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Assistant Commissioner of Income Tax, Company Circle-III (1) , Chennai Versus M/s. Tamil Nadu Industrial Explosives Ltd

Provision for gratuity & bonus - Held that:- As explained by learned Authorized Representative both provision for gratuity and bonus are statutory obligation which has been incurred by the assessee and since the assessee is following mercantile system of accounting the same has to be charged to the profit and loss account of the assessee during the relevant previous year in which such obligation has resulted. The learned Commissioner of Income Tax (Appeals) after placing reliance on the decision .....

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,29,209/- from the insurance company towards loss of its assets. The written down value of these assets which works out to ₹ 27,44,739/- has to be necessarily reduced from the amount of ₹ 1,40,29,209/- to compute the net income received from such claim which only is to be credited to the profit & loss account of the assessee. Accordingly, the assessee has rightly reduced such amount and the balance amount of ₹ 1,12,84,470/- is credited to its profit and loss account which is in .....

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by the Revenue and assessee respectively aggrieved by the common order of the learned Commissioner of Income Tax (Appeals)-III, Chennai dated 16.07.2012 in ITA Nos.614 & 615/07-08/A.III passed under section 143(3) read with section 263 of the Act. 2. The cross objections filed by the assessee were barred by limitation of 910 days. The assessee has filed an affidavit explaining the reason that due to change in the Counsel there was a delay in filing of cross objections and therefore prayed f .....

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s). 3. Though the Revenue challenges the order of the Commissioner of Income Tax (Appeals) on several grounds, however the common effective two grounds are concised as under:- i) The learned Commissioner of Income Tax (Appeals) has erred by holding that the liability on account of gratuity for both the assessment years and bonus for the assessment year 2001-02 are ascertained liability and therefore allowable as deduction and addition cannot be made in the book profit for the purpose of computin .....

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Subsequently, the assessee company filed revised return of income for the assessment year 2001-02 on 17.12.2002. Thereafter, assessments were made. However, pursuant to the directions of the learned Commissioner of Income Tax (Appeals) under section 263 of the Act, assessment was made under section 143(3) read with section 263 of the Act on 28.12.2007 for both the assessment years. Ground No.1: (Provision for gratuity & bonus): 5. During the course of the assessment proceedings, it was obser .....

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of the Act, he added the same to the book profit of the assessee. On appeal, the learned Commissioner of Income Tax (Appeals) deleted the addition by observing as under:- Provision for gratuity:- 4.2 I have carefully considered the facts of the case and the submission of the ld. AR. I have also gone through the decisions relied on by the Id.AR. As submitted by the Id.AR, the appellant follows mercantile system of accounting. The liability to pay gratuity is a statutory liability and the same ha .....

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same cannot be disallowed in computing the book profit u/s 115JB. Hence, respectfully following the decision of Hon'ble Bombay High Court, the ground is allowed . Provision for bonus:- 6.2 I have carefully considered the facts of the case and the submission of the Id. AR. I have also gone through the decisions relied on by the Id.AR. The provision made for bonus is a deferred wage and it is required to be provided with reference to the service of the employee during the year. Where the appel .....

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lusion while working out the book profit u/s 115J. Respectfully following the above decision, the above provision made has to be allowed .as deduction in computing the book profits. The ground is allowed. 6. Before us, learned Departmental Representative relied on the order of the learned Assessing Officer while as the learned Authorized Representative argued in support of the order of the learned Commissioner of Income Tax (Appeals). After hearing both the sides, we are in agreement with the vi .....

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he decisions cited by the learned Authorized Representative in the case of M/s. Echjay Forgings Pvt. Ltd. (251 ITR 15)(Bom) and in the case of Apollo Tyres Ltd. Vs. CIT (255 ITR 273)(SC) has allowed the appeal of the assessee. Therefore, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. Accordingly, we do not find any merit in the appeal of the Revenue. Ground no.2: (Insurance claim received): 7. The assessee has received a .....

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therefore directed the learned Assessing Officer to look into the matter. In the proceedings before the learned Assessing Officer, resulting from the directions of the learned CIT, the assessee did not furnish any details; hence the amount of ₹ 27,44,739/- was added to the income of the assessee while computing the book profit under section 115JB of the Act. Before the learned Commissioner of Income Tax (Appeals) the assessee had made the following submissions:- Out of the insurance amoun .....

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. It was contended that the above treatment given in the books of account was based on actual figures and therefore the Assessing Officer was not correct in adding the sum of ₹ 27,44,789/- to tax. After considering the submissions of the assessee, learned Commissioner of Income Tax (Appeals) allowed the appeal of the assessee by observing as follows:- 8.2 I have carefully considered the facts of the case and the submission of the learned Authorized Representative. From the facts it is clea .....

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