TMI Blog2019 (6) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... ned liability can be added back to the book profit under the aforesaid provisions. Undisputedly, the provision for bad and doubtful debts and advances are not in the nature of unascertained liability. Rather, it represents the assets of the assessee. Therefore, under no circumstances, clause (c) to Explanation 1 of section 115JB(2) of the Act can be brought into play to make the adjustment to book profit. Since, at the time of completion of the assessment proceedings such provision was not in the statute book, therefore, applicability of such provision has never been examined vis a vis the relevant facts. That being the case, at this stage we cannot entertain a completely new plea taken by the Revenue on the issue. Respectfully following the decision of the Tribunal in assessee s own case we uphold the decision of the learned Commissioner (Appeals) on this issue. Claim of deduction u/s 80HHC from the book profit computed under section 115JB - Commissioner (Appeals) relying upon the Special Bench decision of the Tribunal, in Syncom Formulations India Ors. [ 2007 (3) TMI 288 - ITAT BOMBAY-H] has held that while computing book profit under section 115JB deduction u/s 80HHC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court in Lubrizol India Ltd.[ 2015 (8) TMI 134 - BOMBAY HIGH COURT]. In view of the above deduction claimed by the assessee on account of club membership fee is allowable as business expenditure. Disallowance of unpaid service tax u/s 43B - HELD THAT:- Hon'ble Jurisdictional High Court in Tops Security Ltd. [ 2018 (9) TMI 799 - BOMBAY HIGH COURT] following its earlier judgment held that provision of section 43B of the Act does not impose liability to pay service tax before actual receipt of the fund in the account of the assessee. The Hon'ble Jurisdictional High Court held that liability to pay service tax into the treasury will arise only upon the assessee receiving the fund and not otherwise. In Knight Frank India Pvt. Ltd. [ 2016 (8) TMI 1096 - BOMBAY HIGH COURT] held that since the assessee did not claim any deduction on account of service tax payable, there can be no occasion to invoke provisions of section 43B. In the facts of the present case also, it is the contention of assessee that since it has not claimed any deduction on account of service tax payable, no disallowance under section 43B of the Act can be made. We delete the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r short the Act ) vide order dated 22nd March 2005, assessing the total income at Rs.nil and book profit at ₹ 75,52,70,710. Subsequently, the Assessing Officer re opened the assessment under section 147 of the Act. In the course of re assessment proceedings, the Assessing Officer noticing that the assessee has debited an amount of ₹ 23,03,48,610, to the Profit Loss account towards VRS expenses called for necessary details and also asked the assessee to explain as to why it should not be disallowed. In response, it was submitted by the assessee that the assessee has claimed the deduction in terms of section 35DDA of the Act. The Assessing Officer, however, did not find merit in the submissions of the assessee. He observed, though the assessee had claimed deduction under section 35DDA of the Act towards VRS expenses of ₹ 11,03,45,554, being 1/5th of ₹ 55,17,27,077, However, it has debited an amount of ₹ 23,03,48,610, to the Profit Loss Account. Alleging that the assessee was unable to prove with supporting evidence that the VRS expenses amounting to ₹ 23,03,48,610, has been added to arrive at the profit of the amalgamating company, the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 115JB(2) of the Act, it has to be added back for computing book profit. Accordingly, he added back the said amount to the book profit computed under section 115JB of the Act. The assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority. 10. Learned Commissioner (Appeals) relying upon the Special Bench decision of the Tribunal, Kolkata Bench, in JCIT v/s Usha Martin Industries Ltd., [2007] 104 ITD 249 (Kol.) and the decision of the Tribunal, Mumbai Bench, in Maharashtra State Electricity Board v/s JCIT, [2002] 82 ITD 422 (Mum.), held that the provision for bad and doubtful debt and advances is not a liability of the assessee but diminution in value of the asset. Therefore, Explanation 1(c) of section 115JB(2) of the Act would not be applicable. Accordingly, he directed the Assessing Officer not to add the amount while computing the book profit under section 115JB of the Act. 11. The learned Departmental Representative submitted, as per clause (g) to Explanation to section 115JA r/w clause (i) of Explanation 1 to section 115JB(2) of the Act, the amounts set aside as provision for diminution in the value of an asset have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (i) to Explanation 1 of section 115JB(2) of the Act, the Assessing Officer can make such adjustment, we are of the view that this was neither the case before the Assessing Officer nor before learned Commissioner (Appeals).Since, at the time of completion of the assessment proceedings such provision was not in the statute book, therefore, applicability of such provision has never been examined vis a vis the relevant facts. That being the case, at this stage we cannot entertain a completely new plea taken by the Revenue on the issue. Therefore, respectfully following the decision of the Tribunal in assessee s own case as referred to above, we uphold the decision of the learned Commissioner (Appeals) on this issue. Ground is dismissed. 14. In ground no.3, the Revenue has challenged the decision of learned Commissioner (Appeals) in directing the Assessing Officer to allow assessee s claim of deduction under section 80HHC of the Act from the book profit computed under section 115JB of the Act. 15. Brief facts are, in the course of assessment proceedings the Assessing Officer noticed that while computing book profit under section 115JB of the Act, the assessee has claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o more a good law in view of the decision of the Hon'ble Jurisdictional High Court in Ajanta Pharma Ltd. (supra). We are unable to accept the aforesaid contention of the learned Departmental Representative for the following reasons. The Hon'ble Supreme Court in Bhari Information Technology Systems Pvt. Ltd. (supra), has approved the view taken by the Special Bench decision of the Tribunal in Syncom Formulations India Ors. (supra). Further, in case of KEC International Ltd. (supra), the Tribunal following the aforesaid decision of the Hon'ble Supreme Court has directed the Assessing Officer to compute deduction under section 80HHC of the Act on the basis of adjusted book profit and not on the basis of profit computed under the normal provisions of the Act. In view of the aforesaid, we do not find any reason to interfere with the decision of the learned Commissioner (Appeals). Ground raised is dismissed. 20. In ground no.4, the Revenue has challenged the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to allow set off of brought forward loss and unabsorbed depreciation for the assessment year 2001 02. 21. In course of proceedings b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) has also observed that the dispute between the assessee and the Department is only with regard to the appointed date and whether the scheme becomes operative from 31st March 2001. It is further noticed that while allowing assessee s claim, learned Commissioner (Appeals) has relied upon the ratio laid down by the Hon'ble Supreme Court in case of Marshall Sons Co. (supra). As per the aforesaid decision, the date of merger is from the appointed date and not the date on which the High Court granted its approval. In our view, as per the ratio laid down by the Hon'ble Supreme Court in assessee s claim of set off of accumulated loss and unabsorbed depreciation has to be allowed from the appointed date of merger in terms of section 72A of the Act. That being the case, we do not find any infirmity in the decision of learned Commissioner (Appeals) on the issue. Accordingly, the ground raised is dismissed. 26. Grounds no.5 and 6 being general in nature do not require adjudication. 27. In the result, Revenue s appeal is dismissed. C.O. no.83/Mum./2013 By Assessee [Arising out of ITA no.6501/Mum./2008 Revenue s Appeal A.Y. 2002 03] 28. In this cross objection, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, hence, not allowable as expenditure. 36. In rejoinder, the learned Authorised Representative drawing our attention to the material placed in the paper book submitted, these are membership renewal fee, hence, cannot be considered as capital expenditure. 37. We have considered rival submissions and perused material on record. The dispute is with regard to allowability of club expenditure incurred by the assessee towards its employees. While the assessee has claimed it as revenue expenditure, the case of the Revenue is, since the expenditure incurred is towards subscription for acquiring the membership of the club it is capital in nature, hence, not allowable. Keeping in view the aforesaid factual position, we have to examine the allowability of the expenditure. The Hon'ble Supreme Court in United Glass Mfg. Co. Ltd. (supra), has held that club membership fee for employees incurred by the assessee is allowable as business expenditure under section 37 of the Act. Further, the Hon'ble Supreme Court has also held that even otherwise also, it is a pure business expenditure as the expenditure is incurred by the assessee to improve its business relations and prospects. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en dismissed by the Hon'ble Supreme Court. 43. The learned Departmental Representative relied upon the order of the Assessing Officer. 44. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. Undisputedly, the amount in dispute represents service tax which remains to be paid by the assessee. It is the contention of the assessee that service tax is payable only on receipt from consumer of such service. It is observed that the Hon'ble Jurisdictional High Court in Tops Security Ltd. (supra) following its earlier judgment held that provision of section 43B of the Act does not impose liability to pay service tax before actual receipt of the fund in the account of the assessee. The Hon'ble Jurisdictional High Court held that liability to pay service tax into the treasury will arise only upon the assessee receiving the fund and not otherwise. Further, in Knight Frank India Pvt. Ltd. (supra), the Hon'ble Jurisdictional High Court held that since the assessee did not claim any deduction on account of service tax payable, there can be no occasion to invoke provisions of section 43B of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the payees. He submitted, in the subsequent year, when the amount is actually paid the assessee deducts tax at source and entries were made in the books of account reversing the provision made earlier. The learned Authorised Representative submitted, in assessee s own case for the assessment year 2006 07, the Tribunal has decided identical issue. Further, he relied upon the following decisions: i) Alstom own s ITAT order in A.Y. 2006 07; ii) Industrial Development Bank of India v/s ITO; iii) Apollo Tyres Ltd v/s DCIT, [2017] 78 taxmann.com 195 (Del.); and iv) Pfizer Ltd v/s ITO, ITA no.1667/Mum./2010, etc., dated 31.10.2012. 48. The learned Departmental Representative relied upon the observations of learned Commissioner (Appeals) and the Assessing Officer. 49. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. The specific contention of the learned Authorised Representative before us is, the amount in dispute is created as a provision towards expenditure under various heads at the end of the year and at that stage the payees are not identified. Therefore, the assessee is not in a po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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