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2010 (7) TMI 969 - HC - Income TaxMAT - Book profit determination - Whether addition on account of the provisions for gratuity, leave encashment and post retirement medical benefit could be made while computing the book profit u/s 115JB? - assessee is following mercantile system of accounting - claim of the assessee is that these provisions have been made on actuarial valuation and cannot be added for determining book profits u/s 115 JB as it is business liability in praesenti which has arisen during the accounting year and it is only the quantification and discharge of which is to take place at a future date - ITAT allowed deduction HELD THAT:- Section 115 JB was inserted by the Finance Act, 2000 with effect from Ist April, 2001. Under the provisions of this Section, where an assessee is a company, it is required to pay at least 7½% of its book profits as income tax. However, where the tax liability of the company under regular provisions is more than this amount, the company shall pay income tax according to the regular scheme. “Book profits” has been defined by the Explanation added to this Section whereunder it provides that net profit as shown in the profit and loss account for the relevant previous year prepared in accordance with the provisions of Part II and III of Schedule VI to the Companies Act, 1956 shall be increased by amounts specified in Clauses (a) to (g), if any amount referred therein is debited to the profit and loss account and reduced by the amount mentioned in clauses (i) to (viii) therein. The Tribunal while considering the issue in hand had specifically recorded that the provision for gratuity, leave encashment and post retirement medical benefit had been estimated on actuarial basis and was a liability which was created in praesenti though it was to be discharged at a future date. It was further recorded that the provisions which were created in respect of gratuity, leave encashment and post retirement medical benefit on actuarial basis had been estimated with reasonable certainty and, therefore, such an estimate cannot be treated to be contingent one. It was also observed that the provision made by the assessee in respect of gratuity, leave encashment and post retirement medical benefit on actuarial basis cannot be said to be provisions of unascertained liabilities so as to fall under clause (c) of the Explanation to Section 115JB (2). No substantial question arises for consideration .
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