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2016 (12) TMI 946 - AT - Income TaxAddition made on account of Bad and Doubtful Debts and miscellaneous losses written off - Held that:- We observe that assessee has not provided necessary information and explanation along with relevant copies of accounts or documentary evidences before the lower authorities in order to exhibit the opening balance of bad debts provisions transferred to the books of account of assessee, details of bad debts of consumer dues as well as provisions made for consumers for dues of doubtful debts. We are of the view that in the given facts and circumstances the issue needs to be restored back to the Assessing Officer for verification of assessee's claim. Both the assessee and the Revenue have no objection if the issue is restored back to the Assessing Officer. Treatment to capital grant - disallowance of depreciation observing that capital subsidy and grant received are to be reduced from fixed asset and depreciation to be allowed on the remaining balance - Held that:- In the light of proviso to Explanation-10 to section 43(1) of the Act we find it justified to restore the issue back to the file of Assessing Officer to adjudicate afresh after verifying the apportioned amount of grant relating to different assets and calculate the depreciation at the rates applicable to such assets. Needless to mention that all necessary details will be provided by the assessee to the Assessing Officer in order to calculate the correct amount of depreciation, Ld. Assessing Officer to provide proper opportunity of being heard should be given to the assessee. Disallowance under the head small and low value items written off - Held that:- Looking to the overall business exposures of the company and from the perspective of business and practical approach we are of the view that expenditure is relating to carrying on and conducting of the business which has not been disputed by the Revenue, therefore, the assessee needs to be allowed the claim of expenditure being value of small and low value items. Disallowance of prior period expenses - Held that:- Apart from the bifurcation of prior period expenses as referred and general submission of assessee that the amount has been received pursuant to transfer of running business undertaking and no other documentary evidence has been placed on record in order to prove that the liability for the expenditure crystallized during the year. It is true that the books of account of assessee are audited and no major defect has been pointed out by the Assessing Authority and they have been accepted. However, during the course of assessment proceedings ld. Assessing Officer picked up certain items for the purpose of verification. During this course necessary details were called for relating to prior period expenses which involved expenditure prior to 1.4.2005. In such situation it is incumbent on the assessee to prove with necessary details to satisfy the query raised by the Assessing Authority. In such situation we find that the assessee has been miserably failed to substantiate its claim with necessary evidences and documents. We have no reason to allow this ground of the assessee. MAT computation - Treatment of deferred tax in the computation of income - Held that:- When we move to see the effect of tax expenditure in the computation of income we find that assessee has rightly added provisions for wealth tax, provisions for income-tax and fringe benefit tax to the net profit as per profit and loss account of ₹ 174131929 (net profit after tax at ₹ 171794810 + net prior period credit at ₹ 2337119). Further assessee has rightly deducted deferred tax asset from the net profit for the purpose of calculating business income. To this extent assessee has made no mistake in calculating the business income and has rightly deducted deferred tax asset. Had it been deferred tax liability, it would have been added to the net profit. We are, therefore, of the view that ld. CIT(A) has erred in confirming the disallowance of deduction of deferred tax asset at ₹ 6,40,52,414/- while computing business income/loss for the year. Claim of revising its book profit by reducing it by deferred tax asset - Held that:- It is not the case that Revenue authorities have to accept whatever stated in the return of income computing the income mechanically. As per provisions of section 143(1) of the Act is concerned the Revenue has to examine whether any claim as made by the assessee is correct or not. This includes under statement and over statement of the income. If Revenue authorities fail to take note of incorrect claim with regard to total income of the assessee, such failure would necessarily mean mistake apparent from the record. Respectfully following the decision of the Co-ordinate Bench referred above and in the given facts and circumstances of the case, we are of the view that assessee was eligible for deduction of deferred tax asset of ₹ 6,40,52,414/- from the net profit as per audited profit and loss account for the purpose of calculating business income as well as book profit u/s. 115JB of the Act. Further we direct the Assessing Officer to allow the assessee to claim deduction of deferred tax from book profit so as to arrive at the correct tax u/s. 115JB of the Act. Suo motu added service tax payable to the profits as profit and loss account u/s. 43B - Held that:- Assessee has been unable to place on record any detail to prove that service tax payable of ₹ 13,56,000/- was in relation to those services on which service tax are payable only when the due amount from customers is received and the particular provisions of service tax is applicable to assessee for the year under appeal. Assessee came away with the mere plea that it is a collecting agent and service tax is not reflected in the profit and loss account so as to keep service tax payable out of the ambit of provisions of section 43B sub-sec. (a) of the Act. In absence of necessary details and in the given facts and circumstances of the case, we are of the view that service tax payable at ₹ 13.56 lacs is covered under the provisions of section 43B sub-sec. (a) of the Act and if assessee has not deposited the service tax payable before the due date of filing of return of income then the amount needs to be added to the net profit of assessee which in this case has been rightly done so by the assessee at the time of filing return of income. Accordingly, we allow the Cross Objection filed by the Revenue.
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