9911796707
TMI Blog2010 (7) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... -03 has claimed the following substantial question of law:- "Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in setting aside the order of the Ld. CIT (A) and directing the Assessing Officer to allow the claim of the assessee in respect of provision for gratuity of Rs. 15,49,59,191/-, provision for leave encashment of Rs. 6,32,25,125/- and provision for post retirement medical benefit of Rs. 86,41,476/- while computing the book profit u/s 115 JB of the Income Tax Act, 1961 even though these were mere provisions and were not ascertained liabilities?" 2. Briefly stated, the facts are that the assessee company, a Government of India Undertaking engaged in the construction of Hydro Electric Power Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Commissioner of Income Tax v. Vinitec Corp. P. Ltd. 278 ITR 337 (Del) and Bombay High Court in Commissioner of Income Tax v. Echjay Forgings P. Ltd. 116 Taxman 322. 3. We have heard the learned counsel for the revenue. 4. The issue in the present case is - whether in the facts and circumstances, addition on account of the provisions for gratuity, leave encashment and post retirement medical benefit could be made while computing the book profit under Section 115JB of the Act? 5. Learned counsel for the revenue submitted that since the liability had not matured in praesenti and, therefore, the same could not have been excluded from determining the book profits of the assessee under Section 115JB of the Act. 6. We have given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on actuarial valuation and cannot be added for determining book profits under Section 115 JB of the Act as it is business liability in praesenti which has arisen during the accounting year and it is only the quantification and discharge of which is to take place at a future date. 10. The Apex Court in Bharat Earth Mover's case (supra) while pronouncing principles regarding difference between accrued and contingent liabilities, enunciated as under:- "If a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial practice and accountancy." 12. The Tribunal while considering the issue in hand had specifically recorded that the provision for gratuity, leave encashment and post retirement medical benefit had been estimated on actuarial basis and was a liability which was created in praesenti though it was to be discharged at a future date. It was further recorded that the provisions which were created in respect of gratuity, leave encashment and post retirement medical benefit on actuarial basis had been estimated with reasonable certainty and, therefore, such an estimate cannot be treated to be contingent one. It was also observed that the provision made by the assessee in respect of gratuity, leave encashment and post retirement medical ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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