TMI Blog2018 (3) TMI 1589X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. The difficulty in estimating does not convert the accrued liability into a conditional one as held by the Supreme Court. Further, as held by the Supreme Court, it is upon the tax authorities to arrive at a proper estimate of the liability having regard to all the circumstances of the case. It is not suggested that the liability was not properly estimated. - Decided in favour of assessee. - Income Tax Appeal No.356 of 2015 (O&M) - - - Dated:- 21-3-2018 - MR. S. J. VAZIFDAR, CJ. AND MR. AVNEESH JHINGAN, J. For The Appellant : Mr. Tajender K. Joshi, Advocate For The Respondent : Mr. Ved Jain, Advocate ORDER S.J. VAZIFDAR, CHIEF JUSTICE: This is an appeal against the order of the Income Tax Appellate Tribunal upholding the order of the Commissioner of Income Tax (Appeals). The appeal pertains to the Assessment Year 2006-07. 2. The appellant contends that the following substantial questions of law arise in the appeal:- 1. Whether, on the facts and in circumstances of the case and in law, the Hon ble ITAT was right in law in dismissing appeal of the Revenue observing that in view of categorical finding of the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Whether, on the facts and in circumstances of the case and in law, the Hon ble ITAT was right in law in deleting disallowance of ₹ 1,00,25,510/- made by the Assessing Officer in computing the book-profit u/s 115JB in respect of depreciation claimed on land after amortization of land by the assessee because there is no depreciation allowable on land under Companies Act and no rate of depreciation is provided in schedule XIV of Companies Act? 7. Whether, on the facts and in circumstances of the case and in law, the Hon ble ITAT was right in law in applying ratio of decision in case of M/s Apollo Tyres 255 ITR 273 (SC) when the computation of book profit was not as per Companies Act and wrongly claimed depreciation on land not allowable in Companies Act. 3. It is agreed that question Nos.1, 2, 5, 6 and 7 are liable to be answered in favour of the respondent-assessee in view of our order and judgment dated 28.02.2018 in the assessee s case in ITA No.136 of 2015. 4. The appeal is admitted on the substantial questions of law raised in question Nos.3 and 4 which can be dealt with together. Re: Question Nos.3 and 4: 5. The respondent-assessee sells e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factor which is not certain on the date of provisioning and therefore, the liability cannot be ascertained. Accordingly, the Assessing Officer added back ₹ 51.80 crores to the book profit for the purpose of computing the minimum alternate tax under section 115JB. 7. The CIT (Appeals) upheld the assessee s contention that as per the Companies Act, 1956, Schedule IV and Accounting Standard-1 all known liabilities have to be accounted for as the assessee follows the mercantile system of accounting. It was also held that the assessee properly explained various factors leading to tariff adjustment of ₹ 51.80 crores made in the books; that the orders of the CERC are binding; that the adjustment made by the assessee adhered to the rules/guidelines/orders of the CERC and that this was not a contingent liability as calculated as per the CERC guidelines and is, therefore, an accrued liability. The Tribunal upheld the order of the CIT (Appeals) but only on the ground that a similar issue was raised before the Tribunal by the Revenue/appellant in its appeal for the Assessment Year 2005-06 and that the Tribunal had, by an order dated 30.09.2014, confirmed the deletion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity and, therefore, was not a permissible deduction. The High Court based its judgment on the ground that the liability will arise only if an employee does not go on leave and applies for encashment. The Supreme Court held:- 4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 5. In Metal Box Co. of India Ltd. v. Workmen [(1969) 73 ITR 53 : AIR 1969 SC 612] the appellant Company estimated its liability under two gratuity schemes framed by the Company and the amount of liability was deducted from the gross receipts in the P L account. The Company had worked out on an actuar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving regard to all the circumstances of the case. 11. Although the judgment was not under section 115JB, the ratio applies equally to the case before us as the question is the same. The liability in the present case also has definitely arisen, although it would have to be quantified and discharged to adjust it at a future date, i.e., the date on which the CERC determined the tariff. It is not even suggested by the revenue that the liability was not likely to be incurred. Considering the nature of the assessee s enterprise and the mode of fixation of tariff, it is reasonably certain that the liability would arise. Nor is it suggested that the liability was not capable of being estimated with reasonable certainty. The assessee estimated the liability after taking all the relevant factors into consideration. Indeed, the liability was enhanced on account of the CERC fixing the tariff at a rate lower than that sought by the assessee. The difficulty in estimating does not convert the accrued liability into a conditional one as held by the Supreme Court. Further, as held by the Supreme Court, it is upon the tax authorities to arrive at a proper estimate of the liability having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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