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2022 (3) TMI 538 - HC - Income TaxDetermining the MAT payable for the purpose of Section 115JA - Profit computation on the basis of the ‘realizable value’ of such power which has been utilized by the Smelter unit for the manufacture of aluminum - excluding the ‘book profit’ derived by the assessee from the generation of power under clause (iv) of Explanation to Section 115JA(2) - whether power profits are to be determined on the basis of the ‘realizable price’ i.e. the price at which the power is sold to GRIDCO? - HELD THAT:- Delhi High Court referred to the decision of the Supreme Court of India in Tata Iron & Steel Ltd. v. State of Bihar [1962 (9) TMI 49 - SUPREME COURT] and concluded that “in arriving at an amount that is to be deducted from book profits - which is really to the benefit of the assessee as it reduces the amount of tax which it is liable to pay under the provisions of Section 115JA of the Act, the principle of apportionment of profits resting on disintegration of ultimate profits realized by the assessee by sale of the final product by the assessee has to be applied.” The interpretation placed on the expression ‘business’ used in Section 2(b) of the Act and holds that the Assessee here is entitled to reduce from its book profits, the profits derived from its CPPs, in determining the MAT payable for the purpose of Section 115JA of the Act. Question (i) is therefore answered in favour of the Assessee and against the Department by holding that the AO, the CIT(A) as well as the ITAT erred in law in not allowing the claim of the Assessee as deduction under Section 115JA(2)(iv) of the Act relating to ‘power profits’. Disallowing entire claim for leave encashment and post retirement medical benefit which has been determined as an accrued liability and computed on the basis of actuarial valuation - AO has treated the liability on the above ground as a contingent liability and added it to the book profits. This has been upheld by the CIT(A) and ITAT - HELD THAT:- The Court is of the view that the reasoning of the Supreme Court in HCL Comnet Systems & Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] should prevail. The Supreme Court there was considering, for the purposes of Section 115JA (common explanation (c)), whether the provisions for bad and doubtful debts as claimed by the Assessee should be treated as ‘ascertained’ or ‘unascertained’ liability. Adopting the same reasoning, as far as the present case is concerned, the Assessee’s treatment of the liability in respect of the post retirement medical benefits as reflected in its P&L account should be accepted by the Department and cannot be questioned. Consequently, question (ii) is answered in the negative by holding that the ITAT was not justified in not allowing the entire claim for leave encashment and post retirement medical benefit determined as an accrued liability and computed on the basis of actuarial valuation.
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