TMI Blog2014 (9) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer erred in holding the provisions made by the assessee were on account of un-ascertained liability to be added back under clause (c) of the Explanation to section 115- JB (2) of the Act. Accordingly, we set aside the order of the authorities below and direct the assessing officer to allow the claim of the assessee - Decided in favour of assessee Disallowance of provisions made for the bad and doubtful debts - Held that:- The Ld. AR fairly conceded that in view of the retrospective amendment made by the Finance (No.2) Act, 2009 this issue is covered against the assessee. This ground of the revenue’s appeal for making addition on account of the provisions for bad and doubtful debts is allowed. - Decided in favour of revenue Addition in computing the book profit in respect of the expenditure on account of the amortization of the land on the reasoning that no depreciation is allowable on land under the Companies Act as no rate of depreciation is provided in Schedule XIV of Companies Act - CIT(A) deleted the addition - Held that:- It is not the case of the Revenue here that the adjustment made by the AO is under Explanation to section 115J. The contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for doubtful debts claimed by the assessee. 5. That, on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in deleting disallowance of ₹ 6,12,00,000/- made by the Assessing Officer in computing the book-profit u /s 115JB in respect of depreciation claimed on land after amortization of land by the assessee because there is no depreciation allowable on land under Companies Act and no rate of depreciation is provided in schedule XIV of Companies Act. 6. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. 2. Ground No.1, 2 and 3 are regarding adjustment made by the AO by making addition to the Book-Profit in respect of Gratuity, Leave Encashment and Post-Retirement Medical Benefits. 3. This issue is covered in favour of the assessee company by the order of the ITAT in assessee s own case in assessment year 2002-03 in ITA No. 1105/Del/2006 where it was held as under:- 24. We have heard both the parties and perused the material available on record. In this case the assessee has made provision on account of gratuity, leave encashment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that where the assessee has made a provision for gratuity on the basis of actuarial calculations, it cannot be said that provision for gratuity was not ascertained liability. Likewise in the case of Vinitech Corp. P. Ltd. (supra) Hon ble jurisdictional High Court has held that where a liability which was capable of being construed in definite terms, which had arisen in the accounting year, although its actual quantification and discharge might be deferred to a future date. Once the assessee is maintaining his accounts on mercantile system, a liability accrued though to be discharged at a future date would be a proper deduction while working out the profits and gains of business, regard being had to be accepted principles of commercial practice and accountancy. If the facts of the case are viewed in the light of the decisions referred to above, we find that the provision made by the assessee in respect of gratuity, leave encashment and post retirement medical benefit on actuarial basis cannot be said provisions for unascertained liability so as to fall in clause (c) of the Explanation to section 115-JB (2) of the Act. Accordingly the ld. CIT (Appeals) and the assessing officer err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts clarify the nature of the land which reads as under:- Land taken for use from State Government (without transfer of title) and expenses on relief and rehabilitation as also on creation of alternate facilities for land evacuates or in lieu of existing facilities coming under submergence and where construction of such alternate facilities is a specified pre condition for the acquisition of land for the purpose of the project, are accounted for as Land-unclassified to be amortized over the useful life of the project, which is taken as 35 years from the date of commercial operation of the project. Amount of ₹ 6.2 crores has been calculated as per Accounting Policy stated at Para 2.4 (as produced above). The above accounting Policy is in line with Accounting Standard 6 of ICAI. Thus amount amortized is necessary requirement of Companies Act, 1956. The assessee company has prepared the Audited Annual Accounts for the A.Y. 2004- 05 as per the requirement of Accounting Policies, Accounting Standards and other applicable provisions of Companies Act and any deviation there from would have attracted adverse remarks of Auditors. That Assessee s annual Accounts has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehabilitation for land evacuees because of submerges and where construction of such alternative facility is a condition for setting up a project. The cost so incurred by the assessee company is amortized over useful life of the project. The above policies have been approved by the auditors of the company as well as the C AG. The accounts of the assessee company are subject to audit not only by the statutory auditors but also by the C AG also. Further the accounts so prepared has been approved and adopted by the company in the Annual General Meeting and filed with the Registrar of Companies. 8. The Supreme Court in the case of Apollo Tyres Ltd. (Supra) has held that the AO under the Income-tax Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinised and certified by the statutory auditors and will have to be approved by the company in its general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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