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2017 (3) TMI 207 - ITAT KOLKATA

2017 (3) TMI 207 - ITAT KOLKATA - TMI - Leave encashment allowance u/s. 43B - Held that:- It is no doubt true that the assessee in the present case did not file the evidence regarding payment before the due date of filing the return of income u/s 139(1) of the Act by the assessee for the relevant assessment year along with the return of income. Nevertheless the assessee had filed the details of payment of leave encashment before the due date of filing the return of income before the due date. Th .....

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t the deduction to that extent should be allowed. With these observations ground raised by the revenue is dismissed. - Expenditure incurred on issue of debentures - Nature of expenditure - Held that:- The debentures whether convertible or non convertible are in the nature of loan at the time of their issuance and any expenditure incurred on issue of such debentures or bonds had to be regarded as part of the borrowing cost and have to be allowed as a deduction and as a revenue expenditure. Th .....

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t be sustained - Exclusion of retention money in computing total income under normal provision as well as in computing Book Profit u/s. 115JB - MAT - Held that:- As on the date when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any p .....

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tractual obligations are fully performed to the satisfaction of the customer by the Assessee. Therefore the retention money cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard - TDS u/s 194J - fees for professional or technical services - Held that:- AO has accept .....

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ither the interest nor the principal amount had been settled by the two companies right form A.Y.2004-05. The advances were therefore written off in the books of accounts of the assessee. Therefore the conclusions of CIT(A) that the advances written off have to be allowed as deduction u/s 28 r.w.s. 37(1) of the Act are correct and does not call for any interference. - As far as the remaining sum being old government deposits are concerned the details of old government advances off are given .....

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es for purchase of goods , consumable stores and electrical installation. These advances had nexus with the business of the assessee and their write off in the books of accounts has to be considered as allowable deduction u/s 28 r.w.s. 37(1) of the Act. We therefore are of the view that CIT(A) was fully justified in allowing deduciton claimed by the assessee. We also find that the arguments advanced by the assessee before us clearly supports the conclusion arrived at by CIT(A). - Provision .....

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he amount in question cannot be considered as provision for doubtful debts which is to be added to the net profit as per the profit and loss account to arrive at the book profit. In other words the sum in question was a bad debt written off which had to be reduced even while arriving at the profit as per profit and loss account and was accordingly reduced. Addition of the said sum to the net profit as per profit and loss account for the purpose of arriving at book profit u/s.115JB of the Act was .....

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principle laid down in the decisions on which the ld. Counsel has placed on reliance, we are of the view that CIT(A) was justified in accepting the plea of the assesses. With regard to the directions of CIT(A) to verify whether the account of the provisions made for employee benefit has already been debited in the profit and loss account, the directions of CIT(A) his order is correct and is for the assessee to explain as to how the sum in question are not debited in the profit and loss account .....

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2006-07 to 2008-09 were heard together and involve common issues. We deem it convenient to pass a common order. ITA No.100/Kol/2011(Revenue s appeal) & C.O.No.13/Kol/2011 (Assessee s Cross- Objection) A.Y.2006-07 2. ITA No.100/Kol/2011 is an appeal filed by the Revenue against the order dated 30.09.2010 of CIT(A)-I, Kolkata relating to A.Y 2006-07. The assessee has filed a Cross Objection against the very same order of CIT(A) which is C.O. 13/Kol/11. 3. Ground No.1 raised by the revenue in i .....

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not justified and erred in disallowing provision for leave encashment amounting to ₹ 44,57,282/- u/s 43B of the Act. 4. The Assessee is a company. It is engaged in the business of manufacture and sale of metallurgical machinery, materials handling and conveying plant/machinery/spares and coal washing plant on a turnkey contract basis. For A.Y.2006-07 the assessee filed return of income on 28.11.2006 declaring total income of Nil as per the normal provisions of the Act and book profits as .....

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y paid by him. In other words, the deduction on account of expenditure in the form of leave encashment paid by an employer to the employee cannot be allowed on the basis of the provision or on the basis of accrual under the mercantile system of accounting, made in the books of account and will be allowed only to the extent the leave encashment is actually paid to the employee by the employer. The plea of the assessee before the AO was that since section 43B(f) of the Act was declared unconstitut .....

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n, and the fact that in such appeal, the operation of the Hon ble High Court of Calcutta has been stayed, was of the view that deduction on account of provision for leave encashment cannot be allowed as deduction. 5. Before CIT(A) the assessee, apart from reiterating its claim for deduction of the entire sum of ₹ 44,57,282/- based on the decision of the Hon ble Calcutta High Court in the case of Exide Industries Ltd. (supra) made an alternative submission that the assessee in any event sho .....

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r of CIT(A) sustaining the addition of the remaining sum which was the provision made for leave encashment the assessee has filed the cross objection. 6. We have considered the rival submissions. As far as the ground of appeal of the revenue is concerned, we do not find any merits in the grounds of appeal raised by the revenue. The proviso to section 43B clearly lays down that nothing contained in section 43B(f) shall apply in relation to any sum which is actually paid by the assessee on or befo .....

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Act by the assessee for the relevant assessment year along with the return of income. Nevertheless the assessee had filed the details of payment of leave encashment before the due date of filing the return of income before the due date and the same is placed at page 29 of the assessee s paper book and the same has been given as Annexure-1 to this order. The requirement of furnishing evidence of payment along with the return of income is only directory and is not mandatory. The ld. DR however sub .....

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by the revenue is dismissed. 7. As far as the Cross Objection filed by the assessee is concerned, in view of the pendency of the constitutional validity of section 43B(f) of the Act before the Hon ble Supreme Court, it would be just and proper to direct the AO to follow the ultimate decision that might be taken in the said proceedings and decide the grievance projected by the assessee in the cross objection. Thus the cross objection filed by the assessee is treated as allowed for statistical pur .....

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date as provided under the relevant law governing the provident fund, will not be allowed as deduction. It is the plea of the assessee that the employees contribution to PF had been paid by the assessee on or before the due date of filing the return of income for the relevant assessment year u/s 139(1) of the Act and therefore deduction claimed should be allowed as provided under the proviso to section 43B of the Act. The said plea of the assessee was rejected by the AO for the reason that the p .....

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income u/s 139 of the Act. Aggrieved by the order of CIT(A) the revenue has raised ground no.2 before the Tribunal. 11. At the time of hearing it was brought to our notice that the Hon ble Calcutta High Court has also taken the view that employees contribution to PF paid on or before the due date of filing the return of income u/s 139(1) of the Act should be allowed as deduction. In this regard the decision of the Hon ble Calcutta High Court in the case of M/s. Akzo Nobel India Ltd. Vs CIT in IT .....

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th Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in View of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commiss .....

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Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. 12. In view of the aforesaid decision of the Hon ble Calcutta High Court, we do not find any merits in ground no.2 raised by the revenue and accordingly the same is dismissed. 13. Ground No.3 raised by the revenue reads as follows :- 3. That on the facts and in the circumstances of the case Ld. CIT (Appeals) has erred in directing to delete the a .....

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the Assessee filed detailed reply vide its letter dated 08-10-2009 contending that since expenditure has been incurred for raising debts to be utilized for the purposes of business, the expenditure has to be considered as revenue in nature and allowable as deductible expenditure in computing total income. 15. Disregarding the above submission, the AO. in the order u/s 143(3) disallowed the expenditure incurred on issue of FCCB on the basis that since the expenses does not represent interest expe .....

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ible or non convertible does not militate against the nature of the debenture being in the nature of the loan and therefore expenditure incurred would be admissible as revenue expenditure. It was also brought to the notice of CIT(A) that SLP filed by the department against the aforesaid decision of the Hon ble Rajasthan High Court was rejected. Further reliance was placed on the Hon ble Mumbai ITAT in the case of Mahindra & Mahindra vs JCIT 36 SOT 348 (Mum) wherein it was held that the expen .....

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has further been affirmed by the Apex Court. In the said case, it has been categorically held that the debentures when issued is a loan, whether it is convertible or non-convertible, does not militate against the nature of the debenture being loan. Therefore, the expenditure incurred would be admissible as revenue expenditure in the light of the judgment of the apex Court in the case of India Cements Ltd. Contention of the A.O, that aforesaid judgments relate to debentures and not FCCBs does no .....

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. 19. Before us the ld. DR relied on the order of AO. The ld. Counsel for the assessee reiterated the submissions as were made before CIT(A). It was also brought to our notice that in assessee s own case in ITA No.840/Kol/2013 by order dated 15.07.2016 this tribunal allowed similar claim of the assessee. 20. We have considered the rival submissions. We are of the view that the issue in question is squarely covered by the decisions referred to by the assessee before CIT(A). The debentures whether .....

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on the facts and in the circumstances of the case Ld. CIT ( Appeals) has erred in directing to delete the addition of ₹ 2,15,00,000/-. 22. The assessee entered into an agreement dated 11.08.1999 with M/s. Hooghly Mills Co.Ltd for purchase of the property owned by M/s. Hooghly Mills Co.Ltd at at Raja Santosh Roy Road, Kolkata. The assessee paid a sum of ₹ 3 crores as advance at the time of the agreement for sale. It is the plea of the assessee that the property in question which was .....

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h of May, 2004 and therefore the loss of ₹ 2,15,00,000/- was written off in the books of account and claimed as a deduction while computing the total income of the assessee. 23. The AO was of the view that the loss in question was a capital loss and cannot be allowed as deduction as the advances in question was given for acquiring the capital asset. The AO in this regard made a reference to the decision of the Hon ble Supreme Court in the case of Hashimara Industries Limited 230 ITR 927 (S .....

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order that loss occasioned from non-realisation of the advances should be allowed as business loss, there must be nexus between the business and the loss which has been incurred by the assessee. The assessee pointed out that the property in question was intended to be purchased for the purpose of constructing office premises and was directly related to the business of the assessee and therefore the deduction claimed should be allowed. The assessee also distinguished the decision relied upon by t .....

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cotton mill due to which the assessee was able to carry on the cotton business. Hence the loss suffered was on capital account and cannot be deducted as a business loss. It was pointed out that in the present case the Assessee did not acquire any capital asset and merely paid advance. The assessee also placed reliance on the decision of the Hon ble Rajasthan High Court in the case of CIT vs Anjani Kumar Co. Ltd. 259 ITR 114 (Raj.) wherein it was held that advances made to agriculturist for purc .....

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e therefore held that the disallowance made by the AO cannot be sustained. Aggrieved by the order of CIT(A) the revenue has raised ground no.4 before the Tribunal. 26. We have heard the submissions of the ld. DR, who relied on the order of AO. The ld. Counsel for the assessee relied on the order of CIT(A). 27. We have given a very careful consideration to the rival submissions. We are of the view that order of the CIT(A) does not call for any interference. The decision of the Hon ble Rajasthan H .....

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uch capital account was also held to be a capital loss and not a business loss. In the present case the Assessee did not acquire any capital asset and merely paid advance for acquiring capital asset. We are therefore of the view that there is no merit in ground no.4 raised by the revenue and the same is dismissed. 28. Ground No.5 raised by the revenue reads as follows :- 5. That on the facts and in the circumstances of the case Ld. CIT ( Appeals) has erred in directing to exclude retention money .....

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s retention money over which the assessee has no rights and therefore the sum in question cannot be considered as income both under the normal provision of the Act as well as while computing the book profit u/s 115JB of the Act. The break up of the retention money over which the assessee does not have a title and therefore cannot be regarded as income is given at page 49 of the assessee s paper book and the same is given as Annexure-2 to this order. As we have already seen that the assessee exec .....

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ment is obtained. It was the plea of the Assessee that till such time the receipt in question cannot be regarded as income even though the assessee follows mercantile system of accounting. The assessee placed reliance on the decision of the Hon ble Calcutta High Court in the case of CIT vs Simplex Concrete Piles (India)P.Ltd. 179 ITR 8 (Cal) and several other high courts in support of its claim that the sum in question cannot be regarded as income under the normal provisions of the Act. 30. With .....

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ted to profit and loss account, it needs to be excluded while computing the book profit as per Section 115JA. If notional income has been credited to P&L account and the said income has not accrued during the year, the same cannot be considered as "to disclose the result of working of the company during the financial year as provided under Part-I and Part- II of Schedule VI to the Companies Act, 1956." (ii) Hon'ble Mumbai Tribunal in the case of Hitkari Fibres Ltd. -vs.- JCIT ( .....

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the nature of income cannot be taxed as income under section 115JA. When the accounts are prepared in accordance with Part-Il and Part-Ill of Sch. VI of the Companies Act while making adjustments as per the provisions of s.115JA to compute book profits, the amounts which are not taxable or exempt are excluded, because such amounts do not really reflect a receipt in the nature of income and, therefore, such amounts cannot form part of the profit reflecting real working results. While rendering th .....

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d therefore there should not be any hindrance in entertaining the additional ground. The CIT(A) placed reliance on the decision of the Hon ble Supreme Court in the case of Jute Corporation of India 187 ITR 688 (SC) and the decision in the case of NTPC Ltd. 229 ITR 383(SC) to come to the conclusion that when facts to decide an additional ground of appeal are available on record and when it was only a question of applying the law to those facts for correctly deciding the liability to tax of an ass .....

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n the case of Shoorji Vallabhdas and Co. 46 ITR 144 (SC). 33. With regard to including the retention money in computing the book profits the CIT(A) held as follows :- 11.9 Whether the above amount needs to be excluded in computing Book Profit u/s 115JB or not, the above issue is only academic as once it is upheld that the income has not accrued to the assessee, the same cannot be brought to tax under the special provisions of Section 115JB of the Act. In a plethora of decisions it has been held .....

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n upheld by Hon'ble Bangalore Tribunal in the case of Syndicate Bank (supra) & Hon'ble Mumbai Tribunal in the case of Hitkari Fibres Ltd. (supra) & Frigsales (I) Ltd. (supra). It may be noted that in rendering the above decisions, the Hon'ble Tribunal has referred to the decision of Apex Court in the case of Apollo Tyres vs CIT (2002) 255 ITR 273 (SC) and held that the above decision does not debar the assessee to make the above adjustment in computing Book Profit u/s 115JA/J .....

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rder of CIT(A) the revenue has raised ground no.5 before the Tribunal. 35. We have heard the submissions of the ld. DR, who submitted that the CIT(A) ought not to have admitted the additional ground for adjudication. In our view this is not the grievance projected by the revenue in the grounds of appeal. Apart from the above we are of the view that the legal question arising out of facts already available on record can be entertained by CIT(A) in the form of an additional ground. We therefore re .....

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he Act it was submitted by him that the provision of explanation to section 115JB of the Act clearly lays down what are the sums to be excluded and included to the profit as per profit and loss account prepared in accordance with the provisions of the Companies Act, 1956 and the retention money is one of the sums that had to be excluded from the book profits as laid down in Explanatin-1 to section 115JB(2) of the Act. 37. The ld. Counsel for the assessee while reiterating the plea of the assesse .....

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ceipt is considered as income but is exempt by virtue of any specific provision of the Act, then the same would be treated s part of the book profit u/s 115JB of the Act. Thus the ld. Counsel for the assessee submitted that since the retention money in question was not in the nature of income at all it should not be included as part of the book profit u/s 115JB of the Act. 38. We have given a very careful consideration to the rival submissions. As far as the question with regard to excluding the .....

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on the Hon ble Calcutta High Court on identical facts held that having regard to the terms and conditions of the contract, it could not be held that either 10 per cent. or 5 per cent., as the case may be, being retention money, became legally due to the assessee on the completion of the work. Only after the assessee fulfilled the obligations under the contract, the retention money would be released and the assessee would acquire the right to receive such retention money. Therefore, on the date w .....

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bs completed by the assessee during the relevant previous year should not be taken into account in computing the profits of the assessee for the assessment year in question. In view of the aforesaid decision of the Hon ble Calcutta High Court rendered on identical facts as that of the Assessee s case, we are of the view that there is no merit in one part of Gr.No.5 raised by the Revenue viz., that retention money has to be considered as income for computing total income under the normal provisio .....

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of any previous year relevant to the assessment year commencing on or after the 1st day of April,2001, is less than seven and one half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one half ten per cent. The Assessee being a company the provisions of Sec.115JB of the Act were applicable. It is also not in dispute that the income .....

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ous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). In so preparing its book of accounts including profit and loss account, the company shall adopt the same accounting policies, accounting stand and method and rates for calculating depreciation as is adopted while preparing its accounts that are laid before the company at its annual general meeting in accordance with provisions of Sec.210 of the Companies Act. Explanation below Se .....

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as per profit and loss account prepared in accordance with Companies Act, 1956 and make additions or subtraction as is given in the explanation to Sec.115JB(2) of the Act. 40. We have already seen that the issue whether retention money in the case of contracts executed on a turkey basis can be regarded as income at all is no longer res integra and has been concluded by the Hon ble Calcutta High Court in case of CIT Vs. Simplex Concrete (Piles) India Pvt. Ltd. [179 ITR 8]. In the aforesaid decis .....

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when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. Therefore, the Tribunal was right in holding that the retention money in respect of the j .....

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the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Binani Industries Ltd. ITA No.144/Kol/2013 order dated 2.3.2016 reported in (2016) 178 TTJ 0658 (Kol) : (2016) 137 DTR 0185 (Kol)(Trib) had to deal with a case where the question was as to whether receipts on account of forfeiture of share warrants amounting to ₹ 12,65,75,000/-, being a capital receipt, would be liable for taxation u/s 115JB. The tribunal after referring to several decisions on th .....

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he conclusions (i) the object of Minimum Alternate Tax (MAT) provisions incorporated in Sec.115JB of the Act was to bring out real profit of companies and the thrust was to find out real working results of company. (ii) Inclusion of receipt which are not in the nature of income in computation of book profits for MAT would defeat two fundamental principles, it would levy tax on receipt which was not in nature of income at all and secondly it would not result in arriving at real working results of .....

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ccounts thereon and accordingly in order to determine real profit of Assessee, adjustment need to be made to disclosures made in notes on accounts forming part of profit and loss account of Assessee. Profits arrived after such adjustment, should be considered for purpose of computation of book profits u/s 115JB of the Act and thereafter, AO had to make adjustments for additions/deletions contemplated in Explanation to section 115JB of the Act. 42. The Tribunal in the aforesaid decision made a re .....

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is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H.Sugar Factory Ltd.(supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik .....

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e Mumbai Bench held as follows: 26.We shall now examine the scheme of the provisions of sec. 115JB of the Act. It is pertinent to note that the provisions of sec. 10 lists out various types of income, which do not form part of Total income. All those items of receipts shall otherwise fall under the definition of the term "income" as defined in sec. 2(24) of the Act, but they are not included in total income in view of the provisions of sec. 10 of the Act. Since they are considered as & .....

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. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of "income", are excluded for the purpose of computing "Book Profit", since the said receipts are exempted u/s 10 of the Act while computing total income. Thus, it is seen that the legislature seeks to maintain parity between the computation of "total income" and "book profit", in respect of exempted category of income. If the said logic is extended fu .....

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e fully performed to the satisfaction of the customer by the Assessee. Therefore the retention money cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that there is no merit in the other part of ground no.5 w .....

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re directed against the order dated 30.12.2011 of CIT(A)-I, Kolkata relating to A.Y.2007-08. ITA No.532/Kol/2012 (Revenue s appeal): 46. Ground no.1 raised by the revenue in its appeal and ground no.1 and 1.1 raised by the assessee in its appeal can be conveniently decided together . These grounds are as follows :- Ground of appeal of the Revenue: 1. That on the facts and in the circumstances of the case Ld. CIT(A) was not justified and erred in confirming the addition of an amount of ₹ 18 .....

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ling the return back to the Assessing Officer instead of outright deciding the issue. 47. The facts and circumstances under which these grounds of appeal arise for consideration are identical to ground no.1 raised by the revenue in ITA No.100/Kol/2011 for A.Y.2006-07 and C.O.No.13/Kol/2011 for A.Y.2006-07. For the reasons stated therein ground no.1 raised by the revenue is dismissed while grounds 1.0 & 1.1 raised by the assessee are treated as allowed for statistical purposes. 48. Ground No. .....

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stated while deciding the said identical ground of appeal of the revenue in AY 2006-07, we uphold the order of CIT(A) and dismiss ground no.2 raised by the revenue. 50. Ground No.3 raised by the revenue in its appeal and ground no.3 raised by the assessee in its appeal can be conveniently decided together. These grounds of appeal read as under :- Ground of appeal of the Revenue: 3. That on the facts and in the circumstances or the case Ld. CIT(A) was not justified and erred in deleting the addi .....

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ficer instead of outright deciding the issue in spite of holding that the disallowance made by the A.O. is totally unjustified. 51. In the course of assessment proceedings, the AO noticed that the Assessee had claimed credit for Tax deducted at Source (TDS) in respect of certain payments received by the Assessee on which tax had been deducted at source u/s 194J of the Act amounting to ₹ 3,99,472/-. Sec.194J of the Act is applicable when payment is made by way of fees for professional or te .....

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l services. The A.O., however found that there was only a sum of ₹ 13,95,000/- reflected in the profit and loss account as receipts under the head service charges. The AO while passing the order u/s 143(3) dated 21-12-2010, considered income from service charges amounting to ₹ 13,95,000/- as the only income received from professional services and disallowed balance amount of ₹ 57,25,701/- stating that there was nothing on record to prove that the differential amount of ₹ .....

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carrying out all the above activities is booked under the head 'contract sales' in the P&L account. The Assessee further pointed out that while executing the contract, some of the activities like designing and engineering involve technical expertise to the party which is liable to deduction of TDS u/s 194J and not under 194C. Hence, even though amount received on account of designing & engineering is included in the contract sales, as the amount forms part of the total contract r .....

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chase order entered with the said company. Copies of all ledger account showing the income already booked under the head 'Contract Sales' were also filed before the CIT(A). The Assessee pointed out that the above details was never asked by the A.O. during the course of assessment proceedings, the same could not be produced before the A.O. Hence the additional evidence can be considered as admissible under Rule 46A(1) clause (d) to the Income Tax Rules, 1962 (Rules). It was argued that si .....

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ue. The CIT(A) found that TDS certificate from CESC which reflected that they have paid ₹ 70,65,601 to the Assessee as professional charges was in respect of 300 TPH Coal washery at Sarasthali Open Cast Mines having a total contract value of ₹ 1,40,00,000/-. The CIT(A) found that as per the contract with CESC activities like designing and engineering involving technical expertise had to be carried out by the Assessee for which payments tax deduction at source was to be made in terms .....

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oice filed by the Assessee showed that the said receipt was on account of design and engineering charges of ball mill against Customer Purchase Order No. 154/VIII: 752V-1:2005:29910. The CIT(A) also found that the said sum was also duly reflected as part of the contract sales credited in the profit and loss account. 55. The CIT(A) was therefore of the view that since the amount of income as reflected in the TDS certificate is already booked under the head 'Contract Sale' and not shown se .....

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ic head. The CIT(A) found that the Assessee's total revenue for the relevant previous year from contract was ₹ 475 Crs which included all types of contracts like supply contracts, erection & service contract, design & engineering contract as well as composite contracts (comprising of either or all of above types). He held that the AO before coming to a conclusion that income as shown in TDS certificate has not been credited to P&L account, should have verified other revenue .....

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ontracts and his further conclusion that the disallowance made by AO seems to be unjustified, the revenue has raised ground no.3 before the Tribunal. The assessee is aggrieved by the direction of CIT(A) in and by which the CIT(A) directed the AO to verify other revenues as booked in the profit and loss account to come to a definite conclusion that the amounts represented by TDS certificates has been booked as part of the contract sale receipts, the assessee has raised ground no.3 before the Trib .....

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nt documents wherefrom it is found that the income relating to TDS deducted u/s 194J included in the total turnover which is also verified from the TDS certificates issued by CESC. Hence, the claim of the assessee made before ld. CIT(A) is found correct and accordingly the same is allowed. 58. Since the AO has himself accepted the claim of the assessee, we are of the view that there is no merit in ground no.3 raised by the revenue. As far as ground no.3 raised by the assessee is concerned, in vi .....

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is identical to ground no.5 raised by the revenue in ITA No.100/Kol/2011 for A.Y.2006-07. The details of the retention money in this year are given in page no.29 of the assessee s paper book and the same is given as Annexure-3 to this order. All the other facts and circumstances are identical to the facts and circumstances as it prevailed in A.Y.2006-07. For the reasons stated therein we uphold the order of CIT(A) directing the AO to exclude the amount of retention money while computing the tot .....

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ef accordingly, if the contention of the appellant is found to be correct. The direction of the Ld. CIT(A) tentamounts to set aside the case to the file of the A.O. which is not empowered to do and this is a question of involvement of law. 62. At the time of hearing it was admitted by the parties that no such issue arises out of the order of CIT(A) and that this ground of appeal has been erroneously raised in the grounds of appeal. Accordingly ground no.5 raised by the revenue is dismissed as no .....

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mounting to ₹ 1,29,40,600/- was written off In the books of accounts of the Assesssee, as they could not be recovered from the concerned parties. Break-up of the sum so written off is as follows:- Particulars Amount (Rs.) Inter-Corporate advances to McNaeill Engineering (later converted to ODC Carriers Pvt Ltd and ODC Engineering & Constructions Pvt. Ltd) 1,00,00, 000 Interest on inter-corporate deposits given to McNaeill Engineering 27,50,000 Advance for purchase of goods, consumable .....

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d the loss in question does not spring directly from or is not incidental to business of the assessee. The AO further held, as interest on such advances was never shown to have been receivable or receivable from M/s. ODC Carriers Pvt. Ltd., advances written off due to irrecoverability cannot be said to be a business loss. Advance to Jharkhand Steel Traders was disallowed for the reason that no verifiable details were produced to show immediate nexus with business. 66. On appeal by the Assessee, .....

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the order of AO. The ld. Counsel for the assessee submitted that the issue has been decided in favour of assessee by Hon ble Kolkata Tribunal in assessee s own case in A.Y.2003-04 vide order dated 11-01-2017 (ITA No.99/Kol/.2011) wherein it was held that advances represent the money given in relation to business contracts of the assessee and as the necessary details of the parties were duly furnished, the order of CIT(A) holding that advances written off in the course of business is allowable u .....

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for which a deduction is claimed must be one that springs directly from carrying on of the business and is incidental to it, and not any loss sustained by the assessee even it has some connection with his business. If that is established, then the deduction must be allowed, provided that there is no provision against it, expressed or implied, in the Act." Reliance was placed on Hon'ble Supreme Court in the case of CIT -vs.- Abdullabhai Abdulkadar (1961) 41 ITR 345 (SC) wherein it has be .....

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d that when a subsidiary company receives an advance from its holding company, such advance could be claimed as a loss if it turns out to be bad from the holding company's point of view. 69. It was submitted that names of the parties to whom advances were given along with its purpose and other relevant details pertaining to the same had duly been furnished before the A.O vide letter dated 20 12-2010. It was submitted that when the principal amount is doubtful to be recovered, interest is not .....

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sits are quite common and corporate houses accommodate each other on short-term basis on grounds of commercial expediency. - Placing of ICDs is in the usual course of business and a company doing so need not be in money lending business. - Hence the loss on account of K'Ds has to be treated as arising in the normal course of business. It was submitted that the Assessee is not required to be in the money lending business to give advances in the normal course of business. Attention was invited .....

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ing business. 70. We have given a very careful consideration to the rival submissions. The factual details with regard to the corporate advances have to be narrated for the purpose of deciding the issue raised by the revenue in ground no.6 in respect of Inter corporate deposits and interest on intercorporate deposits of ₹ 1,27,50,000/-. 71. The assessee had given a sum of ₹ 1 crore as advances to MacNeill Engineering Ltd.(NEL). It is not in dispute that the advances given to MacNeill .....

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arly ODC Carriers Pvt. Ltd owed a sum of ₹ 75.5 lakhs to MEL and MEL requested ODC Carriers Pvt. Ltd to pay the aforesaid sum due to it to the assessee in discharge of MEL s liability to the assessee. 73. The letters exchanged between the parties in this regard are placed at page nos. 69 to 77 of the assessee s paper book. After the aforesaid arrangement ODC Engineering & Constructions Pvt. Ltd and ODC Carriers Pvt. Ltd., requested their dues to the assessee to be converted into ODCss. .....

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s converted to ODC engineering instead of Mcneill 50,00,000 2004-05 Less Interest written off in the books (B) (A)- (B) 10,41,388 1,27,50,000 31-03-2007 Advances written off in the books - ODC Carriers - ODC Engineering 77,50,000 50,00,000 1,27,50,000 74. It is clear from the aforesaid details that the amount in question represented the money given in relation to contracts and had nexus with the business of the assessee. The amounts due from the aforesaid two companies were irrecoverable. It is .....

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he details of old government advances off are given at page-66 of the assessee s paper book. The old Govt deposits which were written off were so written off owing to the smallness of the amount and the efforts involved in recovering these deposits. We are satisfied that the claim for deduction on account of write off of these sums had to be considered as allowable expenditure u/s 28 r.w.s. 37(1) of the Act. 76. As far as the advance written off of ₹ 1,35,000/- of Kumardhubi division is co .....

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clearly supports the conclusion arrived at by CIT(A). For the reasons given above we dismiss ground no.6 raised by the revenue. 77. In the result the appeal by the revenue is dismissed. ITA NO.217/Kol/2012 (Assessee s appeal) 78. Ground Nos. 1 and 3 raised by the assessee in its appeal have already been decided while deciding the connected grounds of appeal in the revenue s appeal. Ground no.2 raised by the assessee reads as follows :- 2.0 That on the facts and in the circumstances of the case, .....

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ntribution to Provident Fund paid by the assessee on or before the due date of filing the return of income u/s 139(1) of the Act is allowed as deduction. Ground no.2 raised by the assessee is accordingly allowed. 80. Ground No.4 raised by the assessee reads as follows :- 4.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and erred in disallowing provision for doubtful debt amounting to ₹ 8,72,921/- as diminution in the value of assets and not .....

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77; 8,72,921/ - was not added back while computing Book Profit u/s 115JB of the Act. 82. In the order of assessment passed u/s 143(3) of the Act, provision for doubtful debt was added back while computing Book Profit u/s 115JB of the Act. The AO did not give any reasons in the order of assessment for doing so. 83. On appeal by the Assessee, the CIT(A) held that provision for doubtful debt is nothing but diminution in the value of investments and as per the amendment brought in section 115JB by F .....

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debiting P&L A/ c and creating a provision for bad and doubtful debt, assessee simultaneously obliterated said provision from its accounts by reducing corresponding amount from debtors on assets side of Balance Sheet. Hence, the amount provided represents bad debts written off. In this connection, he placed reliance on the decision of the Hon'ble Apex Court in the case of Vijaya Bank -vs.- CIT (2010) 323 ITR 166 (sq, wherein it was held that once an amount was debited in the Profit & .....

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organ Thermal Ceramics Ltd. -vs.- ACIT (IT A No.2208/Mds/2010) - Trent Ltd, Mum -vs.- Department of Income Tax (IT A no. 1073/Mum/2005) The ld. DR relied on the order of CIT(A). 85. After considering the rival submissions we are of the view that the question before us is as to whether the debit in the profit and loss account under the head provision for doubtful debts is really a provision for doubtful debts or write off of doubtful debts as bad debts. The CIT(A) has not appreciated the contenti .....

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profit. In other words the sum in question was a bad debt written off which had to be reduced even while arriving at the profit as per profit and loss account and was accordingly reduced. Addition of the said sum to the net profit as per profit and loss account for the purpose of arriving at book profit u/s.115JB of the Act was therefore not warranted. We therefore accept the plea of the assessee in this regard and hold that a sum of ₹ 8,72,921/- be excluded for the purpose of computing bo .....

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the assessee in its appeal can be conveniently decided together. These grounds of appeal are as follows :- Revenue s appeal: 1. That on the facts and in the circumstances of the case Ld. CIT(A) was not justified and erred in confirming the addition of an amount of ₹ 10,24,152/- on account of provision for leave encashment uss43B of the Act. Assessee s appeal 1.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and erred in disallowing provision .....

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00/Kol/2011 for A.Y.2006-07 and C.O.No.13/Kol/2011 for A.Y.2006-07. For the reasons stated therein ground no.1 raised by the revenue is dismissed while ground 1.0 & 1.1 raised by the assessee are treated as allowed for statistical purposes. 90. Ground No.2 raised by the revenue reads as follows :- 2. That on the facts and in the circumstance of the case the Ld. CIT(A) was not justified and erred in allowing the expenditure of ₹ 2,58,997/- under the head Foreign Currency Convertible Bon .....

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d erred while directing the A.O. to exclude the amount of retention money of ₹ 45,45,81,644/- in computing total income as well as computing book profit u/s.115JB of the I.T. Act. 93. This ground of appeal is identical to ground no.5 raised by the revenue in A.Y.2006-07 in ITA No.100/Kol/2011. The details of the retention money in this A.Y. are given at page no.29 of the assessee s paper book and the same is given as Annexure-4 to this order. All the other facts and circumstances are ident .....

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veniently decided together. These grounds of appeal are as follows :- Revenue s appeal: 4. That on the facts and in the circumstances of the case the Ld. CTT(A) was not justified and erred while giving direction to the A.O. to verify the account of provision made for employees' benefit in computing book profit 115JB of the Act and grant the relief accordingly, if the contention of the appellant is found to be correct. The direction of the Ld. CIT(A) tentamounts to set aside the case to the f .....

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deciding the issue. 95. The issue involved in the aforesaid grounds of appeal is with regard to exclusion of amount withdrawn from General Reserve on reinstatement of employees benefits obligation while computing Book Profit U/s 115JB of the Act of a sum of ₹ 1,02,88,421/-. During the year under consideration, Assessee adjusted ₹ 1,02,88,421/ - against General Reserve for reinstatement of employee benefit obligation on account of adoption of AS-15 (Revised 2005) "Employee Benef .....

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it plans recognised in Financial Statements including contribution to employee's benefit were adjusted with General Reserve and was made as per actuarial valuation. The CIT(A) therefore held that the amount represents ascertained liability. The CIT(A) following the decision of CIT -vs.- Sain Processing & Weaving Mills P. Ltd (2010) 325 ITR 565 (Del) held that since provision for contribution to employee's benefit is a normal business expenditure and same has been disclosed in the not .....

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ordingly. 97. Aggrieved by the order of the CIT(A) directing the AO to reduce the aforesaid sum for arriving at book profit u/s.115JB of the Act, the revenue has raised ground No.4 before the Tribunal. Aggrieved by the order of the CIT(A) directing the AO to verify the account of provision made fore employee s benefit while computing book profit and grant relief, the Assessee has raised Gr.No.3 in its appeal. 98. We have heard the rival submissions. The learned DR relied on the order of the AO. .....

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e computing book profit. Reliance in this regard can be placed on the decision of CIT - vs.- National Hydro Electric Power Corporation Ltd (2010) 45 DTR 117 (P&H) wherein similar view was upheld by the Hon'ble High Court. It was submitted that the issue is squarely covered by the decision of Hon'ble Pune Tribunal in K.K Nag Ltd -vs.- ACIT (2012) 52 SOT 0381 (Pune Trib) wherein it was held that on a conjoint reading of sub-sections (2), (3A) of section 211 and Part 11 of Schedule VI t .....

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derstood with reference to the Notes to accounts accompanying the annual accounts also. It was held that use of the expression 'net profit' in Explanation 1 to the second Proviso to section 115JB of the Act makes it clear that the impugned incremental liability towards leave encashment not debited to the Profit & Loss account but otherwise disclosed in the Notes to Accounts will have to be taken into account while determining the "book profits" under section 115JB of the Ac .....

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be reduced from the net profit as per profit and loss account for the purpose of Sec.115JB of the Act. It was held that current year depreciation not debited to P&L account but disclosed in notes to accounts is eligible to be deducted from net profit while computing book profit u/ s 115JB as notes to accounts form part of the P&L a/ c by virtue of Sec. 211(6) of the Companies Act, 1956. 99. At the time of hearing it was brought to our notice that pursuant to the directions of CIT(A) in t .....

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amount of ₹ 1,02,88,421/- was excluded by the AO in computing book profit, but there was no scope to verification of Provision from P&L accounts, Ld. CIT(A) did not give order to verify from which angle the provision has to be verified. Hence, no further relief may be allowed against the disallowance of claim. 100. Before us the ld. DR reiterated the stand of the AO as reflected in the assessment order as well as in the order giving effect to the order of CIT(A). The ld. Counsel for th .....

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pugned order. 101. We have considered the order of CIT(A) and are of the view that the conclusions drawn by CIT(A) are clearly supported by the decisions referred to by CIT(A) as well as the decisions referred to by the ld. Counsel for the assessee before us. Since the amount in question was an obligation of the assessee as an employer the liability arising on account of such obligation should also be considered while arriving at the book profit for the purpose of Sec.115JB of the Act. Thus on t .....

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t but nevertheless need to be excluded . We do not find any merits in the grounds raised by the assessee also. 102. In the result ground no.4 raised by the revenue and ground no.3 raised by the assessee are dismissed. 103. In the result the appeal by the revenue in ITA No.533/Kol/2012 is dismissed. ITA No.218/Kol/2012 (Assessee s appeal ) 104. Ground Nos 1 and 3 raised by the assessee have already been decided while deciding the connected grounds of appeal raised by the revenue in its appeal. Gr .....

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.4 raised by the assessee reads as follows :- 4.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and erred in disallowing provision for doubtful debt amounting to ₹ 9,34,523/- as diminution in the value of assets and not considering the same as provision for losses in computing book profit u/ s 115JB of the Act. 106. The issue that arises for consideration in the aforesaid ground of appeal is with regard to Disallowance of provision for doubt .....

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