TMI Blog2012 (8) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... profits is uncalled for Provision for gratuity - book profit u/s. 115JA – Held that:- Provision for gratuity not as unascertained liability for the purpose of calculation of book profits u/s 115JB and therefore considering the same for computing the book profits is uncalled for – addition deleted Computation of book profit u/s. 115JB – alleged that assessee had not added provision for fixed assets held for disposal amounting to Rs.7,00,000/- for computing book profit u/s. 115JB – Held that:- There has been retrospective amendment to Sec. 115JB as a result of which provision for diminution in the value of assets needs to be added to arrive at the book profits - matter remanded to the file of the A.O. for limited purpose to verify as to whether the provision of Rs.7 lacs includes any provision made in the current assessment year. Addition is to be made of only the incremental amount of provision made during the year. Therefore, this ground is allowed for statistical purpose - appeal of the assessee is allowed - ITA No.50/Ahd/2010, ITA No.470/Ahd/2010 - - - Dated:- 20-4-2012 - G C Gupta, Anil Chaturvedi, JJ. For Appellant: Shri Sunil Bhandari For Respondent: Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly taken to Balance Sheet without debiting/crediting to the Profit and loss account and hence the payment of sales tax had not been allowed as deduction in earlier years. He further observed that even otherwise the claim would have been disallowed u/s 43B in the earlier years since the tax was not actually paid during those years. However, since the total tax payment of Rs 20,06,132/- comprised of sales tax (Rs 18,35,946/), interest (Rs 1,55,357/-) and penalty (Rs 14,829/-), he allowed only the payment of sales tax amounting to Rs 18,35,946/- and disallowed the balance amount Rs. 1,70,186/- for the reason that amount was in the nature of penal interest and penalty. 3.4. Aggrieved by the disallowance of interest of Rs.1,55,357/-, the assessee is in appeal before us and the Revenue is aggrieved by the decision of allowance of deduction of Rs. 18,35,946/- u/s 43B. 3.5. Before us, the Ld. A.R. submitted that in respect of sales tax liability for FY 95-96, 96-97 97-98 the assesse had made the payments under the Sales tax Amnesty scheme during the assessment year under consideration. The total aggregate payment made was Rs 20,06,132/- which consisted of sales tax of Rs 18,35,94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel that this aspect needs to be verified. We accordingly, remit this issue back to the file of A.O. for limited purpose to verify as to whether in the earlier years the unpaid amount of sales tax at the year-end was added to the income. If the same was added then the same should be allowed as deduction in the current assessment year u/s. 43B. As far as the Revenue s appeal is concerned, based on the above facts, we do not find any infirmity in the order of the CIT (A) and accordingly dismiss the Revenue s 1st ground. The claim of the assesse is accordingly allowed for statistical purposes and of the Revenue is dismissed. Regarding ground No.2. 4. The A.O. observed that the assessee had paid purchase consideration of Rs.53,92,50,000/- to acquire 2876 equity shares of Rs.10 each of Yerrowada Investment Pvt. Ltd. (YIPL). This amount was shown under the schedule of fixed assets as part of Building . Assessee claimed that by virtue of its holding the shares, it holds occupancy rights of the property owned by YIPL. YIPL had acquired land and had constructed about 5 lac sq. ft. of residential and commercial space. In the year 1996, YIPL allotted occupancy rights to its shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to distribution by a company out of accumulated profits coupled with release of any part of the assets of the company. Therefore, to attract section 2(22)(a), the dividend can be taxed only when there is distribution out of accumulated profits by way of release of any part of the assets. In the present, case it is seen that when the assessee acquired the shares, it also acquired the occupancy right in the premises. Such rights were acquired during F.Y. relevant to assessment years 1997-98. There is no amendment to the Articles after the shares are acquired by the assessee. Thus, there is no release of assessment year assets by YIPL to the assessee who is a shareholder therein. There is also no finding that the distribution is out of accumulated profits. What is brought to tax is the annual value of the property and not property itself. Since, there is no release by the company to the assessee of any assets and that too out of accumulated profits during the year in appeal, the addition u/s. 2(22)(a) is not called for. We, therefore, delete addition made u/s. 2(22)(a) of the Act. In view of the fact that there being no change in the facts and following the decision of the co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 16. The next ground of appeal relates to adding of provision for gratuity of Rs.12,03,707/- to book profit u/s. 115JA. 17. The A.O. was of the view that the provision of gratuity of Rs 12,03,707/- was in the nature of unascertained liability, and therefore the same was added by him to compute book profits in view of Explanation to section 115JB. 18. The assessee being aggrieved with the order of A.O. carried the matter in appeal before the Ld. CIT (A). CIT (A) confirmed the action of A.O. by following the decision in earlier year. 19. Being aggrieved by the decision of the CIT(A), the assesse is in now appeal before us. 20. Before us the Ld. A.R. stated that on similar facts, the assesse had raised identical ground before the Hon ble Tribunal for A.Y. 2004- 05. The Hon ble Tribunal deleted the addition made by the A.O. The Ld. A.R. placed before us the copy of the order dated 29.10.2010 (ITA No.2778/AHD/2008) of co-ordinate Bench. 21. Ld. Departmental Representative on the other hand fairly conceded that the issue is covered by ITAT s decision in assessee s own case and in its favour. 22. We have heard the rival contentions and perused the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with ground No.1 of assessee s appeal earlier vide paragraph-3.5 above and therefore, the same is decided in the manner indicated above. 25. Regarding Ground No.2, A.O. observed that assessee had not added provision for fixed assets held for disposal amounting to Rs.7,00,000/- for computing book profit u/s. 115JB. According to the A.O. since it was in the nature of unascertained liability, the same should have been added as per Explanation to Sec.115JB for computation of book profits. He accordingly added the same. 26. On appeal, CIT (A), deleted the addition made by the A.O. following the decision of CIT (A) in earlier year. 27. Aggrieved by the order of CIT (A), the Revenue is now in appeal before us. 28. The Ld. D.R. stated that by virtue of amendment brought by Finance (No.2) Act,2009 w.e.f. 1-4-2001, by insertion of Cl. (i) to Explanation (1) to section 115JB, the amount set aside as provision for diminution in the value of any assets, needs to be added to arrive at book profits . 29. The Ld. A.R. of the assessee fairly conceded that by virtue of retrospective amendment amount of Rs.7 lacs needs to be added to arrive at book profits. He, however stated that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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