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2015 (7) TMI 641 - ITAT CHENNAI

2015 (7) TMI 641 - ITAT CHENNAI - [2015] 42 ITR (Trib) 1 (ITAT [Chen]) - Provisions for wage arrears - addition made for the purpose of computing books profits U/s.115JB and also for computing the total income as per the normal provisions of the Act - Held that:- As submitted by the Ld. A.R, if the assessee has made a commitment in the draft wage settlement before the Joint Commissioner of Labour, to that extent it will be an ascertained liability of the assessee company because at least to that .....

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of provision for doubtful debts - Held that:- The decision rendered by the Hon’ble Apex court in the case of M/s.Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT) is not applicable considering the facts of the assessee’s case. In that case, the assessee is a bank who draws its account as per the guidelines provided by the Reserve Bank of India (RBI). There are legal implications for writing off the debts in the accounts of bank by crediting the debtor’s accounts. The system of accounting is also dif .....

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t “it is not necessary for the assessee to establish the debt had become irrecoverable. It is enough if the bad debts are written off as irrecoverable in the books of accounts of the assessee.” For the above reasons, we find that the action of the Revenue is appropriate in the case of the assessee which is not a Bank governed by the rules of RBI and accordingly we hereby hold that the amount of ₹ 1,42,321/- shown as provision for bad debts which is not credited to the accounts of the debto .....

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o the assessment year 2008-09. Therefore, the aforesaid rules will not be applicable to the case of the assessee, since the relevant assessment year is 2007-08. Moreover on this issue, this Bench of the Tribunal has been consistently taking a view that 3% of the exempt income can be treated as the expenditure incurred for earning such income and accordingly such amount has to be disallowed. Therefore in the case of the assessee also, we hereby hold that 3% of the dividend income which is exempt .....

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filed by the Assessee, and the other appeal in ITA No.981/Msds./2012 by the Revenue for the assessment year 2007-08, aggrieved by the order of the Learned Commissioner of Income Tax(A), Large Taxpayer Unit, Chennai, dated 24.02.2012 in ITA No.48/09-10/LTU(A) passed under section 143(3) read with section 250 of the Act. 2.1 The Assessee has raised five grounds in its appeal, however, the crux of the issues is concised as follows:- 1. The Ld. CIT (A) erred in confirming the order of Ld. Assessing .....

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the exempt dividend income. 2.2 The Revenue has raised three grounds in its appeal, however, the crux of the issues is concised as follows:- 1) The Ld. CIT (A) had erred in deleting the disallowance U/s.14A of the Act by holding that invoking the provisions of Rule 8D is not in order. 3. The brief facts of the case are that the assessee is a public limited company, engaged in the business of manufacturing and trading in petrochemicals, filed its return of income for the assessment year 2007-08 .....

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rovisions for wage arrears in the Profit & Loss Account. On query, the assessee had explained that the above provisions was made on estimate basis since negotiations with labour union was in progress. It was further submitted that the actual liability may be much more than what is provided by the assessee. However the Ld. Assessing Officer did not accept the arguments advanced by the assessee. Citing Section 115JB(1)(c) of the Act, the Ld. Assessing Officer disallowed the provisions made for .....

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an unascertained liability and did not crystallized during the year. The Ld. A.R. has relied on the decision of the Hon ble Supreme Court in the case of HCL Comet System & Services (Supra). But the law has since been neutralized by an amendment to section 115JB(2) with retrospective effect from 01.04.2009. In view of the above and for the reasons given in para 4.2 the ground is dismissed. Para 4.2 is also reproduced herein below for reference:- 4.2. I have carefully considered the facts of t .....

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#8377; 48 crore towards the provisions made for wage arrears of the staff. On further appeal, the Hon ble Jurisdictional Tribunal in ITA No.1690/Mds./2006 for A.Y 1999-00 dated 02.06.2006 has confirmed the order of the CIT(A) by holding as under: In the present case we find that the liability in question cannot be construed to be a statutory liability. I can only be termed as a contractual l liability, as it emanates out of a contact. The memorandum of understanding is only a prelude to the cont .....

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nd labour unions was referred to Industrial Tribunal. The appellant has filed a SLP before the Hon ble Supreme Court which is still pending for final disposal. When the order was passed by the A.O, the A.O has rightly held that it was not an ascertained liability. The liabilities had also not crystallized during the year. Hence, respectfully following the decision of the Hon ble Tribunal, the ground is dismissed. 4.3 Before us Ld. A.R. submitted that:- The Labour Union of the appellant company h .....

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ute before the Supreme Court. In that proposal, the Appellant had indicated the amount of salary increase they are prepared to pay. In the Draft Wage Settlement, the Appellant made the following main proposals: • Proposed a revised scale of pay to be effective from 1.1.2005 • No increase in wages and allowances shall be payable for the period 1.1.2001 to 31.12.2004 but agreed to pay a one-time lump sum amount of ₹ 21,000/- per employee. • Proposal of the Appellant were not a .....

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ourse of conciliation proceedings. This amount was the minimum amount payable and had accrued when the appellant had sent their signed proposal. This amount was never in dispute. Provision made for wage arrears: Though the matter was in dispute, the proposal made by the Appellant in the Draft Wage Settlement to that extent is an ascertained liability. There was no dispute on that liability but only on the additional amount over and above the proposal by the Appellant. Accordingly, the Appellant .....

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F.Y 2006-07. 2. Quantification: The amount of as per the revised pay scale proposed for the year 2005 & 2006 in the Draft Wage Settlement was computed and fprs made in the books of account as it is an ascertained liability. Hence the provision is for an accrued liability and should be allowed both for the normal computation as well as in the computing Book Profits. Accounting Standard by CBDT 218 ITR 1 St. Bharath Earth Movers 245 ITR 428 SC Neyveli Lignite Corporation 93 TTJ 685 Chennai IBP .....

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erefore pleaded that the amount of ₹ 81/- lakhs may be treated as ascertained liability and deduction may be allowed while computing the book profit of the assessee U/s.115JB of the Act as well as computing the total income as per the normal provisions of the Act. 4.4 Ld. D.R stoutly opposed to the submissions of the Ld. A.R and argued in support of the orders of the Revenue. He vehemently pointed out that the amount of ₹ 81/- lakhs is not an ascertained liability and is only a propo .....

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nt the assessee company will have to make the payment. However, these aspects can be verified only from the draft wage settlement agreement and the same is not before us for our perusal. Therefore, we remit back the issue to the file of Ld. Assessing Officer to examine the draft wage settlement agreement in the light of the decisions relied upon by the assessee and pass appropriate order as per merit and law. 5. Ground No.2 - Disallowing the provision for doubtful debts During the course of asse .....

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e Hon ble Apex Court in the case of Vijaya Bank reported in 323 ITR 166 and argued by stating that the provision for bad debts claimed by the assessee should be allowed as deduction. Ld. D.R stoutly opposed to the submissions of the Ld. A.R and argued by stating that the assessee had not written off its bad debts in its books of accounts and therefore the same cannot be allowed as deduction while computing the income of the assessee. 5.3. We have heard both the parties and carefully perused the .....

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ent. Various classifications with respect to debtors are drawn in the books of accounts as per the norms specified by the RBI. In such circumstances, the Hon ble Apex Court had held that it would suffice to reduce the bad debts in the statement of accounts and actual write off bad debts in the books of accounts would not be necessary. With respect to other assessees, the Hon ble Apex Court had categorically held in the case TRF Ltd. Vs. DCIT reported in 323 ITR 397 that it is not necessary for t .....

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