TMI Blog2018 (9) TMI 1940X X X X Extracts X X X X X X X X Extracts X X X X ..... the income under Section 115JB of the Act - HELD THAT:- We find that the assessee has made provision for outstanding liabilities of revenue nature in its accounts. The estimated provisions were reversed in subsequent year. This has been the consistent practice of the assessee. The amounts debited were based upon past pattern of expenditure. However, since TDS had not been deducted by the assessee as individual parties were not identified, the sums were disallowed in normal computation by the assessee. The A.O. had made the disallowance under section 115JB on the ground that these were ascertained liability and TDS were not deducted. We note that the provision was made under normal accounting system as per past practice. The accounts were duly certified by the auditors. In such scenario, ratio of Hon ble Apex Court decision in the case of Bharat Earth Movers Limited vs. CIT [ 2000 (8) TMI 4 - SUPREME COURT ] supports the case of the assessee. We are of the considered opinion that the authorities below have erred in adding back the impugned amounts u/s. 115JB. Hence, we direct for these deletion. Provision for disputed claim - amount in question was a provision for the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant, without giving any specific finding on the issue contrary to the finding given by the TPO that services rendered were only for three aspects of agreement? 3. For these and other grounds that may be urged at the-time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. 3. The facts on the issue raised are that assessee was in the business of providing port service and had international transaction with the associated enterprise which was its principal named M/s. D.P. World Australia Limited, in Australia. The assessee had incurred expenditure of ₹ 3,46,50,000/- on account of technical services provided by the associated provided. The Assessing Officer (A.O. for short) referred the matter to the transfer pricing officer who determined the arm's length price of the technical service.The assessing officer therefore made an adjustment of ₹ 2,15,41,247/-. 4. Upon the assessee's appeal, the learned CIT(A) noted that identical issue was decided earlier by the ld. CIT(A) and the arm's-length price of the said transaction of technical service was directed to be taken at 50% of the amount claimed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in regard to technical service fees shown by the assessee at ₹ 5,78,44,654. The TPO proposed adjustment of ₹ 3,30,54,088 by determining ALP for the international transaction on account of technical service fees at ₹ 2,47,90,566. Resultantly the A.O. made addition of ₹ 3.30 crore. The learned CIT(A), on the basis of TPO's order for the immediately preceding year i.e. 2003-2004, held that the arm's length price of the said transaction of technical service fees be determined at 50% of the amount claimed by the assessee (full value for clause (a) and (b) of the agreement and half consideration for (c), (d), (e) of the agreement). In this way the adjustment to the tune of ₹ 2,88,22,327 was held to be correct thereby determining the true ALP of the international transaction at ₹ 2,89,22,327. 4. We have heard the learned Departmental Representative and perused the relevant material on record. There is no appearance from the side of the assesse despite notice. At the very outset, the learned Departmental Representative conceded that the issue in question is covered against the Revenue by virtue of the order passed by the Bangalore Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ground 3: Deduction under Section 80-IA of the Act for other income-₹ 60,536,836 The CIT (A) erred in not allowing deduction, under Section 80-IA of the Act, in respect of the following income earned by your Appellant Particulars of other 'income Amount in Rs. Rent recovery 495,000 Sundry revenue 4,411,000 Interest income 58,154,000 Total 60,536,836 The CIT(A) failed to appreciate that the other income earned by your Appellant is derived from the business of operating and maintaining the container terminal. The CIT(A) failed to appreciate the fact that the said income would not have been received by your Appellant, had your Appellant not been carrying on its business of operating and maintaining the container terminal. Without prejudice to the above, the CIT (A) erred in not observing the principles of judicial consistency of allowing deduction under Section 80-IA of the Act in respect of scrap sales and miscellaneous income allowed by the Commissioner of Income-Tax (Appeals) in AY 2004-05. Your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit for computation u/s 1 55JB of the Act. iv. The appellant made its submission which was not found lo be acceptable by the AO. The assessee s submission inter alia were as under: The provisions of Section J15JB override the other provisions in the Act. Computation of book profit is governed by the provisions of Section 11 5 JB of the Act. Accordingly specific additions and deductions to the net profit appearing in the profit and loss account to compute the book profit. The Company invites attention of your goodself in the case of Apollo Tyres Ltd. v CIT (2002) 255 ITR 273 wherein the Hon'ble Supreme Court has held: the Assessing Officer while computing the income under Section 115JB has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided in Explanation I to Section 115JB. The Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account to the extent mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit. 13. Against the above order, the assessee is in appeal before us. 14. We have heard both the counsel and perused the records. We find that the assessee has made provision for outstanding liabilities of revenue nature in its accounts. The estimated provisions were reversed in subsequent year. This has been the consistent practice of the assessee. The amounts debited were based upon past pattern of expenditure. However, since TDS had not been deducted by the assessee as individual parties were not identified, the sums were disallowed in normal computation by the assessee. The A.O. had made the disallowance under section 115JB on the ground that these were ascertained liability and TDS were not deducted. 15. We note that the provision was made under normal accounting system as per past practice. The accounts were duly certified by the auditors. In such scenario, ratio of Hon ble Apex Court decision in the case of Bharat Earth Movers Limited vs. CIT [2000] 245 ITR 428 (SC) supports the case of the assessee. In this case, it was held as under: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es payable to Jawaharlal Nehru Port Trust as per the concession agreement. The A.O. was not satisfied with the assessee s response. He was of the opinion that the claims were in the nature of dispute and were not ascertainable as to whether the actual amount came could be spent. Hence, he added back the same holding them to be contingent in nature. Before the ld. CIT(A), the assessee s submissions were as under: That during the year under consideration, the Appellant had made (\ provision of ₹ 13,560,000 towards security charges payable to Jawaharlal Nehru Port Trust ('JNPT ) as per the Concession agreement ('the Agreement'). Such provision is characterised as 'provision for disputed claims' under the head provisions in the audited financial statements for the year ended 31 March 2008. ii. That as per the terms of the Agreement, the Appellant should abide by the security regulations / procedures as stipulated by JNPT from time to time. The deployment of Central Industrial Security Force ('CISF') staff was compulsory at the port premises and services of the CISF staff should be shared facility between JNPT and the Appellant. The appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the ld. CIT(A) has noted that what was the ultimate fate of the liability has not been submitted before him. Even before us, the ld. Counsel of the assessee has not given details of the present position of this liability. In our considered opinion this aspect is crucial for proper adjudication of this issue. Hence, we remit this issue to the file of the A.O. to consider the issue afresh after ascertaining the present fate of the liability. Apropos ground no. 3: 24. This issue relates to the disallowance of deduction u/s. 80-IA in respect of the following income: Particulars of other income Amount (in Rs.) Rent recovery 4,95,000 Sundry revenue 4,411,000 Interest income 58,154,000 Total 60,536,836 25. At the outset, the ld. Counsel of the assessee submitted that he shall not be pressing for the disallowance on account of a rent recovered and sundry revenue. Hence, these grounds are dismissed as not pressed. However, as regards the claim of the interest income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee on fixeddeposits with the bank and other interest income are el igible for deduction under Section 80IA of the Income Tax Act, 1961? 6. This Court answered the question in the affirmative while dismissing the Revenue's appeal. This by holding that income earnedby the assess ee on the fixed deposit from the bank has to be extendeddeductions under Section 80IA of the Act. In support of the above, this Court relied upon the decision of the Delhi High Court in Commissioner of Income Tax Vs. Eltek SGS P. Ltd., 300 ITR 06wherein the difference in the language employed in Sections 80IB and80H H of the Act was brought out i.e. profits and gains derived fromindustrial underta kings as found in Section 80HH of the Act with profits and gains derived from any business of an industrial undertakings . In view of thedifference in language of the two Sections, this Court held that interest on fixed deposits in the bankwould be profits and gains derived from any business of an industrial undertaking. The same reasoning would apply to extend deductionsunder Section 80IA of the Act for the compensation received for nonsupply of spare parts. Thus, the issue sta nds conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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