TMI Blog2015 (6) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Assessment Year 2001-02, we remit back the issue of gratuity to the office of A.O. for readjudication who will readjudicate on the basis of fresh actuarial report if any to be filed by assessee. - Decided partly in favour of revenue for statistical purposes. - I.T.A. No.822 /Del/2013 - - - Dated:- 20-2-2015 - Shri I. C. Sudhir And Shri T.S. Kapoor JJ For the Appellant : Shri Manoj K Chopra, Sr. DR For the Respondent : Shri Vishal Kalra, CA ORDER Per T.S. Kapoor, AM: This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 30.11.2012. The sole grievance of Revenue is the action of Ld. CIT(A) by which he had allowed provisions for leave encashment and gratuity as not includable to the book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake it an actual/ascertained liability. Even, if an amount is at all required to be set aside for meeting the liabilities in future, the same can be done by way of creation of a reserve rather than by creating a provision which is directly charged on the taxable profit. The ratio of Bharat Earth Movers (supra) provides for allowance of liability on account of gratuity only if it is ascertained. This judgement concludes that provision for leave encashment is not contingent liability. A contingent liability is a liability for an event which may or may not happen in future at all whereas an unascertained liability is termed so because there is uncertainty regarding the quantum only. It is thus clear that the quantum of provision for gratuity a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were unascertained and, therefore, were liable to be included for calculation of profits u/s 115JB. He submitted that assessee had arrived at the amount of provisions on the basis of certain assumptions and, therefore, the same were not ascertained liability. It was submitted that in Assessment Year 2000-01, the issue of gratuity was not accepted by Hon ble Tribunal and in Assessment Year 2001-02 also the issue of gratuity has been remanded back to A.O. 4. Ld. A.R. on the other hand submitted that for estimating the provisions some assumptions has to be made and actuarial certificate as referred to by Ld. CIT(A) was obtained to arrive at the estimated provisions. Ld. A.R. further submitted that in Assessment Year 2000-01, Hon ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined liability and, therefore, it had allowed the same for not including the same for calculation of book profits. However it upheld the inclusion of gratuity provisions for purpose of calculation of minimum profits. The relevant findings of the Tribunal are reproduced as under: 17. We have carefully considered the rival submissions in the light of material placed before us. It has been the contention of the assessee right from the beginning that a cumulative sum of ₹ 97,84;1781- (Rs. 68,23,350/- on account of gratuity and ₹ 29,60,828/- on account of leave encashment) was debited to the Profit Loss account. Out of the said sum assessee itself has added back the gratuity of ₹ 68,23,350/- while computing the income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,828/- the claim is made by the assessee on the basis of actuarial valuation. It has not been' shown by the department that there was any defect in such valuation made by the assessee. If it is so then this claim of the assessee has to' be accepted in the light of decision of Hon'ble Supreme Court in the case of Bharat Earthmovers Vs. CIT (supra), wherein it has been held that liability incurred by the assessee under the leave encashment scheme applicable to its employees proportionate to the entitlement earned the employees subject to ceiling on deductible. Therefore, this claim of ht assessee has to be accepted. The A.O. is directed to delete the addition made on account of provision for leave encashment amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the A.O. for readjudication. Assessee will submit the actuarial report afresh to the A.O. A.O. shall consider the orders of ITAT in Assessment Year 2000-01also. This ground of appeal is partly allowed. 8. The case of the assessee was earlier heard on 17.07.2014 but at the time of dictation, it was felt necessary that the result of M.A. filed by assessee in Assessment Year 2000-01 must be considered for arriving at the conclusion. Therefore the case was refixed and was finally heard on 28.01.2015 on which date the Ld. A.R. filed a copy of the order in miscellaneous application 95/Del/2013 pronounced by ITAT on 06.06.2014. Though the decision in M.A. is dated 06.06.2014 which is before the date of original hearing but Ld. A.R. had not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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