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2019 (6) TMI 537 - AT - Income TaxDisallowance of advertisement expenses - year of assessment - addition of expenses on the ground that expenses pertains to the subsequent year as the dates on the bills of the said expenses is of April and May 2008, which does not fall in previous year relevant to the assessment year under consideration - HELD THAT:- There is no dispute that the assessee is following Mercantile system of accounting. Further it is not in dispute that invoices related to the advertisement expenses were received by the assessee in the month of April and May 2008, though the expenses relates to the advertisement made prior to March 2008. Considering the fact that expenses relates to the advertisement expenses are related with the assessment year under consideration, the disallowance made by AO and confirmed by learned CIT (A) are deleted. - Decided in favour of assessee. Addition of provision for warranty - HELD THAT:- A provision is recognized when a enterprises has a future obligation as a result of past events, it is probable that a out flow of the recourses will be required to settle the obligation and a reliable estimation can be made for such obligation. All such factors are missing in the present case. Neither the assessee is manufacturer nor have a past history in respect of the claim of warranty. Thus, we do not find any illegality or infirmity in the order of ld. CIT (A) for our interference. - Decided against assessee. Addition of provision of Gratuity - AO disallowed the provision of gratuity holding that mere provision covered by section 40A(7) and has not been debited in Profit & Loss A/c - HELD THAT:- The assessee has shown the provisions of gratuity as on 31.03.2008 as a liability taken over from its Associated Enterprieses (Brother International Singapore Pvt. Ltd.). In our view, the disallowance made by AO and confirmed by CIT(A) is not correct. The disallowance was made only on the ground that it was not routed through Profit & Loss A/c and was a balance-sheet item. We are conscious of the fact that balance-sheet are not sacrosanct. The assessee claimed the provision of gratuity of ₹ 13,37,283/-. During the remand proceeding assessee furnished actuarial certificate showing amount of ₹ 16,12,347/- which has been reflected in the balance-sheet. The assessee claimed provision for payment of gratuity on the basis of actuarial valuation. AO at the time of passing assessment order on 20.12.2011 has not verified, if the similar amount is claimed in next Assessment Year, therefore, this issue is restored to the file of AO to decide it afresh in accordance with law. Needless to order that before passing the order, the AO shall allow proper opportunity of hearing to the assessee. MAT computation - addition of provision of warranty and gratuity to the book profit while computing income u/s 115JB - HELD THAT:- We have already confirmed the addition regarding provision for warranty and restored the addition/disallowance regarding gratuity. Therefore, the AO is directed to make consequential adjustment accordingly with regard to the disallowance of gratuity. As we have directed the AO to decide the issue of provision of gratuity afresh. Therefore, the AO shall pass the order for adjustment u/s 115JB with regard to provision of gratuity after deciding the issue afresh.
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