TMI Blog2013 (5) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,220/- has been set apart to meet the contingencies. The said amount has not been included in the book profit - It was unascertained liability. Even this amount is earmarked as provision for diminution in the value of any asset for the purpose of arriving at the book profit for the purpose of Section 115JA which ought to have been included - The Assessing Authority was justified in adding the said amount to the book profit. Both the Appellate Authorities committed a serious error in deleting the said amount - Decided against the assessee. - ITA No.918/2006 - - - Dated:- 4-3-2013 - N Kumar and B Manohar, JJ For the Appellant: Sri K V Aravind. For the Respondents: Sri Ashok Kulkarni Sri Aneesha Mirji M/s K R Prasad. JUDGEMENT:- All these appeals are taken up for consideration together, because the assessee is the same, but the assessment years are different, where one question of law is common in three cases and yet another question of law is common to the subsequent two years. 2. The assessee - M/s.Weizmann Homes Ltd., is a company carrying on the business of long term finance. The assessee claimed Rs.48,26,000/- as deduction under Section 36(1)(viii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther miscellaneous charges are directly attributable to and derived from the business of long term finance. Therefore, the assessing officer was directed to consider the processing fee, penal charges and miscellaneous income as part of eligible profit under Section 36(1)(viii) of the Act. Aggrieved by the said order, the Revenue preferred an appeal before the Tribunal. The Tribunal held that the processing fee, penal interest and other charges are incidental to earning of interest on long term finance. So far as processing fee is concerned, there is a direct nexus with the business of the assessee for the purpose of long term finance. Regarding pre-closure charges etc., are also directly linked with the interest earned by the assessee out of long term finance. Penal interest charges by the assessee is nothing but late payment of interest, which is earned by the assessee as provided in the contract with the party. Therefore, the Tribunal upheld the order of the Appellate Authority and dismissed the appeal. Aggrieved by the said order, the Revenue is in appeal. 5. In the assessment order of the subsequent years, the assessee had added back the provision for contingencies at Rs.12,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters dealt with therein, in computing the income referred to in Section 28. (viii) [in respect of any special reserve created [and maintained] by a financial corporation which is engaged in providing long-term finance for [industrial or agricultural development or development of infrastructure facility in India or by a public company formed an registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long-term finance (computed under the head Profits and gains of business or profession [before making any deduction under this clause] carried to such reserve account:] [Provided that the corporation [or, as the case may be, the company] is for the time being approved by the Central Government for the purposes of this clause;] Provided [further] that where the aggregate of the amounts carried to such reserve account from time to time exceeds [twice the amount of] the paid-up share capital [and of the general reserves] of the corporation [or, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 262 ITR page 278, where a reference is made to the judgment of the Privy Council in CIT -vs- Raja Bahadur Kamakhya Narayan Singh and also the judgment of the Apex Court in Cambay Electric Supply Industrial Co. Ltd. -vs- CIT [1978] 113 ITR 84 (SC) and the constitution Bench in the case of Mrs.Bacha F Guzdar -vs- CIT [1955] 27 ITR 1 (SC) where it is held that the word 'derived from' in Section 80HH of the Act must be understood as something which has a direct or immediate nexus with the appellant industrial undertaking. Reliance is also placed on the judgment of of Apex Court in the case of Commissioner of Income-tax -vs- Sterling Foods reported in ITR 1999 page 579, where the earlier view of the Supreme Court was reiterated by saying that there must be, for the application of the words 'derived from', a direct nexus between the profits and gains and the industrial undertaking. Further reliance is placed on the judgment of the Delhi High Court, where the same view is reiterated in the case of National Co-operative Development Corporation -vs- Asstt. CIT reported in 2012 TaxPub (DT) 0014 (Del-HC). The Apex Court in the case of Liberty India -vs- Commissioner of Income Tax re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st day of April, 2001] (hereinafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (2) Every assessee, being a company, shall, for the purposes of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956): Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation of depreciation shall corre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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