ACIT, Shimla V. M/s H.P. Tourism Development Corporation, Shimla

ITA 1027/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68572 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 115JB; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1027/CHD/2012 ASSESSMENT YEAR: 2009-10 THE ACIT, VS M/S H.P. TOURISM DEVELOPMENT CORPN. CIRCLE, SHIMLA SHIMLA. (APPELLANT) (RESPONDENT) DATE OF HEARING : 7.11.2013 DATE OF PRONOUNCEMENT : 22.11.2013 APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY : SHRI VISHAL MOHAN ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 16.7.2012 OF CIT(A) SHIMLA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITIO N OF RS. 1,42,01,481/- MADE BY ASSESSING OFFICER BY TREATING THE PROVISIONS CREATED FOR LEAVE ENCASHMENT AS UNASCERT AINED LIABILITY FOR THE COMPUTATION OF BOOK PROFITS FOR L EVY OF MAT U/S 115JB OF THE INCOME-TAX ACT, 1961. 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SE T-ASIDE AND THAT OF ASSESSING OFFICER RESTORED. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DU RING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAD MADE A PROVISION OF 2 RS. 8,38,97,077/- ON ACCOUNT OF ARREARS OF REVISION OF PAY SCALE AND EMPLOYER SHARE OF CPF. ACCORDING TO ASSESSING OFFICER, THIS PROVISION WAS AN UNASCERTAINED LIABILITY AND ACCORDINGLY THE SAME WA S ADDED TO THE BOOK PROFIT U/S 115JB. THE LD. CIT(A) DELETED THIS DISALLOWANC E. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDERS OF THE TR IBUNAL IN ITA NO.. 1240/CHD/2010. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE OR DER OF ASSESSING OFFICER. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION OF THE TRIBUNAL IN ASSESSMENT YEAR 2007-08 IN ITA NO. 1240/CHD/2010. THE ISSUE WAS DECIDED VIDE PARA 7 T O PARA 10 WHICH ARE AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, FACT- SITUATION OF THE CASE, RELEVANT CASE LAWS AND PAPER BOOK FILED BY THE ASSESSEE. THE BRIEF FACTS OF THE CASE ARE, THA T THE AO NOTICED THAT AS PER FORM NO. 29B UNDER SECTION 115JB OF THE INCOME-TAX ACT,1961, FOR COMPUTING BOOK PROFIT AND DETERMINING TAX LIABILITY OF MAT, THE TAX AUDITORS AS WELL AS THE ASSESSEE HA S SHOWN LOSS OF RS.6,21,35,739/- AND AFTER ADDING PROVISIONS/DISALL OWANCE, NET PROFIT HAS BEEN WORKED OUT AT RS.3,93,25,375/-. UN DER THE PROVISIONS, THE ASSESSEE HAS MADE PROVISION OF RS.9 ,76,20,646/- ON ACCOUNT OF LEAVE ENCASHMENT. IT WAS HELD BY THE LD. AO THAT SINCE THE PROVISION IS NOT ASCERTAINED LIABILITY, AS SUCH THE SAME HAD BEEN DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 8. THE RELEVANT FINDINGS OF LD. CIT(A), ON THE ISSU E, AS CONTAINED IN PARA 6 AND 6.1 ARE REPRODUCED HEREUNDE R : 6. THE FACTS OF THE CASE AS WELL AS THE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED BY THE UNDERSIGNED. THE APPELLANTS RELIANCE ON BHARAT EARTH MOVERS 245 ITR 428 (S.C) IS MISPLACED KEEPING IN VIEW THE DIFFERENT FA CTS IN THE 3 CASE OF THE APPELLANT. WHEREAS IN THE CASE RELIED U PON (SUPRA) THE LIABILITY FOR LEAVE ENCASHMENT WAS ACTU ALLY INCURRED BY THE ASSESSEE APPELLANT, IN THE PRESENT CASE, IT IS ONLY PROVISION CREATED FOR MEETING LEAVE ENCASHMENT LIABILITY AT THE TIME OF ACTUAL AVAILMENT OF LEAVE AT THE TIME OF RETIREMENT/LEAVING THE SERVICES OR TERMINATION O F SERVICES ETC. IT IS PURELY A CONTINGENT LIABILITY. LIABILIT Y IS NEITHER EXISTING NOR ACCRUED. THE RATIO OF CIT V BHARAT GEN ERAL AND TEXTILE MILLS LTD. (1986) 157 ITR 158 (CAL) AND CIT V SULEMAN KHAN & MAHBOOB KHAN, TOBACCO (P) LTD. (AP) 174 ITR 200 (A) APPLIES DIRECTLY TO THE FACTS OF THE CA SE WHEREIN IT WAS LAID DOWN THAT THE LIABILITY CLAIMED TOWARDS PROVISION FOR LEAVE WITH WAGES IS NEITHER EXISTING NOR AN ACC RUED ONE, NOR IS IT CAPABLE OF BEING CERTAIN AND DEFINITE, IT IS PURELY A CONTINGENT ONE DEPENDING UPON ACTUAL AVAIL OF LEAVE BY WORKERS. 6.1 THE CASE OF THE APPELLANT FALLS UNDER CLAUSE (C ) OF EXPLANATION 1 TO SECTION 115JB WHICH PROVIDES AS UN DER: EXPLANATION- FOR THE PURPOSE OF THIS SECTION, BOO K PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOS S ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-S ECTION (2) AS INCREASED BY (A) - (B) (C) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR THEREFORE, THE ADDITION OF RS.9,76,20,646/- ON ACCO UNT OF PROVISION FOR LEAVE ENCASHMENT IS CONFIRMED BEING A CONTINGENT LIABILITY. AS A RESULT, THIS GROUND OF A PPEAL IS DISMISSED. 9. THE PRESENT ISSUE RAISED IN FIRST GROUND OF APPE AL IS COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V PANASONIC HOME APPLIANCES. THE RELEVANT PART OF THE DECISION IS REPRODUCED HEREUNDER: 4 BUSINESS EXPENDITURE-PROVISION FOR LEAVE ENCASHMEN T OF EMPLOYEES-AMOUNT DEDUCTIBLE-INCOME-TAX ACT,1961, S. 37. WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99, THE AO ALLOWED THE RELIEF CLAIMED IN RESPECT OF THE PROVISION MADE FOR LEAVE ENCASHMENT OF RS.1. 19 LAKHS. THE CIT(A) SET ASIDE THE ASSESSMENT ORDER UNDER SEC TION 263 OF THE INCOME-TAX ACT,1961, ON THE GROUND THAT IT W AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE COMMISSIONER OF INCOME-TAX DIRECTED THE AO TO M ODIFY THE ASSESSMENT BY DISALLOWING AND ADDING BACK THE P ROVISION FOR DOUBTFUL DEBTS AND THE PROVISION FOR LEAVE ENCA SHMENT IN COMPUTING THE BOOK PROFITS FOR THE PURPOSE OF LEAVE OF RS.1.19 LAKHS CLAIMED BY THE ASSESSEE WAS ALLOWABLE , SINCE THE LIABILITY WAS ALLOWABLE.ON APPEAL : HELD, DISMISSING THE APPEAL, THAT THE ORDER OF THE TRIBUNAL WAS JUSTIFIED. BHARAT EARTH MOVERS V CIT (2000) 245 ITR 428 (S.C) (PARAS 1,2,3,5) REFERRED TO.) 10. THE CONTENTION OF THE LD. 'AR' IS ALSO SUPPORTE D BY THE EXPLANATION 1 SUB-CLAUSE (C) OF THE PROVISIONS OF S ECTION 115JB OF THE ACT. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DI SCUSSIONS, FINDINGS OF THE LD. CIT(A) ARE SET ASIDE AND THIS G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. FOLLOWING THE ABOVE, WE DECIDE THIS ISSUE IN FAV OUR OF THE ASSESSEE. 8. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-11-2013. SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 22 ND NOVEMBER, 2013 RKK 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH