9911796707
TMI Blog2014 (10) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances which needs deep probe into the matter. So, in the interest of justice, we restore this issue to the Assessing Officer with a direction to decide the same as per fact and law after providing due opportunity of being heard to the assessee. Computation of Book profit u/s.115JB - Held that:- We are not inclined to interfere with the finding of CIT(A) who has upheld the addition made by the Assessing Officer to the Book Profit as defined under Explanation to section 115JB. We uphold the same. Medical expenses reimbursed to employees and payment of Fringe Benefit Tax - Held that:- Since the CBDT has issued clarification that reimbursement of medical expenses up to 15,000/- is taxable as a fringe benefit in the hands of the employer, the Assessing Officer following the Circular has rightly treated the reimbursement of medical expenses to employees and non-working directors of the company as a fringe benefit under section 115 WB(2)(E) of the Act. Accordingly, the action of the Assessing Officer on this ground is upheld. X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout prejudice to the foregoing, the learned Commissioner of Income-tax(Appeals) grossly erred in not considering the fact that the computation of provision made by the assessee was unscientific and unreasonable and hence the excess provision should in any case have been disallowed. 8. For these and such other grounds as may be urged at the time of hearing, the order of the learned CIT (Appeals) may be vacated and that of the Assessing Officer be restored. The appellant craves leave to add, alter or amend any or all the grounds of appeal. 3. The first issue is with regard to disallowance out of deduction u/s.80IA of the Act in respect of profit earned from the project Godawari Lift Irrigation Scheme of ₹ 3,59,81,384/-. The next issue is with regard to disallowance out of deduction u/s.80IA of the Act in respect of profits earned from the project Guthpa Lift Irrigation Scheme amounting to ₹ 82,87,446/-. 3.1 The learned Authorized Representative has pointed out that both the issues have been decided in favour of the assessee in assessee's own case by ITAT, Pune in ITA Nos.657/PN/2010 and 671/PN/2010 vide order dated 17.09.2014 for A.Y. 2006-07, wherein the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project Godawari Lift Irrigation Scheme and Guthpa Lift Irrigation Scheme respectively. We uphold the same. 4. The next issue is with regard to relief in respect of disallowance of the warranty provision amounting to ₹ 83,85,380/-. The learned Authorized Representative has pointed out that this issue has been decided in favour of the assessee in assessee's own case by ITAT, Pune in ITA Nos.657/PN/2010 and 671/PN/2010 vide order dated 17.09.2014 for A.Y. 2006-07, wherein the Tribunal has decided the similar issue by observing as under: "45. In brief, the relevant facts are that the Assessing Officer made a total disallowance of ₹ 1,76,13,328/- on account of Provision for warranty. The Assessing Officer denied the claim of the assessee on the basis of a similar disallowance made in the immediately preceding assessment year 2005-06. However, in the course of proceedings before the CIT(A), assessee contended that the Assessing Officer erred in confusing the calculation made for assessment years 2005-06 and 2006-07 because the Provision made for the year under consideration was on a scientific basis by taking average of expenditure for the last three years as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in placing his own interpretation to Sec 80IA; He failed to appreciate contention and arguments advanced by the "Assessee" in this regard. 2. Ground of Appeal No.2:- Disallowance U/s 40(a)(ia) of the Act: Amount under dispute - ₹ 80,00,000/-. The learned Commissioner of Income Tax (Appeals) erred in considering the payment of Commission to "Non Executive Directors" as- a) covered under the provisions of section 194H of the Act, b) thereby covered for the purposes of deduction of Tax at source as per the applicable rate and c) in absence of deduction of tax at source, covered for the purposes of disallowance U/s 40(a)(ia) of the Act. 3. Ground of Appeal No.3:- Computation of Book Profit U/s 115JB of the Act. Profit on sale of Investments shown in Profit & Loss Account, to exclude for the purposes of calculation of Book Profit U/s 115JB of the Act being invested in prescribed securities:- Amount under dispute: ₹ 177,77,56,572/-. The learned CIT (Appeals) erred in rejecting assessee's claim that the amount invested in prescribed securities out of capital gains, should not be considered for the purposes of calculation of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a developer. In the case before the Hon'ble High Court, assessee was awarded a contract by Jawaharlal Nehru Port Trust (JNPT) to supply, install, test, commission and maintain the container handling equipment, namely, the cranes. JNPT was owing the dedicated container handling terminal. The stand of the Revenue was that assessee was not a developer of the infrastructure facility but had only supplied and installed the container handling cranes at the JNPT port. Therefore, it was contended by the Revenue that assessee was not eligible for the benefits of section 80IA of the Act. The Hon'ble High Court has negated the stand of the Revenue and held that the contract executed by the assessee for supply, installation, testing, commissioning and maintenance of container handling cranes at the JNPT terminal tantamounted to development of an infrastructure facility within the meaning of section 80IA of the Act. In our considered opinion, the said judgement of the Hon'ble High Court clearly covers the case of the assessee of being a 'developer' and not merely a 'contractor' for the purposes of section 80IA(4) of the Act. 27. Remaining on this objection, it has also been asserted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer would have income only if he is paid for development of the infrastructure facility. The Mumbai Bench of the Tribunal in the case of ACIT vs. Bharat Udyog Ltd., 118 ITD 336 (Mum) noted that the business activity of the nature 'build and transfer' also falls within the eligible activities for deduction u/s 80IA of the Act. The Mumbai Bench of the Tribunal has made the aforesaid observations in the context of objection raised before it regarding the claim u/s 80IA of the Act on the ground that assessee was paid by the Government for the development work. The aforesaid objection was negated by the Tribunal and the claim of deduction was allowed u/s 80IA of the Act. Thus, we do not find any justification to deny the claim of deduction u/s 80IA(4) of the Act merely because the cost of the project executed by the assessee was not fully funded by the assessee itself. 32. In view of the aforesaid discussion, we therefore hold that assessee is eligible for the claim of deduction u/s 80IA of the Act amounting to ₹ 40,02,10,981/- in respect of the profits derived from development of infrastructure facility for SSNNL. The order of the CIT(A) is set-aside and the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194J." 8.1 The case relied by the learned Authorized Representative does not touch the issue before us. The issue before us is with regard to commission paid to director. The issue has to be looked into its facts and circumstances which needs deep probe into the matter. So, in the interest of justice, we restore this issue to the Assessing Officer with a direction to decide the same as per fact and law after providing due opportunity of being heard to the assessee. 9. The next issue is with regard to computation of Book profit of ₹ 177,77,56,572/- u/s.115JB of the Act. In appeal, the CIT(A) following its predecessor's decision for A.Y. 2006-07, has decided the issue against the assessee by observing as under: ""8.3 The submissions made by the appellant are carefully examined with reference to the facts of the case and the legal position. In the first instance, it is to be mentioned that in the profit & loss account for the year under appeal, the profit on sale of investments is included under the head 'other income' as shown in schedule 19 to the Profit & loss account. Thus, this is not a case where the profit on sale of investments is directly taken to the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Act. In fact, the Assessing Officer gets jurisdiction to make assessment under section 115J only when the total income computed under the provisions of the Act is below 30 per cent of the book profit of the assessee as contemplated under the said section. While deductions, rebates and allowances are available in the computation of income for normal assessment, additions, deductions and adjustments except to the extent covered by the Explanation to section 115J(1A) are not available in the computation of book profit. In other words, once the Assessing Officer finds that total income as computed under the provisions of the Act is less than 30 per cent of the book profit, he has to give up normal assessment and has to opt for the assessment under section 115J which does not provide for any deduction in terms of section 54E. The assessee had no case that the long-term capital gain was not profit includible in the profit and loss account prepared in terms of Schedule VI to the Companies Act. Since there is no provision in Chapter XII-B for deduction of capital gains in the computation of book profit, the assessee was not entitled to the deduction claimed. So long as long-term cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is justified. In this regard, reference can also be made to the decision of the Bombay High Court in the case of Veekay Lai as reported in 249 ITR 597 wherein the jurisdictional court observed as under in relation to inclusion of profit on sale of investment in the book profits u/s. 115JA: " .... Further, under clause (1) of Part II of Schedule VI to the Companies Act where a company receives the amount on account of surrender of leasehold rights, the company is bound to disclose in the profit and loss account the said amount as non-recurring transaction or a transaction of an exceptional nature irrespective of its nature, i.e., whether capital or revenue. It would be inappropriate to directly transfer such amount to capital reserve. Such receipts are also covered by clause 2(b) of Part II of Schedule-VI of the Companies Act which, inter alia, states that profit and loss account shall disclose every material feature, including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of an exceptional nature. Lastly, even under clause 3(xii)(b) profits or losses in respect of transactions not usually undertaken by the company or und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on various points relating to taxability of fringe benefits. The claim of the appellant is that since the reimbursement of medical expenses to the extent of ₹ 15,000/- is not a perquisite in the hands of the employee, such benefit cannot be considered as fringe benefit under sec. 115WB. However, the Board has clarified this matter in Circular No. 8 of 2005 vide question No.69 of the Circular, which reads as under:- Whether medical reimbursement up to ₹ 15,000 (exempt in the hands of the employees) and medical reimbursement over ₹ 15,000 (taxed as perquisite in the hands of the employee) is liable to FBT? 69. At present, if any sum is paid by the employer for expenditure actually incurred by the employee*for medical treatment in an unapproved hospital and it exceeds ₹ 15,000 during the year, such sum is 'salary' as defined in clause (1) of section 17 of the Income-tax Act and liable to income-tax in the hands of the employee. There is no change in this position. Since such sum is taxable in the hands of the employee, the same is not liable to FBT. However, if any sum is paid by the employer for expenditure actually incurred by the employee for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
