TMI Blog2015 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... section 36. Further the deduction which the assessee claimed was admittedly of the nature described in section 36(1)(iv) and (v). Therefore section 37 would not come to the aid of the assessee. From above it becomes clear that if particular fund is not approved then Section 36(1)(iv) would come into operation and such expenditure cannot be allowed. In such situation Sec 37 is not applicable because Hon'ble High Court in case of Sony India P. Ltd V CIT [2006 (6) TMI 76 - DELHI High Court ] has very clearly held that deduction admissible u/s 30 to 36 cannot be claimed u/s 37. Therefore in our opinion, in view of this decision the claim of the assessee has been correctly denied by the authorities below and accordingly we confirm the order of the Ld. CIT(A). - Decided against assessee. Addition of provisions for bad and doubtful debts written off in the computation of book profit u/s 115JB - Held that:- Section 115JB of the Act, provides that any amount credited to the profit and loss account on account of amounts withdrawn from the reserve or provision had to be reduced from the book profit with an exception that if such reserve or provision is out of reserve created prior to or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RI T.R. SOOD, JJ. For the Appellant: Shri Vishal Mohan For the Respondent: Shri Amarveer Singh ORDER PER T.R. SOOD, A.M These appeals are directed against the order dated 27.9.2010, 31.10.2011 20.11.2013 of the Ld CIT(A), Shimla. ITA No. 1226/Chd/2010 2. In this appeal the assessee has raised the following grounds: 1 That in the facts and circumstances of the case, the Ld. CIT(A) is not justified in upholding the addition of ₹ 1650866/- made on account of premium of group gratuity holding the same not to be allowable u/s 36(1)(v) of IT Act. 2 That in the facts and circumstances of the case, the Ld. CIT(A) is not justified in upholding the addition of ₹ 1.33 crores made on account of provisions for bad and doubtful debts written off in the computation of book profit u/s 115JB of IT Act. 3 Ground No. 1 - After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that the assessee has made claim on account of premium paid to LIC for group gratuity scheme amounting to ₹ 16,50,766/-. It seems that the matter had traveled to the Tribunal in earlier round and the same was set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. During the set aside proceedings it was submitted that the Assessing Officer may makle verification from the office of the Commissioner regarding fate of the application. Alternatively it was contended that if it is found that the gratuity expenditure is not allowable u/s 36 (1) (iv) then same may be allowed u/s 37 and in this regard reliance was placed on the decision of Hon'ble Madras High Court in case of CIT V. Premier Cotton Spg. Mills Ltd., 258 ITR 253. The Assessing Officer considered these submissions and verified from the office of the Commissioner regarding approval of the gratuity scheme. The Ld. Commissioner vide letter No. CIT/Tech/SML/Gratuity Fund/2009-10/4140 clearly stated that no application for approval of gratuity scheme is pending in the office of the Commissioner. He also observed that the facts of the case in case of CIT V. Premier Cotton Spg. Mills Ltd. (supra) are distinguishable, therefore disallowed a sum of ₹ 16,50,766/-. 4 On appeal before the Ld. CIT(A) it was mainly submitted that similar sum had been allowed in the past and therefore same may be allowed during these years. It was also submitted that premiums were made as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve taken caution to pursue the matter in the office of the Commissioner or should have produced some evidence before us to show that the application was really pending. In the absence of such evidence only conclusion which can be reached is that the gratuity fund of the assessee is not approved. Hon'ble Delhi High Court has clearly examined this issue and also the contention of the allowability of the claim of the assessee alternatively u/s 37 in case of Sony India P. Ltd V CIT (supra). In that case head note reads as under: Section 36 of the Income-tax Act, 1961, provides for deductions that are admissible while computing the income referred to in section 28. One of the deductions which is made admissible under clause (iv) of section 36 is any sum paid by the assessee by way of contribution towards a recognized provident fund or an approved superannuation fund . Clause (v) of section 36 (1) similarly provides for deduction of any sum paid by the assessee by way of contribution towards an approved gratuity fund provided the same is under an irrevocable trust . A plain reading of section 36(1) (iv) and (v) makes it manifest that deductions there under are admissible only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if particular fund is not approved then Section 36(1)(iv) would come into operation and such expenditure cannot be allowed. In such situation Sec 37 is not applicable because Hon'ble High Court has very clearly held that deduction admissible u/s 30 to 36 cannot be claimed u/s 37. Therefore in our opinion, in view of this decision the claim of the assessee has been correctly denied by the authorities below and accordingly we confirm the order of the Ld. CIT(A). 9 Ground No. 2 - After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that the assessee had withdrawn a sum of ₹ 3.53 crores from the accumulated provisions created in the earlier year. Since the provisions created in earlier year were not debited to the profit and loss account in those years, the amount withdrawn during the year from said provisions was deducted from the book profit for the purpose of computing profit u/s 115 JB of IT Act. In response to the query it was submitted that proviso to clause (i) of Explanation to Sec 115JB is not applicable because provision made was already added to the profits of the concerned year. The Assessing Officer did not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achal Pradesh in ITA No. 25, 29 47 of 2009 and 12 of 2010 and the same was decided in favour of the assessee. 12 On the other hand, Ld. D.R for the revenue submitted that he does not dispute the figures given by the assessee but however, since the provisions made in the earlier year were never added to the book profit as there was a loss and book profit was not determined in those years, therefore the proviso to clause (i) of Section 115 JB is applicable. 13 We have considered the rival submissions carefully and find that the details of provisions created in the earlier years, is as under: Assessment year Amount of provisions created 1998-99 180849000 1999-2000 19792947 2000-01 17551000 2001-02 44616025 2002-03 9102359 2003-04 275000 272186331 We have verified the figures from profit and loss account as well as the computation of income and it become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt withdrawn from the reserve or provision has been credited to the profit and loss account. In other words, any amount withdrawn fro any reserve or provision credited to the profit and loss account has to be reduced from the net profit as shown in the profit and loss account for the computation of book profit in accordance with section 115 JB of the Act. 33. This, however, does not mean that all reserves created otherwise than by way of debit to the profit and loss account can be reduced from the book profit under section 115JB of the Act. It is only the reserve created after 1st April 1997 that can be credited to the profit and loss account. It may be noticed that this exception to the general rule had only been inserted by the Finance Act, 2002 w.e.f 1.4.2001 (supra). 34. Therefore, in view of the discussion above, it can be safely concluded that section 115JB of the Act, provides that any amount credited to the profit and loss account on account of amounts withdrawn from the reserve or provision had to be reduced from the book profit with an exception that if such reserve or provision is out of reserve created prior to or before 1.4.1997 and, such reserve has been created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Chd/2010 in above noted para No. 8 and following the same we decide this issue against the assessee. 17 Ground No. 2 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has debited a sum of ₹ 24,57,025/- on account of premium paid for leave encashment. In response to the query it was submitted as under: Under the scheme the assessee has to pay a premium and against the said premium, the assessee s employees shall be entitled to be paid leave encashment at the time of their superannuation. That being the case the same can by no stretch of imagination can be termed as an unascertained liability. The said money has been paid to meet the ascertained liability of leave encashment. The said deduction is allowable under section 36(1)(v) of the Income-tax Act, 1961 and also under section 37 of the Income-tax Act, 1961. The same is very much allowable under the Income-tax Act and no question of making any disallowance arises at all. It is further submitted that the assessee has also filed an application for approval of the same the communication in respect of the same is also being placed on record. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under ASIDE scheme. In response to the query it was submitted as under: The corporation is also a nodal agency for execution of civil works under the Government of India Assistance to States for Developing Export Infrastructure and other Allied Activities (ASIDE) which is an assistance to the State Government. Therefore it is being operated through Director of Industrializes, Himachal Pradesh and HPSIDC as a Nodal / executing agency only. The funds being received by the corporation under the scheme are basically the funds on behalf of State Government through Director of Industries for the specific projects of infrastructure development to be executed. Here also, the corporation is entitled to only 10% of the quantum of work executed as agency/supervision charges. As per the scheme, the funds received under the scheme are required to be kept in a separate Bank account as the funds belongs to the Director of industries and this Bank account is being operated jointly with the Director of Industries. Any interest received on this fund by way of placing the funds temporarily in FDR accounts are required to be credited to this scheme only against which infrastructure development pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the following terms and conditions: (i) No administrative expenditure be incurred out of the funds allocated (ii) The account of the implementing agency be kept open for inspection by the sanctioning authority/audit. (iii) The amount received from the Government be kept in a separate head of account of the nodal agency. (iv) No part of the funds be invested except in the scheduled nationalized banks. Any interest accrued be utilized for the scheme. (v) The nodal agency shall submit the report in the prescribed proforma along with the proposal for release of second installment as prescribed in the guidelines. (vi) Audited accounts in support of the expenditure incurred for the ASIDE scheme be submitted within 9 (nine) mohths from the closing of the accounts. Highlighted portion clearly shows that the assessee was required to invest funds in a scheduled bank and the interest if any was required to be utilized for the purpose of scheme. Thus it is clear that the interest never belongs to the assessee. In almost identical situation which arose before the Hon'ble Karnataka High Court where the assessee, the Karnataka Urban Infrastructure Development a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 227/Chd/2010 is partly allowed. 27 In this appeal the assessee has raised the following grounds of appeal: 1 That in the facts and circumstances of the case the Ld. CIT(A) is not justified in upholding an addition of ₹ 14,51,342/- made on account of disallowance in respect of the payment of premium made to LIC under the Gro8p Gratuity Scheme. 2 That in the facts and circumstances of the case the Ld. CIT(A) is not justified in upholding an addition of ₹ 4,,24,342/- made on account of disallowance in respect of the payment of premium in respect of leave encashment. 3 That in the facts and circumstances of the case, the Ld. CIT(A) is not justified in upholding an a d of ₹ 10,96,246/- made on account of interest on FDR s made under the ASIDE Scheme. 28 Ground NO. 1 - Same issue came up for consideration of the Bench in ITA No. 1226/Chd/2010 and we have adjudicated the issue against the assessee vide para No. 8 of this order. Following the same this issue is decided against the assessee. 29 Ground No. 2 - This issue is identical to ground No. 2 decided by us in ITA No. 1227/Chd/2010 wherein this amount was held to be allowable vide para 20 and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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