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2016 (1) TMI 132 - AT - Income TaxMAT computation - adjustment on account of provision for gratuity and leave encashment while computing the book profits for the purpose of Section 115JB - Held that:- As decided in own case claim of the assessee has to be accepted in the light of decision of Hon’ble Supreme Court in the case of Bharat Earthmovers Vs CIT (2000 (8) TMI 4 - SUPREME Court) wherein it has been held that liability incurred by the assessee under the leave encashment scheme applicable to its employees proportionate to the entitlement earned by the employees subject to ceiling on accumulation not being a contingent liability, provision made thereof is deductible. Therefore, this claim of the assessee has to be accepted. The AO is directed to delete the addition made on account of provision for leave encashment, The contents of the learned counsel for the assessee is that actuarial report is on the record, therefore, the provisions should not be treated as unascertained liability. This report has not been relied upon by the revenue authorities below. There are specific defect in the report. Taking into consideration the findings of the ITAT in assessment year 2000-01, defects in the report and the claim of assessee that in assessment year 2000-01, a miscellaneous application has already been filed. We deem it appropriate to set aside this issue to the file of the Assessing Officer for re-adjudication. - Decided in favour of assessee for statistical purposes. Adjustment on account of provision for bad debts while computing book profits u/s 115JB - Held that:- Assessee was fair enough to conceal that issue is against the assessee as per the explanation 1 to Section 115JB of the Act. - Decided against assessee Adjustment to the value of international transactions of export of guar gum and pet chips - Held that:- Assessee had not gained, the AE had not paid anything and the commodities were sold to the AE at the same price at which those were purchased from the local market, just to retain the Star Export House status. The loss incurred by the assessee was only on account of foreign exchange fluctuation. The structure of the transaction was such for the assessee that it could not make any profit or incur any loss as the transactions were not being undertaken for the sake of any profit. We, therefore, are of the view that the addition made by the AO and sustained by the ld. CIT(A) on account of arm’s length price was not justified because the adjustment on account of arm’s length price of international transactions In the present case, the assessee did not make any profit and sold the goods to the PWT at the same price at which it was purchased from the local market and the PWT in turn sold the commodities to the customers at the same price at which these were bought from the assessee. Therefore, the international transactions with PWT met the arm’s length standard. Therefore, by keeping in view the totality of the facts as discussed herein above the addition sustained by the ld. CIT(A) is deleted. - Decided in favour of assessee Re-computation of depreciation - contention of the Revenue is that explanation 5 to Section 32(i) of the Income Tax, which is inserted with effect from 01.04.2002 was clarificatory in nature and therefore the Assessing Officer has rightly disallowed the depreciation - Held that:- Issue has been decided in favour of the assessee by the Hon’ble Jurisdictional High Court in the preceding assessment years ranging from 1997 to 2001 [2011 (3) TMI 679 - DELHI HIGH COURT ] held that fact remains that in the previous years, i.e., in the year 1995-1996 and 1996-97, the Assessee had not claimed any depreciation. When the assessment order in question was in the assessment year 1997-1998, bringing down the value of the asset purchased by showing notional depreciation for the year 1995-96 and 1996- 97 and allowing the depreciation on the written down value in this manner would be clearly wrong when the depreciation in the previous year has not been claimed at all. - Decided in favour of assessee Allowability of the expenditure on the improvement of lease hold premises u/s 37(1) - Held that:- As decided in assessee's own case expenditure to be treated as Revenue in nature. The finding of fact is a direction that improvement were made in the lease premises by erecting temporary wooden portion and structure, and therefore, the same were revenue in nature and even eligible for deduction under Section 37(i) of the Act. - Decided in favour of assessee Addition being 1/10th of preliminary expenses - CIT(A) deleted the addition - Held that:- Issue has been decided in favour of the assessee by the Hon’ble Jurisdictional High Court in the preceding assessment years ranging from 1997 to 2001 [2011 (3) TMI 679 - DELHI HIGH COURT ] held as there is no reason to disallow the same as it is clear that the Revenue had accepted to amortize the aforesaid expense over a period of ten years and, therefore, for all these ten years, the expenditure is eligible for deduction under Section 35D of the Act.- Decided in favour of assessee Disallowance of advertisements expenses related to glow signs and neon sign - CIT(A) deleted the addition - Held that:- As decided in assessee's own case for the assessment year 1999-2000 by putting the neon signs and glow signs, no asset of permanent nature is created. Simply because self-life of such neon signs is more, may not be of any significance once we keep in mind the important aspect on which the expenditure is incurred i.e. on advertising and marketing - Decided in favour of assessee
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