H.P. Tourism Development Corporation, Shimla V. DCIT, Shimla

ITA 1232/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60860 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: ASHWANI K LAL
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITA NO. 1232/CHD/2011 ASSESSMENT YEAR : 2008-09 HP TOURISM DEVELOPMENT V. A.C.I.T. CORPORATION CIRCLE, SHIMLA RITZ ANNEXE, THE RIDGE SHIMLA AAACH 4038 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI K. LAL RESPONDENT BY : SHRI N.K. SAINI DATE OF HEARING : 17.05.2012 DATE OF PRONOUNCEMENT : 24.05.2012 O R D E R PER T.R.SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GR OUND: THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING AND ADDITION O F RS. 1,94,15,683/- BY TREATING THE PROVISIONS CREATED FO R LEAVE ENCASHMENT NOT AS ASCERTAINED LIABILITY FOR THE PUR POSE OF COMPUTATION OF BOOKS PROFIT FOR THE LEVY OF MAT U/S 115 JB OF THE INCOME TAX ACT, 1961. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAD FILED COMPUTATION UNDER MAT PROVISIONS . IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUC TION OF RS. 1,94,15,683/- AFTER THE SET OFF OF ACTUAL PAYMENT O F RS. 34,22,338/- FROM TOTAL PROVISION OF RS. 2,28,38,021 /- ON ACCOUNT OF LEAVE ENCASHMENT. SINCE THE PROVISION HAD BEEN DISALLOWED BY THE ASSESSEE ITSELF, THE ASSESSING OF FICER WAS OF THE VIEW THAT THIS AMOUNT COULD NOT BE REDUCED FROM THE BOOK PROFIT AND ACCORDINGLY HE REJECTED THE CLAIM OF THE ASSESSEE. THE ACTION OF THE ASSESSING OFFICER HAS BEEN CONFIR MED BY THE LD. CIT(A). 3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 1240/CHD/2010. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ST RONGLY RELIED ON THE ORDER OF THE LD. CIT(A). 2 5. THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF TH E ASSESSEE VIDE PARA 7 TO 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 HAS S HOWN 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 ASSE SSEE. 8. THE RELEVANT FINDINGS OF LD. CIT(A), ON THE ISSU E, AS CONTAINED IN PARA 6 AND 6.1 ARE REPRODUCED HEREUNDER : 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 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 TIM E OF RETIREMENT/LEAVING THE SERVICES OR TERMINATION OF S ERVICES ETC. IT IS PURELY A CONTINGENT LIABILITY. LIABILITY IS NEITHER EXISTING NOR ACCRUED. THE RATIO OF CIT V BHARAT GENERAL AND TEXTILE MILLS LTD. (1986) 157 ITR 158 (CAL) AND CIT V SULEM AN KHAN & MAHBOOB KHAN, TOBACCO (P) LTD. (AP) 174 ITR 200 ( A) APPLIES DIRECTLY TO THE FACTS OF THE CASE WHEREIN I T WAS LAID DOWN THAT THE LIABILITY CLAIMED TOWARDS PROVISION F OR LEAVE WITH WAGES IS NEITHER EXISTING NOR AN ACCRUED ONE, NOR I S 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 M ADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIA BILITIES; 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 T HE DECISION IS REPRODUCED HEREUNDER: BUSINESS EXPENDITURE-PROVISION FOR LEAVE ENCASHMEN T OF EMPLOYEES-AMOUNT DEDUCTIBLE-INCOME-TAX ACT,1961, S. 37. 3 WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99, THE AO ALLOWED THE RELIEF CLAIMED IN RESPE CT OF THE PROVISION MADE FOR LEAVE ENCASHMENT OF RS.1.19 LAKH S. THE CIT(A) SET ASIDE THE ASSESSMENT ORDER UNDER SECTION 263 OF THE INCOME-TAX ACT,1961, ON THE GROUND THAT IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. TH E COMMISSIONER OF INCOME-TAX DIRECTED THE AO TO MODIF Y THE ASSESSMENT BY DISALLOWING AND ADDING BACK THE PROVI SION FOR DOUBTFUL DEBTS AND THE PROVISION FOR LEAVE ENCASHME NT 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 GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. FOLLOWING THE ABOVE ORDER, WE DECIDE THE ISSUE IN F AVOUR OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 24.05.2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 .05. 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 4