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2014 (12) TMI 214 - AT - Income TaxTariff adjustment u/s 115JB deleted - Taxability of advance against depreciation (AAD) – depreciation on land amortized - Advance against depreciation is reserve or not for computation of MAT u/s 115JB - Held that:- Following the decision in ACIT, Range II, Faridabad Versus M/s. NHPC Limited [2014 (11) TMI 92 - ITAT DELHI] - Advance against depreciation is an amount that is under obligation right from the inception as the same shall be adjusted in future, hence, cannot be designated as reserve - advance against depreciation is nothing but an adjustment by reducing the normal depreciation including in the future years in such a manner that at the end of the useful life of the plant the same shall be reduced to nil - assessee cannot use the advance against depreciation for any other purposes except to adjust the same against future depreciation so as to reduce the tariff in future years. Once AAD is considered as income as is being alleged by Revenue the obvious implication will be that such income in the Balance Sheet is a reserve. It can’t be that AAD is an income and then it vanishes. Income has to be carried to the Balance Sheet and such income carried to Balance Sheet will form part of the ‘Reserve’. Since ‘AAD’ has been held by Supreme Court is not a reserve, this contention of the Revenue can’t be accepted – Decided against revenue. Computation of book profit u/s 115JB on provision for gratuity, leave encashment and post-retirement benefits – Held that:- In Bharat Earth Movers Versus Commissioner of Income-Tax [2000 (8) TMI 4 - SUPREME Court] it has been held that the liability incurred by the assessee under the Leave Encashment Scheme determined on actuarial valuation is an ascertained liability and cannot be considered as a contingent liability - the amount of such provision can be claimed as deduction only on actual payment and not on the simple creation of provision - in the computation of book profit u/s 115JB, deduction is available for such provision of ascertained liability – revenue has not drawn attention towards any part of the provisions of section 115JB, which makes the provisions of section 43B(f) applicable to the computation of book profits - if the income under the normal provisions of the Act turns out to be more than the book profit u/s 115JB and the total income is to be computed as per the normal provisions, then no deduction for such provision would be admissible unless the amount of such provision is paid before the due date u/s 139(1) of the Act. Provision for loss in hedged transaction – Held that:- The loan was taken as a general purpose loan "and not for purpose of acquisition of any asset" - The finding returned by the CIT(A) remained uncontroverted by the revenue - as the loan was taken not for acquisition of any capital asset but on revenue account, the loss suffered on hedging for payment of interest and repayment of principal amount of loan in foreign currency is deductible as an ascertained liability relying upon CIT Vs. Woodward Governer India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] - such amount, being a provision for an ascertained liability, is deductible in the computation of income, both under the normal provisions and also u/s 115JB of the Act – the order of the CIT(A) is upheld. Disallowance u/s 14A – Computation of income under MAT provisions – Held that:- It can be seen from the assessee's balance sheet as on 31.03.2008 that the amount of Share capital with Reserves and surplus stands at ₹ 17,275.83 crore - the amount of Shareholders funds is far in excess of the amount of Investment yielding exempt income – relying upon CIT Vs. Suzlon Energy Ltd [2013 (7) TMI 697 - GUJARAT HIGH COURT] - there can be no question of disallowance of interest u/s 14A because the amount of Shareholders fund is much higher than the amount of Investments yielding exempt income - the disallowance on account of interest expense is to the tune of ₹ 19.65 crore - If such disallowance is deleted, the remaining amount of disallowance comes to ₹ 5.25 crores - the assessee itself voluntarily made disallowance of ₹ 17.89 crore u/s 14A - as the remaining amount disallowable as per rule 8D is less than the amount suo motu disallowed by the assessee, there is no need for making any further disallowance – thus, the order of the CIT(A) is upheld – Decided against revenue.
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