TMI Blog2019 (12) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... on was computed as per Part II of Schedule VI of the companies Act, 1956 could be made only if the same was permissible as per Item No. (a) to (k) of the Explanation to Sec.115JB. As contemplated in clause (a) of the Explanation to Sec. 115JB the amount of Income tax paid or payable, and the provision therefor was liable to be added for computing the book profit under Sec.115JB of the Act. However, as there was no such provision for making the addition with regard to wealth tax, therefore, the A.O could not have added the same for computing the book profit of the assessee company under Sec.115JB of the Act. Our aforesaid view is fortified by the order in the case of JCIT Vs. Usha Martin Industries Ltd. [ 2006 (12) TMI 171 - ITAT CALCUTTA] . As such, not being in agreement with the view taken by the lower authorities, we direct the A.O to rework the book profit under Sec. 115JB after deleting the provision for wealth tax. The Ground of appeal No. 7 is allowed. Addition of the difference between the payment of net present value as against the future liability relating to deferred Sales Tax - HELD THAT:- The obligation of the assessee to remit to the government the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- that was still lying with it was acknowledged as an outstanding liability. In our considered view, part of the aforesaid amount which was collected by the assessee company from the flat owners was utilised for payment of taxes and maintenance of the building, while for the balance unutilised amount that was admittedly acknowledged by the assessee as an outstanding liability was ultimately to be handed over to the housing society at the time of final settlement of accounts. In fact, the assessee company had duly reflected the balance amount of ₹ 30,34,526/- i.e the amount outstanding towards the housing society as a liability in its books of accounts . In the backdrop of the aforesaid facts, we find ourselves to be in agreement with the view taken by the CIT(A) that the amount collected by the assessee company from the flat owners for the purpose of maintenance of the building and payment of taxes etc. could not have been assessed as its income for the year under consideration. Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold the same. Provision written back by the assessee - CIT-A deleted the addition - HELD THAT:- In sum and substance, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit under Sec.115JB - HELD THAT: - . As can be gathered from the orders of the lower authorities, the A.O while computing the book profit under Sec. 115JB had included the amount of provision for doubtful debts to the extent the same had been written back by the assessee. As observed by the CIT(A), since the assessee had already added back the provision in the earlier years and credited the same in the year under consideration, therefore, the same could not have been added for the purpose of computing the book profit under Sec. 115JB - ITA Nos. 4252 to 4254/Mum/2011, ITA No. 4573/Mum/2011 - - - Dated:- 23-12-2019 - Shri Pramod Kumar, Vice President And Shri Ravish Sood, Judicial Member For the Appellant : Shri R. Murlidhar, A.R For the Respondent : Shri Awungshi Gimson, D.R ORDER PER RAVISH SOOD, JM The assessee and the revenue being aggrieved with the order passed by the CIT(A)- 41, Mumbai, dated 31.12.2009 for A.Y. 2005-06 have preferred cross-appeals before us. Also, the assessee is in appeal against the respective orders of the CIT(A)-41 for A.Y. 2006-07 and A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x was not taxable since it was a capital receipt could not entertained since the said amount was offered to tax in the return by the assessee and since no revised return was filed, the claim could not be allowed in view of the Supreme Court decision in the case of Goetze India Ltd. [284 ITR 323]. 9. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 2. Briefly stated, the assessee company which is engaged in the business of development/construction activity and manufacturing of rigid and flexible PVC films etc., had filed its return of income for A.Y 2005-06 on 16.10.2006, declaring its total income at ₹ 7,15,310/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. 3. Search and seizure action was conducted under Sec. 132 on Kalpataru group of cases on 22.03.2007. In the course of the search proceedings certain incriminating documents belonging to the assessee relating to its non-core assets and arbitration proceedings with M/s Hindustan Spinning and Weaving Mills were seized. Consequently, a survey was also conducted at the assesse s pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alpatru Homes Ltd. ₹ 2,09,73,640/- After making the aforesaid additions/disallowances the A.O assessed the income of the assessee company under the normal provision at ₹ 12,65,65,070/-. The book Profit under Sec.115JB was reworked out at ₹ 9,61,86,460/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). After deliberating at length on the contentions advanced by the assessee, the CIT(A) partly allowed the appeal, vide his order dated 16.03.2011. 6. Being aggrieved with the order of the CIT(A), both the assessee and the revenue have carried the matter in appeal before us. We shall first advert to the appeal of the assessee. At the very outset of the hearing of the appeal, the ld. Authorized Representative (for short A.R ) for the assessee submitted that as per instructions the Grounds of appeal Nos. 1 to 4 and Ground of appeal No. 6 are not being pressed by him. On the basis of the aforesaid concession of the ld. A.R, the aforesaid Grounds of appeal Nos. 1 to 4 and Ground of appeal No. 6 are dismissed as not pressed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text of the aforesaid issue, and also the perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. In our considered view, if a business liability had 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. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers Vs. CIT (2000) 245 ITR 428 (SC) . In the said case, it was observed by the Hon ble Apex Court that what should be certain is the incurring of the liability and the fact that the same is capable of being estimated with reasonable certainty, although the actual quantification may not be possible. As therein observed, if the aforesaid requirements were satisfied, then the liability could not be held as a contingent liability. Also, it was observed by the Hon ble Apex Court, that although the liability is in praesenti though it is to be discharged at a future date, it would not make any difference if the future date on which the liability is to be discharged is not certain. In the backdro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad relied on the order of the ITAT, Kolkata, Special Bench in the case of JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (SB) . (iii). Per contra, the ld. D.R has relied on the orders of the lower authorities. Decision : (i). We have heard the authorized representatives for both parties in context of the aforesaid issue, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. On a perusal of Sec. 115JB of the Act, we find, that an addition to the book profit which during the period relevant to the year under consideration was computed as per Part II of Schedule VI of the companies Act, 1956 could be made only if the same was permissible as per Item No. (a) to (k) of the Explanation to Sec.115JB. As contemplated in clause (a) of the Explanation to Sec. 115JB the amount of Income tax paid or payable, and the provision therefor was liable to be added for computing the book profit under Sec.115JB of the Act. However, as there was no such provision for making the addition with regard to wealth tax, therefore, the A.O could not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 3,07,23,725/-] in its profit and loss account for the year under consideration. In its return of income, the assessee did not claim that the aforesaid amount of ₹ 3,80,75,339/- credited in its profit loss account was not taxable. In fact, even in the course of the assessment proceedings the assessee did not claim that the profit/gain on payment of the sales tax liability was not taxable. However, it was only in the course of the proceedings before the CIT(A) that the assessee by way of an additional ground of appeal, for the first time claimed that the profit/gain of ₹ 3,80,75,339/- was not taxable. Although, the CIT(A) admitted the aforesaid additional ground of appeal that was raised by the assessee, but then observing that no such claim was raised either in the original return or the revised return of income, he held a conviction that the said fresh claim of the assessee could not be admitted in light of the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). (iii) Aggrieved, the assessee has assailed the order of the CIT(A) in context of the aforesaid issue in appeal before us. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x deferral benefit, as per which, it was allowed to collect the sales tax from the customers and pay the amount to the Government after sometime. As observed by us hereinabove, the sales tax department had thereafter introduced a scheme, as per which, the eligible units were allowed to pay the net present value of the future liability, and by making such payment obtain a discharge for the entire sales tax deferred liability. As the assessee had opted for the aforesaid scheme and paid the net present value of ₹ 3,07,23,725/- (as against the future liability of ₹ 6,87,99,064/-), therefore, it had credited the balance amount of ₹ 3,80,75,339/- in its profit and loss account . Admittedly, the assessee had neither in its return of income nor in the course of the assessment proceedings claimed that the aforesaid profit/gain on payment of sales tax liability was not exigible for tax. On a perusal of the order of the CIT(A), we find, that the assessee had for the very first time claimed before him that the profit/gain of ₹ 3,80,75,339/- on premature discharge of the future sales tax deferred liability that was credited in its profit and loss accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same was not exigible to tax in its hands. We have given a thoughtful consideration to the aforesaid claim of the assessee and find substantial force in the same. In our considered view, the first requirement of Sec. 41(1) is that an allowance or deduction is made in respect of the loss, expenditure or a trading liability incurred by the assessee. Apart from that, the other requirement is that the assessee should have specifically obtained a benefit in respect of such trading liability by way of a remission or cessation thereof. As observed by us hereinabove, the aforesaid scheme under which the sales tax liability of the assessee was deferred, therein enabled the assessee to remit the sales tax collected from the customers to the government, though not immediately, but after certain period. Although, the amount of sales tax collected by the assessee was not to be immediately paid to the government upon collection and was to be remitted later on in the terms of the scheme, the same relieved the assessee of its obligation only for the time being. However, the same in no way could be construed as being in the nature of a remission of the said liability. As a matter of fact, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of ₹ 6,59,327/- made on account of compensation for land acquisition. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of ₹ 73,07,137/- and holding it as assessee's liability. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in allowing the assessee to reduce an amount of ₹ 23,74,772/- from the total income as being provision written back during the year. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of ₹ 3,18,000/- without appreciating the fact that the income pertains to A.Y. 2005-06. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the assessee in the year under consideration and holding it as assessee's liability. 6. Whether on the facts and in circumstances of the case and in law the, Ld.CIT(A) is justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roha, Maharashtra, which formed part of its stock-in-trade, was duly accounted for in its sales for the year under consideration i.e A.Y. 2005-06. Observing, that the A.O had overlooked the aforesaid factual position, despite the fact that the complete details of sales were furnished by the assessee with him, the CIT(A) deleted the aforesaid addition. Decision : (i) We have heard the authorised representatives for both the parties in context of the issue under consideration, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. As is discernible from the order of the CIT(A), the assessee company had duly accounted for the compensation of ₹ 6,59,327/- that was received on the compulsory acquisition of its land at Roha, Maharashtra, which formed part of its stock-in-trade, in its sales for A.Y. 2005-06. Admittedly, as the A.O had overlooked the fact that the aforesaid compensation received by the assessee was duly accounted for and formed part of the sales of the assessee for the year under consideration, therefore, he had erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept the aforesaid claim of the assessee and treated the entire amount of receipts of ₹ 73,07,137/- as the income of the assessee from Other sources and added back the same to its taxable income. (ii) On appeal, it was observed by the CIT(A) that the accounts of the society had not been settled and an amount of ₹ 30,34,526/- i.e to the extent the same had not been spent was shown as a liability by the assessee in its books of accounts . It was observed by the CIT(A) that the assessee had utilised part of the amounts which were collected from the flat purchasers for payment of municipal taxes, society maintenance charges, common area maintenance expenses etc. It was observed by the CIT(A) that the balance unutilized amount of ₹ 30,34,526/- which was available with the assessee was shown by it as a liability in its books of accounts . Also, it was observed by the CIT(A) that the A.O while framing the assessment in the case of the assessee for A.Y. 2001-02 to A.Y. 2004-05, had observed, that the taxability of the aforesaid amount could only be considered at the time of the final settlement of the accounts of the society. On the basis of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee at the time of handing over the maintenance work of the building to the aforesaid housing society had parted with an amount of ₹ 1,96,224/-, while for the balance unutilised amount of ₹ 30,34,526/- that was still lying with it was acknowledged as an outstanding liability. In our considered view, part of the aforesaid amount which was collected by the assessee company from the flat owners was utilised for payment of taxes and maintenance of the building, while for the balance unutilised amount that was admittedly acknowledged by the assessee as an outstanding liability was ultimately to be handed over to the housing society at the time of final settlement of accounts. In fact, the assessee company had duly reflected the balance amount of ₹ 30,34,526/- i.e the amount outstanding towards the housing society as a liability in its books of accounts . In the backdrop of the aforesaid facts, we find ourselves to be in agreement with the view taken by the CIT(A) that the amount of ₹ 73,07,137/- collected by the assessee company from the flat owners for the purpose of maintenance of the building and payment of taxes etc. could not have been assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed as a deduction. On a perusal of the records, the CIT(A) observed that the amount of provisions had already added back by the assessee in its computation charts for the preceding years in which they were made. Accordingly, the CIT(A) was of the view that now when the assessee had added back the amount of the provisions while computing its income for the preceding years, the same on being written back in the subsequent years could not be added to its income, as the same would otherwise lead to double addition in its hands. On the basis of his aforesaid observations the CIT(A) deleted the addition of ₹ 23,74,772/-made by the A.O. Decision : (iii) We have given a thoughtful consideration to the aforesaid issue and are persuaded to subscribe to the view taken by the CIT(A). As is discernible from the orders of the lower authorities, the assessee in its returns of income for the preceding years had while computing its income added back any provision that would be made towards doubtful doubts/advances and for diminution in value of investments. In sum and substance, the aforesaid provisions were not claimed as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (i). We have heard the authorized representatives for both the parties in context of the aforesaid issue under consideration, perused the orders of the lower authorities and the material available on record. As is discernible from the order of the CIT(A), the assessee had duly accounted for the receipt of ₹ 3,18,000/- in its books of accounts . Apart from that, the payment of 80% of the fees received by the assessee company to the flat owners association/housing society had also been accounted for in its books of accounts . Further, the expenditure incurred by the assessee out of the aforesaid amount is also borne out from its accounts. In our considered view, the CIT(A) has rightly observed that the A.O had overlooked the factual position and had on the basis of misconceived facts made the aforesaid addition of ₹ 3,18,000/- in the hands of the assessee. Accordingly, finding no infirmity in the view taken by the CIT(A), who had rightly vacated the addition of ₹ 3,18,000/-, we uphold his order to the said extent. (E). Deletion of the amount receivable by the assessee from Kalpataru Homes Ltd: ₹ 2,09,73,640/-: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on account of short/deficit realisation of the non-core assets of the assessee company amounting to ₹ 2,09,73,640/-, it had rendered itself as liable for the said amount towards the assessee company. Also, it was observed by the CIT(A) that M/s Kalpataru Homes Ltd. had paid an interest of ₹ 36lac for non-payment of ₹ 2,09,73,640/- , which was offered by the assessee as its income for the year under consideration. As regards the view taken by the A.O that the short/deficit amount of ₹ 2,09,73,640/- that was realisable by the assessee from M/s Kalpataru Homes Ltd. was to be assessed as the income of the assessee company, the same did not find favour with the CIT(A). It was observed by the CIT(A), that the receipt of the aforesaid amount was to be routed through the balance sheet and not the profit and loss account of the assessee company. In fact, it was observed by the CIT(A) that the assessee had shown a debtor of ₹ 2,09,73,640/- in its balance sheet which had not been realised till date. As such, the CIT(A) was of the view that on the realisation of the aforesaid amount the same could not be held as the income of the assessee company. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Observing, that the realisation of the non-core assets of the assessee company had fallen short by an amount of ₹ 2,09,73,640/-, the A.O held a conviction that the said amount which M/s Kalpataru Homes Ltd. was liable to pay to the assessee i.e in excess of the net value of the non-core assets so realised was to be assessed as the income of the assessee company. As observed by us hereinabove, the CIT(A) observing that there was a serious fallacy in the aforesaid view of the A.O had vacated the said addition. (iv) We have given a thoughtful consideration to the aforesaid issue and are in agreement with the view taken by the CIT(A) that the amount of ₹ 2,09,73,640/- could not have been held as the income of the assessee. As is discernible from the orders of the lower authorities, the aforesaid amount outstanding was on account of realisation of debtors. Accordingly, we are persuaded to subscribe to the view taken by the CIT(A), that as the aforesaid amount which was to be realised was generated over the years by the assesee and had been offered to tax, therefore, no addition as regards the same was called for in its hands. Accordingly, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal No. 6 is dismissed. ITA No. 4253/Mum/2011 A.Y. 2006-07 12. We shall now advert to the appeal of the assessee for A.Y. 2006-07. The assessee has assailed the impugner order on the following grounds of appeal before us: 1. The learned CIT(A) erred in holding that the notice issued u/s 153C was vaild without appreciating that no incriminating document belonging to the appellant was Found in the course of search of M/s. Kalpataru Properties Pvt. Ltd. and others and therefore, there was no reason to issue the notice u/s 153C. 2. The learned CIT(A) erred in holding that the interest received of ₹ 1,92,91,821/- is taxable as income from other sources as against business income claimed by the assessee. 3. Without prejudice to the above grounds, the learned CIT(A) erred in not allowing netting off of the interest paid against the interest received and only the net interest should have been taxed as income from other souces. 4. The learned CIT(A) erred in confirming the disallowance of depreciation in respect or block of asset of residential building, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he book profit under Sec.115JB of the Act. We find that the issue involved in the present appeal had been adjudicated by us while disposing off the Ground of appeal No. 7 in the appeal of the assessee for A.Y. 2005-06 in ITA No. 4252/Mum/2011. In our aforesaid order, we had after drawing support from the order of the ITAT, Kolkata, Special Bench in the case of JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (SB) , had therein observed that the provision for wealth tax cannot be added while computing the book profit under Sec.115JB of the Act. As the issue involved in the present appeal remains the same as was there before us in the assesses appeal for A.Y. 2005-06 in ITA No.4252/Mum/2011, therefore, our observations and the view therein taken shall apply mutatis mutandis for the purpose of disposal of the present issue. The Ground of appeal No. 5 is allowed in terms of our aforesaid observations. 18. The Ground of appeal No.6 being general in nature is dismissed as not pressed. 19. The appeal of the assessee is allowed in terms of our aforesaid observations. ITA No. 4254/Mum/2011 A.Y. 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. In the course of the assessment proceedings the A.O inter alia observed that the provision for leave encashment was not to be allowed while computing the book profit under Sec.115JB of the Act. 23. On appeal, the CIT(A) not finding favour with the contentions advanced by the assessee, therein upheld the view taken by the A.O that the provision for leave encashment was to be added while computing the book profit under Sec.115JB of the Act. Also, the assessee by way of a specific ground had assailed the addition of the provision for wealth tax while computing the book profit under Sec. 115JB of the Act. However, the CIT(A) declined to accept the aforesaid claim of the assessee and observed that the same was to be added under Sec. 115JB of the Act. 24. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. It was submitted by the ld. A.R that the provision for leave encashment was not to be added while computing the book profit of the assessee under Sec. 115JB of the Act. Also, the ld. A.R had assailed the order of the CIT(A), wherein he had observed that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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