Assistant Commissioner of Income Tax, Central Circle-5(1)(1), Bangalore V. M/s. NSL Sugars Limited, Bangalore

ITA 1355/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4701 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Provision of bad debts
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 1355/BANG/2017 ASSESSMENT YEAR : 2012 - 13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 5(1)(1), BANGALORE. VS. M/S. NSL SUGARS LTD., NO.60/1, 2 ND CROSS, RESIDENCY ROAD, BANGALORE 560 025. PAN: AAGCS 0938Q APP ELLANT RESPONDENT A PPELLANT BY : MS. NEERA MALHOTRA, CIT(DR - II)(ITAT), BENGALURU RE SPONDENT BY : NONE DATE OF HEARING : 16. 0 5 .201 8 DATE OF PRONOUNCEMENT : 01 . 0 6 .201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 29.03.2017 OF THE CIT(APPEALS)-V, BENGALURU RELATIN G TO ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE OF SUGAR. THE ASSESSEE FILED A RETURN OF INCOME FOR THE AY 2012-13 DECLARING A LOSS OF RS.51,74,48,709. THE R ETURNED LOSS WAS ASSESSED AT RS.42,20,26,296 AFTER MAKING DISALLOWAN CE OF RS.9,54,22,413 U/S. 40(A)(IA) OF THE ACT. ITA NO. 1355/BANG/2017 PAGE 2 OF 5 3. THE AO COMPUTED BOOK PROFITS U/S. 115JB OF THE A CT AND IN DOING SO, ADDED TO THE PROFIT AS PER PROFIT & LOSS ACCOUNT TH E PROVISION FOR DOUBTFUL ADVANCES OF RS.60.39 LAKHS AND PROVISION FOR GRATUI TY OF RS.35.44 LAKHS. THE BOOK PROFIT WAS COMPUTED BY THE AO AS FOLLOWS:- MAT CALCULATION NET LOSS AS PER P & L 514023000 ADD: PROVISION FOR DOUBTFUL ADVANCES 6039000 9583000 GRATUITY PROVISION 3544000 MINIMUM ALTERNATIVE TAX U/S 115JB(LOSS) 50440000 MAT NIL 4. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION O F RS.35.44 LAKHS BY SUBMITTING THAT PROVISION FOR GRATUITY WAS MADE ON THE BASIS OF ACTUARIAL VALUATION AND THEREFORE IT WAS AN ASCERTAINED LIABI LITY AND NOT AN UNASCERTAINED LIABILITY. THE ASSESSEE PLACED RELIAN CE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DCT V. INOX LEISURE LTD. [2013] 354 ITR 314 (GUJ) WHEREIN THE HONBLE HIGH COURT TOOK THE VIEW THAT PROVISION FOR GRATUITY LIABILITY IS MADE ON THE BAS IS OF ACTUARIAL VALUATION WHICH CANNOT BE SAID TO BE AN UNASCERTAINED LIABILI TY AND THEREFORE ADDITION TO THE PROFIT AS PER PROFIT & LOSS ACCOUNT CANNOT B E MADE UNDER EXPLANATION (1)(C) TO SECTION 115JB OF THE ACT WHILE DETERMININ G THE BOOK PROFITS. THE CIT(APPEALS) FOLLOWING THE AFORESAID DECISION DIREC TED THE ADDITION MADE TO THE BOOK PROFITS ON ACCOUNT OF PROVISION FOR GRATUI TY TO BE DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVE NUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE GROUND S OF APPEAL RAISED BY THE REVENUE BEFORE THE TRIBUNAL READS AS FOLLOWS:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APP EALS)- 5, BANGALORE, IS OPPOSED TO THE LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 1355/BANG/2017 PAGE 3 OF 5 2. WHETHER THE CIT(A) IS JUSTIFIED IN GRANTING RELI EF ON ADDITION TO MAT CALCULATION ON ACCOUNT OF PROVISION OF BAD DEBTS OF RS.60.39 LAKHS AND PROVISION FOR GRATUITY OF RS.35.44 LAKHS IN ACCORDANCE WITH CLAUSE (J) TO EXPLANATION 1 TO SECTION 115JB OF THE I.T.ACT, 1961. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UP ON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESS MENT ORDER BE RESTORED. 6. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE. AT THE OUTSET, WE OBSERVE THAT THE GROUNDS OF APPEA L RAISED BY THE REVENUE ARE NOT CORRECT. IN GROUND NO.12(II) RAISED BEFORE THE CIT(APPEALS), ADDITION ON ACCOUNT OF PROVISION FOR GRATUITY WHILE DETERMINING THE BOOK PROFITS WAS CHALLENGED BY THE ASSESSEE BY RAISING T HE FOLLOWING GROUND:- 12. II. THE PROVISION OF GRATUITY IS ON THE BASIS OF ACTUARIAL VALUATION AND THE SAME IS AN ASCERTAINED LIABILITY BUT NOT AN ESTIMATED LIABILITY. AS SUCH THE SAID PROVISION OU GHT NOT TO BE ADDED UNDER CLAUSE (J) OF SECTION 115JB OF THE INCO ME TAX ACT, 1961. 7. IT IS ONLY IN SUPPORT OF THE AFORESAID GROUND CH ALLENGING THE ADDITION TO THE BOOK PROFITS ON ACCOUNT OF PROVISION FOR GRA TUITY OF RS.35.44 LAKHS WHILE COMPUTING THE BOOK PROFITS, RELIEF WAS ALLOWE D BY THE CIT(APPEALS). EVEN IN THE SUBMISSIONS BEFORE THE CIT(APPEALS) AS EXTRACTED IN PARA 7 OF HIS ORDER, THE CIT(APPEALS) HAS CONSIDERED ONLY ADD ITION ON ACCOUNT PROVISION FOR GRATUITY WHILE COMPUTING THE BOOK PRO FITS AND NOT THE PROVISION FOR DOUBTFUL DEBTS. EVEN THE DECISION OF THE HONB LE GUJARAT HIGH COURT BASED ON WHICH THE CIT(APPEALS) GAVE RELIEF TO THE ASSESSEE DEALS ONLY WITH THE PROVISION FOR LIABILITY ON ACCOUNT OF GRAT UITY. 8. IN THIS APPEAL, THE LD. DR SUBMITTED THAT PROVIS ION FOR BAD AND DOUBTFUL DEBTS SHOULD BE ADDED WHILE COMPUTING THE BOOK PROFITS AS IT FALLS WITHIN THE AMBIT FOR PROVISION FOR DIMINUTION IN TH E VALUE OF ASSETS ITA NO. 1355/BANG/2017 PAGE 4 OF 5 PRESCRIBED UNDER CLAUSE (J) OF EXPLANATION 1 TO SEC TION 115JB OF THE ACT. SHE ALSO PLACED RELIANCE ON THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. STERIPLATE P. LTD., 338 ITR 547 (P&H) AND THE HONBLE HIGH COURT OF KARNATAKA DECISION IN THE CASE OF CIT V. MYSORE BREWERIES LTD., 29 DTR 289 (KAR) . ALL THESE DECISIONS ARE WITH REFERENCE TO PROVISION FOR DOUBTFUL DEBTS. WE HAVE ALREADY HELD THAT THE ORDER OF CIT(APPEALS) DEALS ONLY WITH THE PROVISION FOR GRAT UITY. IF THE AO CONSTRUES THE ORDER OF CIT(APPEALS) IN THE ORDER GIVING EFFEC T TO THE DECISION OF THE CIT(APPEALS) AS A RELIEF FOR ALLOWED EVEN IN RESPEC T OF PROVISION FOR BAD DEBTS OF RS.60.39 LAKHS, IN OUR VIEW, THE SAME WOUL D NOT BE IN ORDER. WE MAKE IT CLEAR THAT AS FAR AS PROVISION FOR BAD DEBT S IS CONCERNED, THE POSITION OF LAW IS VERY CLEAR, THE SAME HAS TO BE A DDED TO THE BOOK PROFITS AS PER EXPLANATION 1 (J) TO SECTION 115JB OF THE AC T. WITH THESE OBSERVATIONS, WE DISMISS THE APPEAL OF THE REVENUE, AS THE RELIEF ALLOWED BY THE CIT(APPEALS) IN RESPECT OF PROVISION FOR GRA TUITY IS IN ACCORDANCE WITH THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF INOX LEISURE LTD. (SUPRA) . ADMITTEDLY, THE PROVISION FOR GRATUITY WAS MADE BY THE ASSESSEE ON THE BASIS OF ACTUARIAL VALUATION. IN T HESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) INSOFAR AS IT RELATES TO RELIEF ALLOWED IN RESPECT OF PROVISION FOR GRATUITY. 9. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N .V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / ITA NO. 1355/BANG/2017 PAGE 5 OF 5 COPY TO: 1. APPE LLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.