed as a deduction and as a revenue expenditure. This expenditure cannot be regarded as capital. We do not find any infirmity in the order of CIT(A) and accordingly ground no.3 raised by the revenue is dismissed. 21. Ground No.4 raised by the revenue reads as follows :- 4. That on the facts and in the circumstances of the case Ld. CIT ( Appeals) has erred in directing to delete the addition of ₹ 2,15,00,000/-. 22. The assessee entered into an agreement dated 11.08.1999 with M/s. Hooghly Mills Co.Ltd for purchase of the property owned by M/s. Hooghly Mills Co.Ltd at at Raja Santosh Roy Road, Kolkata. The assessee paid a sum of ₹ 3 crores as advance at the time of the agreement for sale. It is the plea of the assessee that the property in question which was agreed to be purchased by the assessee was a land on which the assessee wanted to construct a building to be used as its office premises. However due to disputes the ultimate sale did not fructify. In full and final settlement, M/s. Hooghly Mills Co.Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a business loss. It was pointed out that in the present case the Assessee did not acquire any capital asset and merely paid advance. The assessee also placed reliance on the decision of the Hon ble Rajasthan High Court in the case of CIT vs Anjani Kumar Co. Ltd. 259 ITR 114 (Raj.) wherein it was held that advances made to agriculturist for purchase of land which was not refunded was a business loss and had to be allowed as deduction. Reliance was also placed on the decision of ITAT Mumbai in the case of Pik Pen Pvt. Ltd. Vs ITO in ITA No.6847/Mum/2008 order dated 28.01.2010 laying down the identical proposition. 25. The CIT(A) was of the view that the decisions relied upon by the assessee before him directly supported the plea of the assessee that the loss in question was a loss incidental to the business and was not a capital loss. He therefore held that the disallowance made by the AO cannot be sustained. Aggrieved by the order of CIT(A) the revenue has raised ground no.4 before the Tribunal. 26. We have heard the submissions of the ld. DR, who relied on the order of AO. The ld. Counsel for the assessee relied on the order of CIT(A). 27. We have given a very caref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be given to the assessee only on successful trial run of the final acceptance by the customer. According to the assessee therefore this is an air of suspense over the right of the assessee to the money which it had received unless and until successful trial run and final settlement is obtained. It was the plea of the Assessee that till such time the receipt in question cannot be regarded as income even though the assessee follows mercantile system of accounting. The assessee placed reliance on the decision of the Hon ble Calcutta High Court in the case of CIT vs Simplex Concrete Piles (India)P.Ltd. 179 ITR 8 (Cal) and several other high courts in support of its claim that the sum in question cannot be regarded as income under the normal provisions of the Act. 30. With regard to the claim of the assessee that the said sum cannot also be regarded as part of the book profits u/s 115JB of the Act. The assessee relied on the following decisions :- (i) Bangalore ITAT in the case of Syndicate Bank -vs.- ACIT (2006) 7 SOT 51 (Bang) where it has been held that the entry by way of crediting the profit and loss account in respect of zero coupon bond is of notional credit and not in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide an additional ground of appeal are available on record and when it was only a question of applying the law to those facts for correctly deciding the liability to tax of an assessee in accordance with law, the additional grounds of appeal should be permitted to be raised. 32. As far as the question whether retention money can be regarded as income under the normal provisions of the Act is concerned, the CIT(A) was of the view that even in the mercantile system of accounting, income cannot be said to have resulted even though the entry might have been made in the books of accounts. In this regard the CIT(A) placed reliance on the decision of the Hon ble Supreme Court in the case of Shoorji Vallabhdas and Co. 46 ITR 144 (SC). 33. With regard to including the retention money in computing the book profits the CIT(A) held as follows :- 11.9 Whether the above amount needs to be excluded in computing Book Profit u/s 115JB or not, the above issue is only academic as once it is upheld that the income has not accrued to the assessee, the same cannot be brought to tax under the special provisions of Section 115JB of the Act. In a plethora of decisions it has been held that MAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With regard to the excluding the aforesaid receipts from the book profits u/s 115JB of the Act it was submitted by him that the provision of explanation to section 115JB of the Act clearly lays down what are the sums to be excluded and included to the profit as per profit and loss account prepared in accordance with the provisions of the Companies Act, 1956 and the retention money is one of the sums that had to be excluded from the book profits as laid down in Explanatin-1 to section 115JB(2) of the Act. 37. The ld. Counsel for the assessee while reiterating the plea of the assessee as put forth before CIT(A) further placed reliance on the decisions of the Hon ble ITAT, Kolkata Bench in the case of DCIT vs Binani Industries Ltd. In ITA NO.144/Kol/2012 for A.Y.2009-10 order dated 02.03.2016 wherein the entire case laws on the issue has been discussed. The Tribunal finally concluded in the aforesaid decision that if the receipt is not in the nature of income then it cannot be considered as income for the purpose of book profit u/s 115JB of the Act. On the other hand if a receipt is considered as income but is exempt by virtue of any specific provision of the Act, then the same wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and accordingly the same is dismissed. 39. As far as the excluding the retention money from computation of book profit u/s 115JB of the Act is concerned, the provisions of Sec.115JB of the Act have to be looked at. Section 115JB of the Act as applicable for AY 2006-07 provides that notwithstanding anything contained in any other provision of the Act, where in the case of an Assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2001 , is less than seven and one half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one half ten per cent . The Assessee being a company the provisions of Sec.115JB of the Act were applicable. It is also not in dispute that the income tax payable on the total income as computed under the Act in respect of the previous year relevant to AY 2006-07 was less than Seven and one half percent of its book profits and therefore book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. Therefore, the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the profits of the assessee for the assessment year in question. In view of the aforesaid decision of the Hon ble High Court rendered on identical facts as that of the Assessee s case, there can be no doubt that retention money does not have any character of income. 41. When a receipt is not in the character of income, can it form part of the book profits for the purpose of Sec.115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Binani Industries Ltd. ITA No.144/Kol/2013 order dated 2.3.2016 reported in (2016) 178 TTJ 0658 (Kol) : (2016) 137 DTR 0185 (Kol)(Trib) had to deal with a case where the question was as to whether receipts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Apollo Tyres Ltd. (supra) as a case in which the income in question was taxable but was exempt under a specific provision of the Act and but for the exemption, the income would be chargeable to tax and such items of income should also be included as part of the book profits. But where a receipt is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H.Sugar Factory Ltd.(supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture Pvt. Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary company which is not treated as income u/s 2(24) of the Act and since it does not form part of the total income u/s.10 of the Act and therefore does not enter into computation provision at all under the normal provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard. In light of the aforesaid discussion, we are of the view that there is no merit in the other part of ground no.5 with regard to excluding retention money from the book profits for the purpose of Sec.115JB of the Act, and consequently the same is dismissed. 44. In the result the appeal by the revenue is dismissed and the Cross Objection by the assessee is allowed for statistical purpose. ITA No.532/Kol/2012(Revenue s appeal) ITA No.217/Kol/2012 (Assessee s Appeal) A.Y.2007-08 45. ITA No.532/Kol/2012 is an appeal by the revenue while ITA NO.217/Kol/2012 is an appeal by the assessee. Both these appeals are directed against the order dated 30.12.2011 of CIT(A)-I, Kolkata relating to A.Y.2007-08. ITA No.532/Kol/2012 (Revenue s appeal): 46. Ground no.1 raised by the revenue in its appeal and ground no.1 and 1.1 raised by the assessee in its appeal can be conveniently decided together . These grounds are as follows :- Ground of appeal of the Revenue: 1. That on the facts and in the circumstances of the case Ld. CIT(A) was not justified and erred in confirming the addition of an amount of ₹ 18,41,476/- on account of provision for leave enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice charges not credited to P L account amounting to ₹ 57,25,701/- back to the Assessing Officer instead of outright deciding the issue in spite of holding that the disallowance made by the A.O. is totally unjustified. 51. In the course of assessment proceedings, the AO noticed that the Assessee had claimed credit for Tax deducted at Source (TDS) in respect of certain payments received by the Assessee on which tax had been deducted at source u/s 194J of the Act amounting to ₹ 3,99,472/-. Sec.194J of the Act is applicable when payment is made by way of fees for professional or technical services rendered. The AO called upon the Assessee to show how corresponding income of ₹ 71,20,701 is shown in the profit and loss account as or under the head fees for professional or technical services. In its reply to the aforesaid query of the AO, the Assessee filed reply dated 08-11-2010 in which the Assessee claimed that receipts from contract credited in profit and loss account amounting to ₹ 4,74,82,22,653/- includes both income from contractors as well as professional services. The A.O., however found that there was only a sum of ₹ 13,95,000/- reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the income is already credited to Profit Loss account for the year under consideration, the disallowance as made by the A.O. is grossly unjustified. 53. The CIT(A) on perusal of the details/ information filed before him and after confronting the said details to the AO for his comments and after recording the fact that the AO did not give any comments despite adequate opportunity was of the view that the evidence filed before him needs to be taken into consideration for deciding the issue. The CIT(A) found that TDS certificate from CESC which reflected that they have paid ₹ 70,65,601 to the Assessee as professional charges was in respect of 300 TPH Coal washery at Sarasthali Open Cast Mines having a total contract value of ₹ 1,40,00,000/-. The CIT(A) found that as per the contract with CESC activities like designing and engineering involving technical expertise had to be carried out by the Assessee for which payments tax deduction at source was to be made in terms of Section 194J and not under 194C of the Act. The CIT(A) also found that even though the amount received is on account of designing engineering the same was credited under the head 'contract sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised ground no.3 before the Tribunal. The assessee is aggrieved by the direction of CIT(A) in and by which the CIT(A) directed the AO to verify other revenues as booked in the profit and loss account to come to a definite conclusion that the amounts represented by TDS certificates has been booked as part of the contract sale receipts, the assessee has raised ground no.3 before the Tribunal. 57. At the time of hearing it was brought to our notice that the AO gave effect to the directions of CIT(A) in the impugned order and passed an order dated 2.7.2012. In the said order the AO has accepted that the disputed income as shown in the TDS certificate has been included in the contract sales already disclosed by the assessee. The following were the relevant observations of the AO in this regard :- In respect of credit of income under Service Charges, the A/R produces all the relevant documents wherefrom it is found that the income relating to TDS deducted u/s 194J included in the total turnover which is also verified from the TDS certificates issued by CESC. Hence, the claim of the assessee made before ld. CIT(A) is found correct and accordingly the same is allowed. 58. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) was not justified and erred in deleting the addition made of an amount of ₹ 1,28.35,000/- by the A.O on account of Advances written off on the contention that the said advances are not incidental to the business of the assessee and has not been given during the normal course of business. 64. During the previous year, advances amounting to ₹ 1,29,40,600/- was written off In the books of accounts of the Assesssee, as they could not be recovered from the concerned parties. Break-up of the sum so written off is as follows:- Particulars Amount (Rs.) Inter-Corporate advances to McNaeill Engineering (later converted to ODC Carriers Pvt Ltd and ODC Engineering Constructions Pvt. Ltd) 1,00,00, 000 Interest on inter-corporate deposits given to McNaeill Engineering 27,50,000 Advance for purchase of goods, consumable stores and electrical installation to Jharkhand Steel Trader 1,35,000 Old Government Deposits 55,600 The Assessee claimed the sums as advances written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be one that springs directly from carrying on of the business and is incidental to it, and not any loss sustained by the assessee even it has some connection with his business. If that is established, then the deduction must be allowed, provided that there is no provision against it, expressed or implied, in the Act. Reliance was placed on Hon'ble Supreme Court in the case of CIT -vs.- Abdullabhai Abdulkadar (1961) 41 ITR 345 (SC) wherein it has been held that :- In order that a loss might be deductible it must be a loss in the business of the assessee and not a payment relating to the business of somebody else which under the provisions of the Act was deemed to be and became the liability of the assessee. Loss was allowable if it sprang directly from and was incidental to the business of the assessee; Reliance was further placed on CIT -vs.- Gillanders Arbuthnot Co. Ltd. (1992) 195 ITR 331 (Cal) wherein it was held that when a subsidiary company receives an advance from its holding company, such advance could be claimed as a loss if it turns out to be bad from the holding company's point of view. 69. It was submitted that names of the parties to whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mson Magor group. ODC Engineering and Constructions Pvt. Ltd owed a sum of ₹ 50,00,000/- to MEL. MEL requested ODC Engineering Constructions Pvt. Ltd to pay the aforesaid sum to the assessee in discharge of the amounts due by MEL to the assessee. This was agreed to by both the assessee and MEL as well as ODC Engineering Construction Pvt. Ltd. 72. Similarly ODC Carriers Pvt. Ltd owed a sum of ₹ 75.5 lakhs to MEL and MEL requested ODC Carriers Pvt. Ltd to pay the aforesaid sum due to it to the assessee in discharge of MEL s liability to the assessee. 73. The letters exchanged between the parties in this regard are placed at page nos. 69 to 77 of the assessee s paper book. After the aforesaid arrangement ODC Engineering Constructions Pvt. Ltd and ODC Carriers Pvt. Ltd., requested their dues to the assessee to be converted into ODCss. The details of the conversion of the amounts originally given as advances to MEL and conversion into ODC is given below : Date Particulars Amount 01-04-2000 Advance given to Mcneil Engineering Ltd. 1,00,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s parties for purchase of goods , consumable stores and electrical installation. These advances had nexus with the business of the assessee and their write off in the books of accounts has to be considered as allowable deduction u/s 28 r.w.s. 37(1) of the Act. We therefore are of the view that CIT(A) was fully justified in allowing deduciton claimed by the assessee. We also find that the arguments advanced by the assessee before us clearly supports the conclusion arrived at by CIT(A). For the reasons given above we dismiss ground no.6 raised by the revenue. 77. In the result the appeal by the revenue is dismissed. ITA NO.217/Kol/2012 (Assessee s appeal) 78. Ground Nos. 1 and 3 raised by the assessee in its appeal have already been decided while deciding the connected grounds of appeal in the revenue s appeal. Ground no.2 raised by the assessee reads as follows :- 2.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and erred in disallowing ₹ 85,125/- u/ s 36(1 )(va) read with 2(24)(x) of the Act on account of contribution made to Provident Fund on the contention that the same was not paid within due date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from its accounts by reducing corresponding amount from debtors on assets side of Balance Sheet. Hence, the amount provided represents bad debts written off. In this connection, he placed reliance on the decision of the Hon'ble Apex Court in the case of Vijaya Bank -vs.- CIT (2010) 323 ITR 166 (sq, wherein it was held that once an amount was debited in the Profit Loss account and corresponding debts were reduced, it was nothing but a write-off of bad debt. Since the amount debited has been reduced from debtors, it represents bad debts and therefore the same cannot be added in computing Book profit. He relied on the following decisions in support of his claim as aforesaid: - CIT-vs.-Yokogawa India Ltd. (2012) 204 Taxman 305 (Kar) - CIT -vs.- Kirloskar Systems Ltd. (2014) 220 Taxman 1 (Kar) - Flex Foods Ltd. -vs.- DCIT (ITA N 0.4800/DeV2011) - Murugappa Morgan Thermal Ceramics Ltd. -vs.- ACIT (IT A No.2208/Mds/2010) - Trent Ltd, Mum -vs.- Department of Income Tax (IT A no. 1073/Mum/2005) The ld. DR relied on the order of CIT(A). 85. After considering the rival submissions we are of the view that the question before us is as to whether the debit in the profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring the matter relating to the payment made for leave encashment before the date of filing the return back to the Assessing Officer instead of outright deciding the issue. 89. The facts and circumstances under which these grounds of appeal arise for consideration are identical to ground no.1 raised by the revenue in ITA No.100/Kol/2011 for A.Y.2006-07 and C.O.No.13/Kol/2011 for A.Y.2006-07. For the reasons stated therein ground no.1 raised by the revenue is dismissed while ground 1.0 1.1 raised by the assessee are treated as allowed for statistical purposes. 90. Ground No.2 raised by the revenue reads as follows :- 2. That on the facts and in the circumstance of the case the Ld. CIT(A) was not justified and erred in allowing the expenditure of ₹ 2,58,997/- under the head Foreign Currency Convertible Bond being revenue in nature although the addition was rightly made by the A.O. being the said expenditure as Capital in nature. 91. This ground of appeal is identical to ground no.3 raised by the revenue in A.Y.2006-07 in ITA No.100/Kol/2011. For the reasons stated therein we uphold the order of CIT(A) and dismiss ground no.2 raised by the revenue. 92. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Book Profit U/s 115JB of the Act of a sum of ₹ 1,02,88,421/-. During the year under consideration, Assessee adjusted ₹ 1,02,88,421/ - against General Reserve for reinstatement of employee benefit obligation on account of adoption of AS-15 (Revised 2005) Employee Benefits'. The said amount was claimed under regular provisions and while computing book profit since the expenses are allowable expenditure incurred during the normal course of business. The A.O. did not allow said exclusion in computation of Book Profit u/s 115JB of the Act stating that such downward adjustment is not allowed in the explanation below Sec.115JB(2) of the Act. 96. On appeal by the Assessee, the CIT(A) found that as per Note 21 of Schedule 22 to the Balance Sheet all defined benefit plans recognised in Financial Statements including contribution to employee's benefit were adjusted with General Reserve and was made as per actuarial valuation. The CIT(A) therefore held that the amount represents ascertained liability. The CIT(A) following the decision of CIT -vs.- Sain Processing Weaving Mills P. Ltd (2010) 325 ITR 565 (Del) held that since provision for contribution to employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the same is sufficient because the net profit as shown in the P L account for the purposes of Explanation 1 to the second Proviso to section 115JB of the Act is to be understood with reference to the Notes to accounts accompanying the annual accounts also. It was held that use of the expression 'net profit' in Explanation 1 to the second Proviso to section 115JB of the Act makes it clear that the impugned incremental liability towards leave encashment not debited to the Profit Loss account but otherwise disclosed in the Notes to Accounts will have to be taken into account while determining the book profits under section 115JB of the Act. It was submitted that the provision made on account of employees' benefits is an ascertained liability which is to be deducted from net profit as per P L account in order to compute correct book profit u/ s 115JB. Reliance in this regard is placed on decision of Hon'ble Delhi High Court in CIT -vs.- Sain Processing Weaving Mills P. Ltd (2010) 325 ITR 565 (Del) wherein the question was whether depreciation not debited in the profit and loss account of an Assessee whether can be reduced from the net profit as per profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for the purpose of Sec.115JB of the Act. Thus on the principle laid down in the decisions on which the ld. Counsel has placed on reliance, we are of the view that CIT(A) was justified in accepting the plea of the assesses. With regard to the directions of CIT(A) to verify whether the account of the provisions made for employee benefit has already been debited in the profit and loss account, the directions of CIT(A) his order is correct and is for the assessee to explain as to how the sum in question are not debited in the profit and loss account but nevertheless need to be excluded . We do not find any merits in the grounds raised by the assessee also. 102. In the result ground no.4 raised by the revenue and ground no.3 raised by the assessee are dismissed. 103. In the result the appeal by the revenue in ITA No.533/Kol/2012 is dismissed. ITA No.218/Kol/2012 (Assessee s appeal ) 104. Ground Nos 1 and 3 raised by the assessee have already been decided while deciding the connected grounds of appeal raised by the revenue in its appeal. Ground No.2 raised by the assessee in its appeal is identical to ground no.2 raised by the revenue in ITA No.100/Kol/2011 for A.Y.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
