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2021 (12) TMI 538 - AT - Income TaxDisallowance of ESOP expenses - AO disallowed the claim holding that it is a notional loss - HELD THAT:-This issue is squarely covered in favour of the assessee by the decision of Biocon Ltd [2020 (11) TMI 779 - KARNATAKA HIGH COURT] as held assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. Disallowance of interest on advance - interest free loan granted to a joint venture company - HELD THAT:- As the assessee has huge non-interest-bearing funds available with it against the amount advanced interest free to a joint-venture company, the issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of CIT versus Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT] - thus we direct the learned assessing officer to delete the disallowance of interest expenditure. Addition being provision of the gratuity expenditure Provision for gratuity liability - Provision being created in compliance with revised Accounting Standard-15 issued by the Institute of Chartered Accountants of India (ICAI), relating to accounting of employee benefits - HELD THAT:- The incremental provision on account of post-retirement gratuity to employees has been made in respect of liability in presenti, viz., entitlement earned by the employee while in service until the end of the relevant previous year, on the basis of actuarial valuation Since the aforesaid liability was quantified and recognized on a scientific and rational basis based on report of the actuarial valuer, the liability therefore crystallized and accrued in the relevant assessment year itself and was allowable deduction in that year. As relying on M/S HEWLETT PACKARD INDIA (P) LTD. [2008 (3) TMI 23 - HIGH COURT OF DELHI] liability is considered as ascertained if the same is determined on actuarial valuation. The court held that the provision made for contingent liability was entitled to deduction if the provision was determined accurately and scientifically. In view of this we hold that provision of gratuity made in accordance with AS 15 and backed by actuarial valuation is an ascertained and current liability which cannot be added to the book profit while working MAT . Thus Ground is allowed.
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