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TMI Blog2017 (3) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... fide as it is on record and the change was made on the basis of accepted accounting principles. On that basis of this finding, we do not find any infirmity in the order of Ld. CIT(A) on this issue, and, therefore, the relief granted to the assessee by the Ld. CIT(A) is sustained . - Decided against revenue. Liability of interest on turnover tax - whether an allowable expenditure for computing book profit? - Held that:- CIT(A) in his detailed order provided the reasons carefully as to why the claim of assessee is justified herein. At the same time we also observe the decision of the West Bengal Tribunal in the case of Kingsway & Co. [1989 (7) TMI 326 - WEST BENGAL TAXATION TRIBUNAL ] wherein the provisions for interest on turnover tax is determined as an ascertained liability and once it is so, the same cannot be added to the book profit u/s. 115J of the Act. We agree with the findings of the Ld. CIT(A) and the relief given to the assessee on this issue is, therefore, sustained. - Decided against revenue. Provision of doubtful debt - whether an allowable expenditure for computing book profit? - Held that:- Issue is decided in favour of the assessee company by the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that liability of interest on turnover tax is allowable expenditure for computing Book Profit, ignoring the fact that provision for interest on turnover tax is unascertained liability. 3. That on the facts and circumstances of the case the Ld. CIT(A) erred in holding that provision for doubtful debt is allowable expenditure for computing book profit, ignoring the fact that provision for doubtful debt is not ascertainable, hence not allowed to be deducted while computing book profit. 3. The facts of the case are that the assessee company filed its return of income for AY 1990-91 on 31.12.1990 declaring NIL income. The book profit u/s. 115J of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was also shown at NIL. The revised return of income was filed on 27.05.1991. However, in this return also the income under the normal provisions as well as book profit u/s. 115J of the Act was shown at NIL. The AO processed the return of income u/s. 143(1)(a) of the Act, issued intimation dated 12.03.1991 wherein he computed the book profit u/s. 115J of the Act at ₹ 42,86,748/- being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 115J of the Act as per the order u/s. 251/154 of the Act. The instant appeal is filed against the said computation of book profit u/s. 115J of the Act. 5. The first ground of appeal relates to the position of law that provisions for gratuity is not to be added to book profit. The AO made an addition of ₹ 36,93,429/- on account of provision made by the assessee on account of gratuity. It was contended before the AO that the provision made for gratuity is not an unascertained liability and, therefore, the same cannot be added to compute the boo profit u/s. 115J of the Act that the liability had been calculated on the basis of actuarial valuation towards future payments to the employees. The assessee submitted a copy of actuarial valuation certificate issued by the Advocate and registered valuer. However, the contention of the assessee was not accepted by the AO for the reason that there was change in the method of accounting from cash basis to lower the book profits for the year under consideration. On careful consideration of facts and law, the Ld. CIT(A) in his order on record, has stated that the AO was not justified in rejecting the claim of the assessee company for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not proved to be mala fide as it is on record and the change was made on the basis of accepted accounting principles. On that basis of this finding, we do not find any infirmity in the order of Ld. CIT(A) on this issue, and, therefore, the relief granted to the assessee by the Ld. CIT(A) is sustained . This ground of appeal of revenue is dismissed. 8. The next ground of appeal relates to the liability of interest on turnover tax whether an allowable expenditure for computing book profit. 9. The AO had made an addition of ₹ 37,56,330/- on account of provision for interest on turnover tax in the computation made u/s. 115J of the Act. It was submitted before the AO that the provision for interest on turnover tax is an ascertained liability and, therefore, same cannot be added to the book profit. It was submitted that the liability for interest on turnover tax is statutory liability u/s. 10A of Bengal Finance (ST) Act, 1941, which is not discretionary or optional under the Act. It was submitted beore the AO that the provisions of section 10A was inserted in the Bengal Finance (ST) Act, 1941 w.e.f. 01.10.1983. According to the provisions of the said Bengal Finance (ST) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was not accepted by the AO for the reason that the liability was not accrued in the year under consideration but in earlier years. The Ld. CIT(A) in his order held that the AO was not justified in holding that the liability on account of interest on turnover tax was not accrued in the year under consideration. The fact remains that the liability of ₹ 37,56,330/- was an ascertained liability and this fact has also not been disputed by the AO. The assessee had made provision for interest on turnover tax after the decision in the case of Kingsway Co. supra and since it is an ascertained liability, therefore, same cannot be added to the book profit u/s. 115J of the Act. The Ld. CIT(A), therefore, directed that the AO to delete the said addition. 11. We have perused the case records and arrived at our considered view that the Ld. CIT(A) in his detailed order provided the reasons carefully as to why the claim of assessee is justified herein. At the same time we also observe the decision of the West Bengal Tribunal in the case of Kingsway Co., supra wherein the provisions for interest on turnover tax is determined as an ascertained liability and once it is so, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee vide ITA No. 2815/Kol/2013. The assessee has raised following grounds of appeal: 1.On the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the disallowance of ₹ 20,479,843/- in computing adjusted book profit for the purpose of section 115J of the Act claimed by the appellant on account of unabsorbed loss being lower than brought forward business loss. 2. On the facts and circumstances of the case, the Ld. CIT(A) erred in proceeding on a wrong interpretation of the express provisions of the Act and therefore, not taking into consideration the details of business loss suffered and depreciation incurred by the appellant, the evidence of which were filed by the Appellant. 16. The crux of the grounds of appeal of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of ₹ 20,479,843/- in computing adjusted book profit for the purpose of section 115J of the Act claimed by the assessee on account of unabsorbed loss is being lower than brought forward business loss. The AO did not allow deduction of lower of business loss or unabsorbed depreciation while computing the book profit u/s. 115J of the Act. On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115J of the Act as claimed by the assessee. That being further aggrieved, the assessee is in appeal before us on this issue. 17. At the time of hearing before us, the Ld. AR brought to our notice the following chart : FY ending on Business Loss Business Loss after adjustments Depreciation debited in P L A/c Depreciation required to be set off u/s. 205 12/31/1984 5,691,124 5,281,104 4,573,136 4,573,136 12/31/1985 4,157,785 3,760,109 3,313,732 3,313,732 12/31/1986 3,407,665 1,938,244 4,176,873 1,938,244 12/31/1987 5,019,047 2,659,153 3,628,301 2,659,153 3/31/1989 4,928,272 3,301,526 4,787,501 3,301,526 Total 23,203,893 16,940,136 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation to sec. 115J of the Act. The Hon ble Calcutta High Court observed that the answer to the aforesaid question is clearly given by the two decisions of the Hon ble Supreme Court as stated above. Once loss is held to be arrived at after taking into account depreciation, there is no scope of disputing the contention of the assessee that the amount of depreciation of ₹ 13,85,66,473/- is to be set off in terms of clause (iv) of the Explanation to section 115J of the Act. Thus, it was a duty of the AO to set off the said amount as the said duty falls within the purview of the limited power of making increases and deductions provided for in the explanation to the said section. 18. The Ld. DR, on the other hand, referred to the case of Hon ble Madras High Court in the case of CIT Vs. Madras Fertilizers Ltd. (2013) 33 Taxman.com 623 (Mad) wherein the issue was decided in favour of the revenue. The Madras High Court had held that a perusal of P L Account for the year 1988-89 showed that the entire loss including the depreciation for the year was duly set off as against the profits available in the year 1987- 88 by taking the depreciation and loss from the general reserv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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