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TMI Blog1994 (9) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... iability in respect of power charges payable to Maharashtra State Electricity Board for the purpose of computation of income under section 28 as well as section 115J. 4. The brief facts of the case are that the assessee-company during the assessment year 1990-91 had made provision of Rs. 3.81 lakhs in its books of account in respect of liability relating to power charges amounting to Rs. 220.01 lakhs and liability of interest thereon amounting to Rs. 80.81 lakhs. The liability admittedly does not pertain to the year in question but pertains to the earlier years, i.e., 1983 onwards. The assessee while computing its income claimed this liability as deduction out of the profits of the current year. Similarly for the computation of book profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1989-90. Regarding delayed payment charges and interest it was explained that the company was unable to pay the demand due to heavy losses. The MSEB was charging delayed payment charges at the rate of 2% of the bill amount as well as 18% interest on the outstanding amount. The company made representation to the MSEB for not charging the delayed payment charges as interest had already been charged. The MSEB was also requested to waive the same as the company was a sick unit under BIFR. However, the MSEB declined to accept the request of the assessee and therefore the assessee had to make provision for the same. Since interest was automatic liability provision for this had to be made along with the provision for main demand. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certained one. However, no reduction was made so far as additions made in computing the income under section 28. 9. The learned counsel for the assessee, Shri S.M. Inamdar has vehemently argued that since the liability towards power charges was in dispute and the dispute was finally decided in early 1990, the liability was crystallised in assessment year 1990-91 and, therefore, this liability had been rightly excluded by the CIT(A) for the purpose of computation of book profits under section 115J. However, he submitted that for the same reason, the CIT(A) should have deleted the addition of this amount from the computation of income under section 28. When the Bench asked him to explain the nature of the liability it was explained by him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation of income under section 28 and also could not be excluded while computing the book profits under section 115J as no provision could be made by the assessee-company in respect of earlier liabilities. 11. In rejoinder the learned counsel for the assessee submitted that the order of the BIFR was not final. He invited our attention to the last para of the order which states that Board has decided to address the Chief Minister of Maharashtra as the Bench felt that without these concessions and relief the viability of the company was doubtful. He, therefore, contended that the matter was kept open for negotiation. Regarding making of provision for earlier years he contended that there was no provision in the Companies Act or in Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Therefore, we are unable to accept the contention of the assessee that the liability was crystallised in the assessment year 1990-91. 13. The contention of the revenue that the liability was crystallised either on the date, i.e., 30-9-1992 when the MSEB informed the assessee-company for reduction of contract demand from 46.208 KVA to 36,000 KVA with effect from 1-5-1986 or on 17-8-1988 when the BIFR passed the order also cannot be accepted. As already mentioned by us in the earlier para that there was no dispute at all regarding the accrual of the liability and the representation of the assessee was simply a mercy petition for waiver. The contention of the revenue that the liability crystallised subsequently either on the date of orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a provision in respect of this ascertained liability. There is no provision in the Companies Act or Income-tax Act which may prohibit the assessee in making such provision. There is no requirement under section 115J for exclusion of provision to meet an ascertained liability even if it related to an earlier year. Therefore, in our opinion, the CIT(A) was justified in directing the Assessing Officer to exclude this liability from the computation of book profits under section 115J. This will dispose of the revenue's appeal In IT Appeal. No. 1900/B/94 and the assessee's ground Nos. 1 to 3. The revenue's appeal is therefore, dismissed. Since the order was rectified by the CIT(A) the ground Nos. 1, 2 and 3 of the assessee's appeal become ..... X X X X Extracts X X X X X X X X Extracts X X X X
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