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2016 (5) TMI 479 - ITAT KOLKATA

2016 (5) TMI 479 - ITAT KOLKATA - TMI - MAT provisions - addition of deferred tax liability in book profit but not excluding the amount of deferred tax assets included brought forward loss - Held that:- From the plain reading of the provisions of this section 115JB of the Act, it is clear that the amount of loss brought forward or unabsorbed depreciation whichever is less as per books will be reduced from the amount of book profit. So in the instant case the plea of the assessee that the amount .....

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r of Companies, except to the extent provided in explanation to Sec. 115JB of the Act. The accounts of the taxpayer were duly certified by the auditors and the same was accepted by shareholders in the Annual General Meeting which was filed with Registrar of Companies and as per the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) and Hon'ble Bombay High Court in the case of Kinetic Motor Co. Ltd. the AO cannot make any adjustments to the book profits of the taxpayer .....

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in force from 24.03.2008 so disallowance under section 14A is not applicable for the year under consideration. However we disagree with the view of ld. AR in terms of the provisions of section 115JB of the Act which are self explanatory. Accordingly in our considered view we find no infirmity in the decision of the ld. CIT(A)- Decided against assessee.

Applicability of provisions of Section 234B and 234C - Held that:- As relying of Emami Ltd. Vs. CIT case [2011 (6) TMI 163 - CALCUTTA .....

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over the period of 5 years. However, the lower authorities disallowed the same on the ground that there is no provision under the Act to claim the deferred revenue expenses. From the facts of the case we observe that the AO is not skeptical about the genuineness of the expenses incurred. The whole amount of ₹ 154.64 million has been incurred in connection of business prior to the commencement of commercial production. Any expense incurred in connection to the business is an allowable expen .....

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ure during construction period where it was recommended that the indirect expenditure incurred during the construction period should be capitalized as part of indirect construction cost to the extent to which the expenditure is indirectly related to construction or if incidental thereto.- Decided against revenue.

Disallowance of consultancy expenses - Held that:- From the records we find that WBIDC is a state level financial institution and engaged in providing equity capital and proj .....

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r play we’re inclined to the restore this file to the AO for fresh adjudication as per law after giving opportunity to the assessee. We also direct the AO to issue show cause notice to WBIDC under section 133(6) of the Act for the necessary details and clarification as required under the provisions of law. - Decided in favour of assessee for statistical purpose.

Disallowance u/s 14A r.w.r 8D - Held that:- Rule 8D of the IT Rules came into effect from 24.03.2008 and the instant case be .....

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d SBI MMD account - Held that:- AO treatment to difference arising on account of foreign exchange in the value of sundry creditors as notional loss and contingent liability which the assessee has not incurred so it was disallowed is strongly disagreed on the ground that this year and adjustment was made by the assessee in terms of AS 11 issued by ICAI and in pursuance of mercantile system of accounting as notified u/s 145 of the Act.- Decided against revenue.

Addition of freight expen .....

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. Accordingly the Ld. CIT(A) has given the relief to the assessee and on this point of view Ld. DR has not brought anything on record contrary to the findings of the Ld CIT(A) in deleting the addition - Decided against revenue.

Addition on account of claimant in accounting method - Held that:- the duty benefit under the scheme was available to the assessee only on receipt of this certificate issued by the Director-General of foreign trade. Prior to the year, assessee was recognizing t .....

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dited along with audit report by the auditor of the company were placed. In view of above we do not find any reason to interfere in the order of learned CIT(A). - Decided against revenue.

Addition in the computation of book profit on account of doubtful advances and debts - Held that:- AO has treated the provision created against the doubtful debts and advances as the provision for unascertained liability. Therefore for computing the book profit under the provisions of MAT deduction f .....

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ri Harakamal Chakraborty, GM (Fin. & Acc.) For the Respondent : Shri Rajat Subhra Biswas, CIT-DR ORDER Per Waseem Ahmed, Accountant Member These are cross-appeals by assessee and Revenue against common order of Commissioner of Income Tax (Appeals)-XXXII, Kolkata dated 28.01.2009. Assessment was framed by JCIT, Range-12, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 28.12.2007 for assessment year 2005-06. Shri Harakamal Chakraborty, .....

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e additional ground of appeal no. 3 of the appellant that it was not liable to pay any tax under section 115JB. 2. For that the CIT(A) erred in rejecting the ground of appeal no. 16 of the appellant hat in the event the provision for deferred tax was not allowed as a deduction for determining the book profit, then the amount of deferred tax assets that was included in the brought forward loss be also excluded for determining the brought forward loss for the purpose of clause (iii) of the Explana .....

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T(A) erred in holding that deferred revenue expenses amounting to ₹ 154.64 million were not deductible in computing income under the Income-tax Act. 6. For that the CIT(A) erred in dismissed the alternative ground that the deferred revenue expenses amounting to ₹ 154.64 million were required to be included in the actual cost of the assets for allowing depreciation under section 32 of the Income-tax Act. 7. For that the CIT(A) erred in upholding the disallowance of the payment of S .....

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e due dates for payment of the advance tax installments and that there is retrospective amendment of the low long after the close of the financial year imposing liability for tax. 4. During the course of hearing before us, Ld. AR of assessee did not press for grounds No. 1 and 4 and same stand dismissed as not pressed. 5. The first issue raised in ground no. 2 by the assessee is that ld. CIT(A) erred in confirming the order of the AO by adding the deferred tax liability of ₹ 243.670 lacs i .....

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e income and accounting income that originate in one period in the form of deferred tax assets or deferred tax liability but the same can be reversed in one or more subsequent periods. 5.3 The deferred tax is nothing but income tax. The Act does not differentiate between current income tax and deferred income tax. Therefore the same was added for the working of book profit. 5.4 The claim of the assessee for excluding the deferred tax assets embodied in the brought forward loss while working out .....

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nd provision therefor . The Ld CIT(A) also held that the deferred tax liability is nothing but unascertained liability. The relevant extract of his order reproduced as under:- The A.O in its order has very clearly brought out the relevant extract of the observation of Hon'ble Apex Court in this judgment in J.K. Industries Ltd. Vs. UOI which is reproduced hereunder:- To sum up deferred tax is nothing but accrual of tax out of divergence between account profit and tax audit. This difference ar .....

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profit and tax profit and as such the same cannot be held as an allowable adjustment as per provision of sec. 115JB. Even otherwise an amendment has been brought in sec. 115JB by Finance Act 2008 w.r.e.f 01.08.2001. vide this amendment, a new clause(f) is introduced in Explanation 1 to section 115JB by which the amount of deferred tax and the provision therefore; if debited to the profits and loss account, the net profit as shown in the profit and loss account should be increased by that amount .....

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ce this ground of assessee stands dismissed. The plea of the assessee that the amount of deferred tax assets embodied in the brought forward loss should be excluded while working out the MAT liability was rejected by the ld. CIT(A) on the ground that the provisions of the Act are very clear as mentioned in sub-clause (iii) of explanation to section 115JB. It states that LOSS BROGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS . So brought forward loss means loss as reflected .....

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depreciation whichever is less is deductible from the current year s book profits, for the financial year 2004-05 (AY 2005-06), the assessee reduced ₹ 212.80 crores from the book profit of that year being the c/f loss as on 31.03.2004 which was lower than the c/f unabsorbed depreciation of ₹ 386.76 crores. However, the said loss of 212.80 crores was computed after taking into account credit of ₹ 333.20 crores on account of deferred tax assets as it was the understanding of the .....

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iability as unascertained liability. The AO also held that deferred tax is nothing but the income tax only therefore the same was disallowed and added in the working of MAT under section 115JB of the Act. The assessee has taken the alternate plea before the AO and ld. CIT(A) that the brought forward loss contains the amount of deferred tax assets and which should be excluded while working out the MAT liability. But the AO disregarded the plea of the assessee on the ground that the matter is sub .....

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us judicial pronouncement that for the levy of the tax under the provisions of MAT the assessee has to work out the profit in the manner as prescribed in explanation 1 to section 115JB(2) of the Act. As per the provisions of the Act the manner for working out the profit cannot be altered as per the requirement of the assessee. The relevant provision of the law is reproduced below : 115JB.(1) (2) Explanation [1].- For the purposes of this section, , book receipt profit means the net profit as sho .....

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nt. From the plain reading of the provisions of this section 115JB of the Act, it is clear that the amount of loss brought forward or unabsorbed depreciation whichever is less as per books will be reduced from the amount of book profit. So in the instant case the plea of the assessee that the amount of the deferred tax assets included in the brought forward loss should be excluded from the said amount is not tenable. We are also relying in the decision of Hon'ble Supreme Court in the case of .....

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th Registrar of Companies and as per the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) and Hon'ble Bombay High Court in the case of Kinetic Motor Co. Ltd. the AO cannot make any adjustments to the book profits of the taxpayer once it was certified by the auditors. Accordingly, in our considered view, we find no infirmity in the order of the ld. CIT(A), hence this ground of appeal of the assessee is dismissed 8. Next issue raised by assessee by way of grou .....

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came in second appeal before us. 9. We have heard rival contentions and perused the materials available on record. Before us Ld. AR submitted that the aforesaid direction is ultra vires of the Act. As per Sec. 14A(1), it applies to total income computed under Chapter IV of the Income Tax Act whereas income under section 115JB is computed under Chapter XIIB of the Income Tax Act. Consequently Rule 8D which is notified under section 14A is also inapplicable to income determined under section 115JB .....

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expenditure incurred in relation to the income to which the provisions of section 10 applies then the book profit will accordingly be reduced by the said expenditure. The relevant extract of the provision is reproduced below. 115JB.(1) (2) Explanation [1].- For the purposes of this section, , book receipt profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a)- (b)- (f) the amount or amounts of expend .....

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for the year under consideration. However we disagree with the view of ld. AR in terms of the provisions of section 115JB of the Act which are self explanatory. Accordingly in our considered view we find no infirmity in the decision of the ld. CIT(A), hence this ground of appeal of the assessee is dismissed. 10. Next issue raised by assessee by way of additional ground no. 1 is that provisions of Section 234B and 234C of the Act have no application in case there was no liability to pay any advan .....

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t 2009 w.r.e.f. 1-4-2001 towards the amount of deferred tax and the provision therefore and provisions for diminution in the value of assets respectively. As a result the interest under section 234B and 234C of the Act was levied for the short payment of advance tax. 12. At the outset, we find that the issue is squarely covered in favour of the assessee in terms of Hon ble jurisdictional High Court in the case of Emami Ltd. Vs. CIT (2011) 337 ITR 470 (Cal). The head note of the order reads as un .....

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ar preceding the relevant assessment year, the assessee had no liability to Assessment Year advance tax, he cannot be asked to pay interest in term of s. 234B and s. 234C for default in making payment of tax in advance which was physically impossible. As the issue is already covered by the decision of Hon'ble jurisdictional High Court in favour of assessee, we accordingly direct the AO not to charge any interest under section 234B & 234C of the Act on account of retrospective amendment i .....

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al production from the assessment year 1985-86 to 2001-02. The commercial production started w.e.f. 01/08/2001. Expenses incurred prior to the commencement of business are ₹ 805.65 million. As per the policy followed by the assessee these expenses were to be written off over a period of five years beginning from the assessment year 2002-03 and ending in the assessment year 2007-08. Accordingly the deferred revenue expenses were claimed in the following manner: S. No Assessment Year Amount .....

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nue expenditure for an amount of ₹ 15.46 crores under section 37 of the Act. The AO during the assessment proceedings sought the clarification as to why this expense should be allowed. On being questioned by the AO about the allowability of deferred revenue expenditure, the assessee submitted that the deferred revenue expenditures are on account of amortization of miscellaneous expenses that were incurred prior to the start of the commercial production. The assessee submitted that the defe .....

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Industrial Investment Corporation (1997) 225 ITR 703 and Challapalli Sugar Limited vs CIT (1975) 98 ITR 167.The assessee also submitted that these deferred revenue expenditure pertains to the assessment years starting from AY 1985-86 to 2001-02. However, the AO has disregarded the claim of the assessee by considering that the amount of amortized expenses and its allowability needs to be determined as per the provisions of the Act. There is no provision under the Act for claiming the deferred re .....

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has amortized this deferred revenue expenditure amounting to ₹ 805.65 million for a period over five years after the commencement of commercial production on 01.08.2001. The same has been allowed by the A.O. in earlier years. Ld. AR claimed that if this deferred revenue expenses cannot be claimed as an expense u/s 37 then assessee should be allowed to capitalize this expense and same is deductible u/s 32. However, Ld. CIT(A) observed that the assessee itself accepts that these are the expe .....

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ed that there were indirect expenses incurred prior to the commencement of commercial production of the assessee factory on 01.08.2001 and as per the guidance note of the institute of Chartered Accountants of India on treatment of expenses during the construction period, the same were treated as deferred revenue expenses and charged to profit and loss account @ 1/5 p.a. over five years. The learned AR also relied on the decision of Hon ble Supreme Court in case of CIT vs. UP State Industrial Inv .....

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t they have not substantiated the same with reference to any provisions in the Income Tax Act or any judgment. Ld. AR has relied on the citation of the Tribunal decision in case of Virtual Soft Systems Vs. ACIT [2010] 38 SOT 412(Delhi) where it was held that Guidance notes issued is binding and revenue cannot reject it easily. He further relied on the jurisdictional High Court in case of India Steamship Co. Ltd. Vs. Joint Commissioner of Income Tax & ors. (2005)194 CTR (Cal) 386; Eq: (2005) .....

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allowed to be capitalized under section 32 of the Act. 17. From the aforesaid discussion, we find that the assessee has incurred expenses prior to the commencement of business and classified as deferred revenue expenditure. The assessee started claiming those expenses after the commencement of business 1/5th over the period of 5 years. However, the lower authorities disallowed the same on the ground that there is no provision under the Act to claim the deferred revenue expenses. From the facts o .....

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he expenses incurred prior to the commencement of production should be capitalized with the fixed assets of the assessee and depreciation should be allowed thereon accordingly as per law. In this connection, we are relying in the decision of Hon'ble Supreme Court in the case of Challapalli Sugars Ltd v. CIT (1975) 98 ITR 167 (SC) where the head notes is as reproduced:- As the expression actual cost has not been defined, it should be construed in the sense which no commercial man would misund .....

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d before the commencement of production on such borrowed money can be capitalized and added to the cost of the fixed assets created as a result of such expenditure. We are also relying in the guidance note issued by the Institute of Chartered Accountant of India on treatment of expenditure during construction period where it was recommended that the indirect expenditure incurred during the construction period should be capitalized as part of indirect construction cost to the extent to which the .....

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) General administrative and office expenditure which is indirectly related or incidental to construction, including, as may be appropriate, stationery and printing, rent, rates and taxes, postage and telegrams, travel and conveyance etc. (d) Appropriate insurance charges. (e) Appropriate expenditures on maintenance and operation of vehicles. (f) Appropriate expenditures in connection with temporary structures and service facilities built or acquired specially for the purpose of construction (se .....

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s Note). (k) Expenses on land grading and leveling (see paragraph 96 of this Note). Taking a consistent view by the decision of Hon ble Supreme Court and reliance in the aforesaid guidance note we reverse the orders of authorities below. Hence, this ground of the assessee is allowed. 18. Next issue raised by the assessee by way of additional ground no. 7 is that the ld. CIT(A) erred in confirming the order of AO by disallowing the payment of ₹ 90.36 million to WBIDC on account of consultan .....

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plete details of the payment like services rendered, basis of payments, copy of the agreement, supporting documents etc. The assessee could not substantiate the expenditure except the memo of charge as an evidence of the transaction. Hence the AO made the addition to the total income of the assessee. 20 Aggrieved, assessee preferred an appeal to ld. CIT(A) where the assessee submitted that as per the provisions of section of section 40A(2)(a) if the AO is not satisfied he can disallow the expend .....

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that this amount of expense is exclusively for the business and profession then, it should be allowed u/s 37(1) of the Act. The ld. CIT(A) has observed that section 40 A(2)(b) of the Act becomes applicable only when the reasonableness, relevance and reason of such expenditure incurred for the business is proved by the assessee. Here assessee was not able to produce any such evidence in support of its claim of this expenditure as well as for the genuineness of this payment. Failure to produce the .....

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has also relied in the following decisions : 1. Ramanand Sagar Vs. Deputy CIT (2002) 256 ITR 134 - The Hon ble court held that just debiting will not make that expense allowable. Assessee furnished Xerox copies of bills and vouchers. In this case AO was not satisfied with the justification of the assessee and hence disallowed this expense. It was held by the High Court that disallowance made by the AO. was held to be order. 2. Malayala Manorama Co. Ltd Vs. CIT (2006) 284 ITR 69 It was held that .....

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assessee came in second appeal before us. 21. We have heard rival contentions and perused the materials available on record. Before us Ld. AR argued that there is no any ambiguity regarding the amount expensed of as well as same has been expensed off wholly and exclusively for business or profession hence it should be allowed as an expense. From the aforesaid discussion we understand that the consultancy charges paid by the assessee was disallowed by the AO on the ground that assessee failed to .....

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the state of West Bengal. We further find that the payment has been made to the government organization and the AO has not exercised his power under section 133(6) of the Act for the clarification by issuing show cause notice to the party before making the disallowance. We also find that the order of the AO is silent about the deduction of TDS from the payment of the consultancy charges to the party. Accordingly in the interest of Justice and fair play we re inclined to the restore this file to .....

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ssessee has earned dividend income amounting to ₹ 18,91,89,000/- from the Investment made in HPL Cogeneration Ltd. which has been claimed as exempted income under sec 10(34). AO observed that the assessee has not added back the relevant expenditure for earning this exempted income. The assessee was asked to furnish the details as to why the proportionate management expenditure should not be added back to the income of the assessee. Ld. AR submitted that as per Sec. 14A of the Act all those .....

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income and so disallowed @ 5% of total dividend income i.e. ₹ 94,59,450/-. 24. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Before Ld. CIT(A) Ld. AR has given explained sec 14A that as per this section only those expenses are disallowed which are directly identifiable to be incurred to earn that exempted income. Here assessee is holding only a minor stake that too only in one company. The assessee also submitted that it was held in ITAT Mumbai Bench in ITA No.8057/Mum/03, ITA .....

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section 14A(1) disallowance can be made only in respect of expenditure incurred. Here the assessee has not incurred any expenditure in relation to dividend income. Hence Provision of section 14A do not apply at all. Assessee has relied on citation of the following cases: 1. CIT vs. Hero Cycles Ltd [ 323 ITR 518]- P&H High Court 2. Maxopp Investment Limited vs. CIT [(2012)347 ITR 272 (Delhi High Court)] 3. CIT vs. Torrent Power Ltd. [2014] 363 ITR 474 (Gujarat High Court) It was held that Ru .....

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er for making disallowance in terms of provision of Sec. 14A r.w.s. 8D of the IT Rules, 1962. However we understand that the Rule 8D of the IT Rules came into effect from 24.03.2008 and the instant case before us is for AY 2005-06. Therefore, the provisions of Rule 8D of the IT Rules is not applicable in assessee s present case. We further find that prior to insertion of Rule 8D of the IT Rules various courts have held that the disallowance in terms of provision of Sec. 14A of the Act should be .....

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er the income tax. The Tribunal has computed expenditure at 1 per cent of such dividend income which, according to them, is the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed. In this view of the matter, we reverse the orders of authorities below and directed the Assessing Officer to make disallowance @ 1% of dividend income. Accordingly, this ground of assessee s appeal is allowed in part. 26. In the result, assessee s appeal is partly allowed for stati .....

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reight. 3. On the facts and circumstances of the case,, Ld. CIT(A) has erred in deleting the addition of ₹ 1240 Million accepting the change of accounting method as bonafide. 4. On the facts and circumstances of the case,, Ld. CIT(A) was not justified in accepting revised return, the accounts of which was not laid before the AGM of the assessee Company. 5. On the facts and circumstances of the case, the Ld. CIT(A) is not justified in deleting the addition of ₹ 21.619 Million made in .....

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he foreign exchange in the value of sundry creditors account and MMD SBI account. The above said difference was recorded on the last day of the financial year while preparing the financial statements. The AO observed that it is a notional loss and represents contingent liabilities which have not been actually incurred by the assessee. Therefore the same was disallowed by the AO and added to the total income of the assessee. 29. Aggrieved, assessee preferred an appeal to learned CIT(A) where it w .....

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it was held that the provisions in the accounts on account of difference in foreign exchange should be made by the company following mercantile system of accounting which are having effect on liabilities and as a result on the quantum of profits. It is well settled that pre-existing liabilities should be adjusted in the light of foreign exchange under mercantile system of accounting. The claim of the assessee cannot be denied merely on the ground that it is just a provision and no amount has bee .....

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deduction u/s. 37(1). I agree with the contention of the appellant and hence this ground is allowed. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 30. We have heard rival contentions and perused the materials available on record. Before us Ld. DR vehemently supported the order of AO and on the other hand the learned AR relied on the order of Ld CIT(A) and filed a paper book which running from pages 1 to 97. From the aforesaid discussion, we find that the AO treated .....

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he Accounting Standards (A) 11, the Effects of changes in Foreign Exchange Rates (revised 2003), issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-2004. Relevant extract of the Accounting Standard is reproduced as follows:- 9. A foreign currency transactions should be recorded on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between t .....

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here the closing rate is unrealistic and it is not possible to effect an exchange of currencies at that rate at the balance sheet date. In such circumstances, the relevant monetary item should b reported in the reporting currency at the amount which is likely to be realized from, or required to disburse, such item at the balance sheet date: 11(b)…. 11(c)… 12. Cash receivables and payables are examples of monetary items…. 13. Exchange differences arising on the settlement of .....

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ssion or income from other sources shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee .....

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in Oil and natural Gas Corporation Ltd. V. Deputy CIT (Asstt.) [2003] 261 ITR (AT) 1 (Delhi) which rightly follows the settled position as explained in the judgment of the Hon'ble Supreme Court which we have referred to. We, therefore, reject the submission of the Appellant in these appeals that the increase in liability on account of the fluctuation in the rate of foreign exchange remaining on the last day of the financial year is notional or contingent and, therefore, cannot be allowed as .....

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freight on stock transfer. The assessee has also recovered part of the freight charges from the customers incurred in connection with the sales. However the AO observed that expenses incurred on freight was more than the recovery made by the assessee from the customers. The AO also found that the claim of the assessee towards such freight expenses was also disallowed in the AYs 2003-04 and 2004-05, so the AO accordingly disallowed the claim of the assessee for freight expenses and added to the .....

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ssee had borne more amount of freight charges over and above the amount agreed due to damages/detention charges, price increased due to increase in fuel cost. Moreover, the freight charges on the stock transfer from factories to depots are to be incurred by the assessee alone. The assessee submitted that for the earlier AYs 2003-04 and 2004-05 the freight charges were shown as receivable in the balance sheet of the respective years so the question of disallowance of freight expenses does not ari .....

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xpenses of freight of ₹ 13,55,80,000/-. The appellant during the relevant previous year has debited to the P & L a/c ₹ 135.58 million under the heading freight charges . Out of the said amount 46.99 million represents the element of freight cost in excess of recovery and 86.59 million representing freight charges on stock transfer which is not for any recovery or otherwise. The AO has disallowed the freight expenses on the ground that the freight charges is receivables of the app .....

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s on stock transfer is concerned this is definitely expenditure incurred for business irrespective of the act that the same is recoverable or not from the customers, I find force in assessee s contentions in this regard, hence, this ground of the appellant is allowed. Being aggrieved by this order of the learned CIT(A) Revenue is in appeal before us. 35. We have heard rival contentions and perused the materials available on record. Before us Ld. DR vehemently supported the order of AO and left t .....

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freight expenses, a sum of ₹ 86,59,000/- was incurred on the stock transfer by the assessee from the factory to the depots. In our view, the question of disallowance of freight expenses in connection with the stock transfer does not arise. This freight expense has direct connection with the business of the assessee. For other freight expenses, the reason given by the AO for the disallowance is not tenable as the AO has not pointed out any reasonable reasons for the same. There is no doubt .....

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is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹ 124 crores on account of claimant in accounting method. 37. The assessee was entitled for custom duty benefit under the target plus scheme on the basis of export turnover in accordance with paragraph 3.7 of the foreign trade policy. The assessee in the earlier years was used to recognized custom duty benefit under the target plus scheme in the books of accounts on the basis of completion of export. However, the assesse .....

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available to the assessee on the basis of incremental growth of the export. For the year under consideration, there was an incremental growth in the exports of the assessee therefore the assessee was entitled for the benefit of custom duty. Accordingly the AO held that the income on account of custom duty is available immediately when the assessee achieves the incremental growth in the export business. Therefore, the AO disallowed the claim of the assessee and added the custom duty benefit to t .....

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s order of Ld CIT(A) Revenue is in appeal before us. 39. We have heard rival contentions and perused the materials available on record. Before us Ld. DR vehemently supported the order of AO whereas Ld AR drew our attention on page no. 79 of the paper book where the notification for the custom benefit under target plus scheme is placed. The relevant notification reads as under:- exemption on goods imported into India against a Duty Credit Certificate issued under the Target Plus Scheme. - In exer .....

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Schedule to the customs Tariff Act 1975 (51 of 1975); and (b) The whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act,- subject to the following conditions, namely:- (1) That the benefit under this notification shall be available only in respect of duty credit certificate issued under the said Scheme to a Star Export House on the basis of incremental growth in FOB value of exports made during the financial year 2003-04; (2) That the said certificate has b .....

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aforesaid, it is amply clear that the duty benefit under the scheme was available to the assessee only on receipt of this certificate issued by the Director-General of foreign trade. Prior to the year, assessee was recognizing the income on the completion of export but that really does not entitle the assessee for the duty exemption unless the certificate is received by the assessee. In view of above, we find no infirmity in the order of Ld CIT(A). Hence this ground of appeal of the Revenue is .....

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the Ministry of corporate affairs were also placed on page number 1 to 13 of the supplementary paper book. The financial statements duly audited along with audit report by the auditor of the company were placed from page 16 to 24 of the supplementary paper book. In view of above we do not find any reason to interfere in the order of learned CIT(A). Hence this ground of appeal of Revenue is dismissed 42. 5th issue raised by Revenue in this appeal is that the learned CIT(A) erred in deleting the .....

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that the same is not in the nature of provision for unascertained liabilities. However, the AO disregarded the claim of the assessee by stating that provisions has been provided on account of unseen but anticipated loss of the company and is therefore clearly is in the nature of un-ascertain liability. The AO accordingly held that the provision for doubtful advances and debts should be added in the book profit for the purpose of MAT. 44. Aggrieved, assessee preferred an appeal to Ld CIT (A) who .....

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supported the order of learned CIT(A). From the aforesaid discussion, we find that AO has treated the provision created against the doubtful debts and advances as the provision for unascertained liability. Therefore for computing the book profit under the provisions of MAT deduction for such provisions was disallowed and added to the book profit. However in our considered view the provision for Sec. 115JB speaks for the provisions created for unascertained liabilities therefore we disagree with .....

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d and doubtful debt. The provision for bad and doubtful debt can be added back to the net profit only if Item (c) stands attracted. Item (C) deals with amount(s) set aside as provision made for meeting liabilities, other than ascertain liabilities. The assessee s case would, therefore, fall within the ambit of Item (c) only if the amount is set aside as provision; the provision is made for meeting a liability; and the provision should be for other than ascertained liability, i.e., it should be f .....

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