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2008 (9) TMI 419 - AT - Income TaxBusiness Expenditure - claimed deduction on interest payable - unascertained or contingent liability - Computation of income u/s 115JB - deduction of accrued liability of interest - Interest income, not credited to the accounts, could be added to the book profit under s. 115JB - Interest charged under s. 234B of the Act. Business Expenditure - claimed deduction on interest payable - unascertained or contingent liability - CIT allowed the interest expenditure - HELD THAT:- We find that the assessee had taken loan from the Pearless and there was some dispute pending in respect thereof in the Court. The dispute came to an end in this year. The Court directed the assessee to pay interest @ 21 per cent p.a. till the date of the order of the Court and @ 10 per cent p.a. thereafter. In these circumstances, it cannot be said that the liability was not an ascertained liability - Further, it is a trite law now to say that entries in the books of account are not conclusive about determination of the income and that if a liability has been incurred but not entered in the books, the same has to be allowed if the assessee follows mercantile system of accounting. It is also seen that following the aforesaid principle, the AO has brought to tax interest income although this income was not provided in the books of account. Therefore, the action of the AO is contradictory in nature in this behalf. The ld CIT(A) has examined the matter in correct legal perspective and on the basis of decision of Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT[1971 (8) TMI 10 - SUPREME COURT]. In view thereof, we do not find any such error in the order of the ld CIT(A), which requires correction from us. Thus, this ground is dismissed. Computation of income u/s 115JB - deduction of accrued liability of interest - HELD THAT:- We are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of the company in general body meeting, filed before the RoC, and to which he has not taken any objection under that Act. The impugned amount was not entered in the books as liability and the auditor had made certain remarks only in regard to the impugned amount - No objection has been taken by the Registrar to the accounts filed before him. Therefore, the book profit has to be taken as per the aforesaid P&L a/c. No adjustment is permissible in the book profit in respect of aforesaid amount under any of the cls. (i) to (vii) of the Explanation to s. 115JB. In view thereof, it is held that the ld CIT(A) erred in directing the AO to reduce this amount from the book profit. Thus, this ground is allowed. Interest income of Rs. 1,19,07,474, not credited to the accounts, could be added to the book profit under s. 115JB - HELD THAT:- The AO does not have any power to reopen the accounts for this purpose, which have been filed after due process before the RoC and to which he has not taken any objection. Following our finding on that ground of the Revenue, it is held that the interest income of Rs. 1,19,07,474 could not have been added to the book profit under s. 115JB. Thus, this ground is allowed. Interest charged under s. 234B of the Act - HELD THAT:- The interest charged under s. 234B of the Act was stated to be consequential in nature. The AO is directed to recompute the interest after giving effect to this order. Appeal allowed in part.
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