M/s KMG Infotech Ltd., Bangalore V. DCIT, Bangalore

ITA 329/BANG/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3596 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H PADAMCHAN D KHINCHA
• Assessee Lawyers: MULAFFAR HUSSAIN
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Bad and doubtful debts
• Section: 143(3); 234B; 14A; 115JB; 37(1); 10B; 201; 144C; 13; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.329/BANG/2015 ASSESSMENT YEAR : 2010-11 KMF INFOTECH LTD., UNIT 201/202, VANGUARD RISE, 163, KONENA AGRAHARA, BENGALURU-560 017. PAN - AABCK 2065 P VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(1), BENGALURU. APPELLANT RESPONDENT IT(TP)A NO.126/BANG/2015 ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(1), BENGALURU. VS. KMF INFOTECH LTD., UNIT 201/202, VANGUARD RISE, 163, KONENA AGRAHARA, BENGALURU-560 017. PAN - AABCK 2065 P APPELLANT RESPONDENT REVENUE BY : SHRI H PADAMCHAND KHINCHA, C.A ASSESSEE BY : SHRI MULAFFAR HUSSAIN, CIT (DR) DATE OF HEARING : 02.03.2020 DATE OF PRONOUNCEMENT : 05.03.2020 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : IT(TP)A NO.329 & 126 /BANG/2015 PAGE 2 OF 13 THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ASST. ORDER PASSED BY THE AO U/S 143(3) R.W.S 144C OF THE ACT P URSUANT TO THE DIRECTIONS GIVEN BY LD DISPUTE RESOLUTION PANEL (DR P) FOR ASST. YEAR 2010-11. 2. THE GROUNDS URGED BY THE ASSESSEE RELATED TO THE FOLLOWING ISSUES :- A) TRANSFER PRICING ADJUSTMENT MADE BY THE AO B) DISALLOWANCE U/S 14A OF THE ACT C) DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS MAD E U/S 36(1)(VII) OF THE ACT D) INTEREST CHARGED U/S 234B OF THE ACT. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND C ONTESTING THAT THE FOREIGN CURRENCY EXPENSES NEED NOT BE EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE ACT. THE SAID ADDITIONAL GROUND READS AS UNDER:- THE LEARNED AO HAS ERRED IN EXCLUDING FOREIGN CURR ENCY EXPENSES FROM EXPORT TURNOVER WITHOUT APPRECIATING THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF RENDERING S OFTWARE DEVELOPMENT SERVICES AND NOT IN RENDERING TECHNICAL SERVICES. 3. IN THE APPEAL FILED BY THE REVENUE FOLLOWING ISS UES ARE URGED : A) RELIEF GRANTED BY LD DRP IN RESPECT OF TRANSFER PRI CING ADJUSTMENTS. B) COMPUTATION OF DEDUCTION U/S 10A OF THE ACT IT(TP)A NO.329 & 126 /BANG/2015 PAGE 3 OF 13 C) COMPUTATION OF BOOK PROFIT BY EXCLUDING THE PROVISI ON FOR GRATUITY TREATING THE SAME AS ASCERTAINED LIABILITY . 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVI DING SOFTWARE DEVELOPMENT AND PREMIUM SOLUTION WORLDWIDE. THE AS SESSEE IS A SUBSIDIARY OF COMPANY NAMED KEY MANAGEMENT GROUP ( KMG) (INC), USA. 5. THE FIRST COMMON ISSUE RELATED TO TRANSFER PRICI NG ADJUSTMENT MADE BY THE TPO AND PARTIALLY CONFIRMED BY LD DRP. BOTH THE PARTIES ARE IN APPEAL CHALLENGING THE DECISION REND ERED BY LD DRP. THE LD AR SUBMITTED THAT KMG, USA DOES EXTENSIVE MA RKETING AND SECURE CONTRACTS FROM 3 RD PARTIES. IT OUTSOURCES THE SAME TO THE ASSESSEE ON BACK TO BACK BASIS I.E, THE ASSESSEE C OMPANY SERVES AS AN EXECUTION CENTER FOR CONTRACTS WON BY KMG USA. THE LD AR SUBMITTED THAT KMG USA DOES NOT RETAIN ANY MARGIN F ROM THE AMOUNTS BILLED TO THE END CUSTOMERS. HOWEVER, THE ASSESSEE COMPANY PAYS COMMISSION TO KMG USA FOR THE MARKETIN G SERVICES RENDERED BY IT. THE ASSESSEE COMPANY APPLIED CUP M ETHOD (INTERNAL CUP) TO BENCH MARK THE INTERNATIONAL TRAN SACTIONS ENTERED WITH ITS AE. THE TPO, HOWEVER, REJECTED THE CUP ME THOD AND ADOPTED TNMM METHOD AS MOST APPROPRIATE METHOD AND ACCORDINGLY MADE TRANSFER PRICING ADJUSTMENT. THE LD DRP GRANTED RELIEF WITH RESPECT OF COMPARABLES. 6. THE LD AR SUBMITTED THAT THE IDENTICAL ISSUE WAS CONSIDERED BY THE COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2011-12 IN IT(TP)A NO.286/BANG/2016 AND THE TRIBUNA L, VIDE ITS IT(TP)A NO.329 & 126 /BANG/2015 PAGE 4 OF 13 ORDER DATED 4/4/2017, RESTORED THE ISSUE TO THE FIL E OF THE AO/TPO FOR DENOVO CONSIDERATION, SINCE THE TRIBUNAL WAS OF THE VIEW THAT THE TPO AS WELL AS DRP HAD NOT ASSIGNED ANY REASON AS TO WHY CUP METHOD IS NOT APPROPRIATE METHOD. THE LD AR FURTHE R SUBMITTED THAT THE ASSESSEE HAS ALSO SOUGHT FOR ADJUSTMENT FO R UNUTILIZED CAPACITY AND IT WAS NOT GIVEN BY THE TPO/AO. FURTH ER THE DIRECTIONS GIVEN BY LD DRP IN THIS REGARD HAVE NOT BEEN GIVEN EFFECT TO. THE LD AR ALSO SUBMITTED THAT HE IS READY TO A RGUE THE MATTER ON MERITS. 7. THE LD DR, ON THE CONTRARY SUBMITTED THAT THE TR IBUNAL HAS ALREADY RESTORED AN IDENTICAL MATTER TO THE FILE OF THE AO/TPO INAY 2011-12. ACCORDINGLY HE SUBMITTED THAT ISSUES RELA TING TO TRANSFER PRICING ADJUSTMENT MAY BE RESTORED TO THE FILE OF T HE AO/TPO. 8. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. WE NOTICED THAT AN IDENTICAL ISSUE WAS EXAMINED BY THE COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR ASST. YEAR 201 1-12 AND THE ISSUE RELATING TO TRANSFER PRICING ADJUSTMENT WAS R ESTORED TO THE FILE OF AO/TPO WITH THE FOLLOWING DIRECTIONS. 7. DURING THE COURSE OF HEARING BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE ONLY EXPORTS SOFTWARE DEVELOPMENT SERVICES TO AES AS WELL AS NON-AES IN USA AND DOMESTIC CLIENTS. THUS KMG USA DOES EXTENSIVE MARKETING AND SECURE CONTRACTS WITH THIRD PARTIES AND OUTSOURCES THE SAME TO KMG INDIA ON BACK TO BACK BASIS. THE IT(TP)A NO.329 & 126 /BANG/2015 PAGE 5 OF 13 ASSESSEE-COMPANY SERVES AS AN EXECUTION CENTRE FOR CONTRACTS WON BY KMG USA. KMG USA DOES NOT RETAIN ANY MARGINS FROM THE AMOUNT BILLED TO END CUSTOMERS . FOR THE SERVICES PERFORMED BY AE, ASSESSEE COMPANY PAYS COMMISSION AT 10% FOR OFFSHARE SERVICES AND 25% ON ONSITE REVENUE SERVICES. THUS, REVENUE EARNE D BY THE 'ASSESSEE-COMPANY FROM ITS AE IS ONLY PASS THROUGH INCOME AND THEY ARE NOT AN INTERNATIONAL TRANSACTION. IT IS THE CONTENTION OF THE LEARNED CO UNSEL FOR THE ASSESSEE THAT TPO HAD NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE-COMPANY. DRP REJECTED THE ASSESSEE-COMPANY'S CONTENTIONS WITHOUT ASSIGNIN G REASONS WHATSOEVER. THE ASSESSEE ALSO CONTENDS THAT THE TPO AS WELL AS DRP HAD NOT ASSIGNED ANY REASON AS TO WHY CUP METHOD IS NOT MOST APPROPRIATE METHOD IN THE NATURE OF TRANSACTIONS ASSESSEE COMPANY HAD WITH ITS AE. IT WAS ALSO SUBMITTED THAT TPO HAS NOT CONSIDERED THE ALTERNATIVE SUBMISSIONS OF THE ASSESSEE COMPANY THAT IN CASE TNMM IS ADOPTED AS THE MOST APPROPRIATE METHOD, SAME SHOULD BE APPLIED BASED ON INTERNAL COMPARABLES RATHER THAN EXTERNAL COMPARABLES. NOW, LAW IS QUITE SETTLED THAT INTERNA L COMPARABLES ARE MORE PREFERABLE TO EXTERNAL COMPARABLES. FINALLY, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE T PO HAD NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE- COMPANY FOR ADJUSTMENT TOWARDS UNUTILIZED CAPACITY. IT(TP)A NO.329 & 126 /BANG/2015 PAGE 6 OF 13 THE AO ALSO NOT FOLLOWED DIRECTIONS OF THE DRP WHIL E PASSING FINAL ASSESSMENT ORDER. IN THE CIRCUMSTANCE S, IT WAS PRAYED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE AG FOR DE NOVO CONSIDERATION. 8. ON THE OTHER HAND, LEARNED CIT(DR) HAD NO SERIOU S OBJECTIONS FOR RESTORING THE MATTER BACK TO THE FIL E OF THE AO/TPO FOR FRESH ANALYSIS OF TP STUDY. IN THE CIRCUMSTANCES, WE REMIT THE MATTER BACK TO THE AO T O CONSIDER THE ABOVE SUBMISSIONS DE NOVO AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE COMPANY. 9. SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALSO, FOLLOWING THE DECISION RENDERED BY COORDINATE BENCH (REFERRED SUP RA) IN THE ASSESSES OWN CASE, WE RESTORE THIS ISSUE TO THE FI LE OF AO/TPO FOR DENOVO CONSIDERATION. 10. THE SECOND COMMON ISSUE RELATES TO DEDUCTION CL AIMED U/S 10A OF THE ACT. 11. THE LD DRP HAS DIRECTED THE AO TO COMPUTE THE D EDUCTION U/S 10A OF THE ACT AFTER REDUCING EXPENDITURE INCUR RED IN FOREIGN CURRENCY AND LEASE LINE EXPENSES BOTH FROM EXPORT T URNOVER AND TOTAL TURNOVER ALSO. THE ASSESSEE HAD INCURRED FORE IGN EXPENSES TO THE TUNE OF RS.18.64 CRORE IN FOREIGN EXCHANGE OUTS IDE INDIA. THE AO NOTICED THAT THE ASSESSEE, WHILE COMPUTING DEDUC TION U/S 10B, HAS NOT REDUCED THE ABOVE SAID EXPENDITURE FROM EXP ORT TURNOVER. IT(TP)A NO.329 & 126 /BANG/2015 PAGE 7 OF 13 THE AO COMPUTED THE DEDUCTION U/S 10B OF THE ACT BY REDUCING THE ABOVE SAID EXPENDITURE FROM EXPORT TURNOVER ONLY. THE LD DRP, BY FOLLOWING THE DECISION RENDERED BY HONBLE KARNATAK A HIGH COURT IN THE CASE OF CIT VS. TATA ELIXI LTD., (ITA NO.70/200 9 AND OTHERS) HELD THAT THE EXPENDITURE INCURRED IN FOREIGN CURRE NCY IS REQUIRED TO BE DEDUCTED FROM THE TOTAL TURNOVER ALSO. 12. THE REVENUE IS AGGRIEVED BY THE DECISION SO GIVEN BY LD DRP. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND, WHICH IS EXTRACTED ABOVE, CONTENDING THAT THE EXPENSES INCUR RED IN FOREIGN EXCHANGE NEED NOT BE DEDUCTED FROM THE EXPORT TURNO VER AT ALL, SINCE THE COMPUTER SOFTWARE CANNOT BE TREATED AS TE CHNICAL SERVICES AS MENTIONED IN CLAUSE (IV) TO EXPLANATION 2 TO SEC .10A OF THE ACT. THE LD A.R PLACED HIS RELIANCE ON THE DECISION REND ERED BY HONBLE JURISDICTIONAL KARNATAKA HIGH COURT IN THE CASE OF THE COMMISSIONER OF INCOME TAX VS. M/S MPHASIS LTD (ITA NO.1075/2008 C/W ITA NO.196/2009 DATED 01-08-2014). 13. THE GROUND RAISED BY THE REVENUE IS COVERED AGAINST THE REVENUE BY THE DECISION RENDERED BY HONBLE JURISDI CTIONAL KARNATAKA HIGH COURT IN THE CASE OF TATA ELIXI LTD (SUPRA). HOWEVER, THE REQUIREMENT OF CONSIDERING THE ISSUE O F DEDUCTION OF FOREIGN EXPENSES FROM BOTH EXPORT TURNOVER AND TOTA L TURNOVER SHALL ARISE ONLY IF THE ADDITIONAL GROUND URGED BY THE AS SESSEE IS DECIDED AGAINST THE ASSESSEE, I.E., IF THE ADDITIONAL GROUN D IS DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THERE IS NO REQUIREMENT OF DEDUCTING FOREIGN EXPENSES FROM THE EXPORT TURNOVER , THEN THE GROUND URGED BY THE REVENUE SHALL BECOME INFRUCTUOU S. WE NOTICE IT(TP)A NO.329 & 126 /BANG/2015 PAGE 8 OF 13 THAT THE ADDITIONAL GROUND HAS BEEN RAISED FOR THE FIRST TIME BEFORE US. HENCE THE LD D.R SUBMITTED THAT THE FACTUAL AS PECTS RELATING TO THE ISSUE AND THE APPLICABILITY OF THE DECISION REN DERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF MPHASIS LTD (SU PRA) NEED TO THE EXAMINED BY THE AO. WE FIND MERIT IN THE SUBMI SSIONS MADE BY LD D.R. 14. WE FURTHER NOTICE THAT THE AO HAS ACTUALLY A LLOWED DEDUCTION U/S 10B OF THE ACT. THE LD DRP HAS REFERRED TO BOT H SEC.10B AND 10A IN ITS DIRECTIONS. THE GROUNDS URGED BY BOTH T HE PARTIES REFER TO SEC.10A ONLY. THUS, THERE IS CONFUSION ABOUT TH E SECTION UNDER WHICH THE DEDUCTION WAS CLAIMED BY THE ASSESSEE. 15. IN VIEW OF THE FOREGOING DISCUSSIONS, WE REST ORE THIS ISSUE TO THE FILE OF THE AO FOR EXAMINING IT AFRESH BY CONSI DERING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. 16. WE SHALL NOW TAKE UP THE OTHER ISSUES URGED BY THE ASSESSEE. 17. AT THE TIME OF HEARING THE LD AR DID NOT PRESS GROUND RELATING TO DISALLOWANCE MADE U/S 14A OF THE ACT IN VIEW OF THE SMALLNESS OF THE AMOUNT. ACCORDINGLY THE SAID GROUND IS DISMISS ED AS NOT PRESSED. 18. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS CLAIMED BY THE ASSE SSEE U/S 36(1)(VII) OF THE ACT. IT(TP)A NO.329 & 126 /BANG/2015 PAGE 9 OF 13 19. THE FACTS RELATING TO THE SAID ISSUE ARE THAT T HE AO NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.1,15,265/ - AS PROVISION FOR DOUBTFUL DEBTS. THE ASSESSING OFFICER DISALLOW ED THE SAME BY HOLDING THAT IT IS AN UNASCERTAINED LIABILITY AND H ENCE DISALLOWABLE U/S 37(1) OF THE ACT. THE DRP ALSO CONFIRMED THE S AME. 20. THE AR SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE PROVISION FOR DOUBTFUL DEBT U/S 36(1)(VII) OF THE A CT, AS THE SAME IS IN THE NATURE OF BAD DEBTS WRITTEN OFF, SINCE THE ASSESSEE HAD DEDUCTED THE PROVISION FOR DOUBTFUL DEBTS AMOUNT FROM THE SUNDRY DEBTORS BALANCE SHOWN IN THE ASSET SIDE O F BALANCE SHEET. HE RELIED ON THE DECISION RENDERED BY HONBLE SUPRE ME COURT IN THE CASE OF VIJAYA BANK VS. CIT (2010) 190 TAXMAN 257 I N SUPPORT OF HIS CLAIM. 21. WE HEARD LD DR AND PERUSED THE RECORD. WE HAVE EARLIER NOTICED THAT THE AO HAS DISALLOWED THE CLAIM U/S 37 (1) OF THE ACT. HOWEVER THE LD AR SUBMITTED THAT THE PROVISION FOR DOUBTFUL DEBTS IS ALLOWABLE U/S 36(1)(VII) OF THE ACT AND IN THIS REGARD HE PLACED RELIANCE ON THE DECISION RENDERED BY HONBEL SUPREM E COURT IN THE CASE OF VIJAYA BANK (SUPRA). SINCE THE IMPUGNED CL AIM HAS NOT BEEN EXAMINED BY THE AO IN TERMS OF 36(1)(VII) OF T HE ACT, WE RESTORE THIS ISSUE TO HIS FILE FOR EXAMINING THE SAME AFRES H. 22. THE NEXT ISSUE RELATES TO INTEREST CHARGED U/S 234B OF THE ACT. CHARGING OF INTEREST U/S 234B IS CONSEQUENTIA L IN NATURE AND HENCE THIS ISSUE DOES NOT REQUIRE ADJUDICATION. IT(TP)A NO.329 & 126 /BANG/2015 PAGE 10 OF 13 23. WE SHALL NOW TAKE UP THE REMAINING ISSUE IN THE APPEAL OF THE REVENUE. 24. THE ONLY REMAINING ISSUE IS WHETHER PROVISI ON FOR GRATUITY IS AN ASCERTAINED LIABILITY ELIGIBLE TO BE DEDUCTED FR OM THE NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF T HE ACT. 25. THE LD A.R SUBMITTED THAT THE PROVISION FOR G RATUITY IS HELD TO BE AN ASCERTAINED LIABILITY IN THE FOLLOWING CASE L AW:- (A) DRESSER VALVE INDIA P LTD VS. ACIT (2009)(30 S OT 495)(MUM) (B) CIT VS. ECHJAY FORGINGS P LTD (2001)(116 TAXM AN 322)(BOM) (C) EICHER MOTORS LTD VS. DCIT (2004)(82 TTJ 0061 )(IND) (D) CIT VS. BECHTEL INDIA P LTD (2007)(TAXCORP (D T) 40696)(DEL). ON THE CONTRARY, THE LD D.R PLACED HIS RELIANCE ON THE ASSESSMENT ORDER. 26. IN THE CASE OF DRESSER VALVE INDIA P LTD (SUPR A), AN IDENTICAL ISSUE WAS EXAMINED BY MUMBAI BENCH OF TRIBUNAL AND IT WAS HELD AS UNDER:- 18. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE T HROUGH THE ORDERS, DECISIONS AND JUDGMENTS AND PROVISIONS OF THE INCOME-TAX ACT. FROM THE FACTS, IT IS NOTICED THAT THE OBJECTION OF THE REVENUE IS WITH REGARD TO THE ASSESSEES FAI LURE TO FOLLOW THE AS-15 AND THE ACTUARIAL METHOD REFERRED THERE IN AND NOT DISPUTED THE QUANTIFICATION OF THE PROVISION OF GR ATUITY. IN IT(TP)A NO.329 & 126 /BANG/2015 PAGE 11 OF 13 OTHER WORDS, THE INCORRECT QUANTIFICATION OF THE PR OVISION MAKES THE PROVISIONS AS AN UNASCERTAINABLE LIABILIT Y AND THEREFORE, SUCH PROVISIONS SHOULD BE DEALT WITH AS PER THE PROVISIONS OF SECTION 115JB READ WITH EXPLANATION1( C) AND ACCORDINGLY, THE BOOK PROVISIONS SHOULD BE INCREASE D. ON THE OTHER HAND, THE CASE OF THE ASSESSEE IS THAT IT IS AN ASCERTAINED LIABILITY AS EVIDENT FROM THE BOOKS AND METHOD OF QUANTIFICATION DOES NOT DECIDE THE ISSUE OF ASCERTA INMENT OR OTHERWISE OF THE LIABILITY AND THEREFORE, THE PROVI SION FOR GRATUITY IS REQUIRED TO BE EXCLUDED FOR THE PURPOSE OF DETERMINING THE BOOK PROFITS. CONSIDERING THE RIVAL POSITIONS, IT IS NOTICED THAT THE SAID PROVISION OF SECTION 11 5JB ARE CODE BY ITSELF AND DETERMINATION OF THE BOOK PROFITS HAS TO BE DONE ONLY AS PER THE PROVISIONS OF SECTION 115JB, WHICH UNAMBIGUOUSLY PROVIDES FOR EXCLUSION OF PROVISIONS OF ASCERTAINED LIABILITIES FOR THE PURPOSE OF BOOK PR OFITS. IN THIS REGARD, WE HAVE PERUSED THE APEX COURT JUDGMENT IN THE CASE OF BHARAT EARTH MOVERS (425 ITR 428) AND THE RELEVA NT PORTIONS OF THE SAME READS AS UNDER. BUSINESS LIABILITY ARISING IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DA TE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIAB ILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH T HE REASONABLE CERTAINTY WITHOUT ACTUAL QUANTIFICATION. TILL THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS N OT A CONTINGENT ONE. THE LIABILITY IS ONE PRESENT/ THOU GH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MA KE ANY DIFFERENCE IF THE DATE OF LIABILITY HAS TO BE DISCHARGED IT IS NOT CERTAIN. 19. THUS, ALTHOUGH THE PROVISION ARE NOT ALLOWABLE AS DEDUCTION, CERTAIN PROVISIONS WHICH ARE CAPABLE OF ESTIMATION WITH REASONABLE CERTAIN WITHOUT QUANTIFICATION ARE ALLOWABLE AS THEY ARE ASCERTAINABLE. ON FINDING THAT THE ACTU AL QUANTIFICATION IS NOT A LEGAL NECESSARY IN MATTERS OF ASCERTAINMENT OF THE GRATUITY, WE ARE OF THE OPINI ON THAT THE PROVISION OF GRATUITY IN THE ASSESSEES CASE IS CAP ABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY AND THEREFORE, IT IS NOT A CONTINGENT OR UNASCERTAINED LIABILITY. THUS, IT IS AN IT(TP)A NO.329 & 126 /BANG/2015 PAGE 12 OF 13 ASCERTAINED LIABILITY AND THE SAME FALLS OUTSIDE SC OPE OF THE PROVISIONS OF CLAUSE (C) OF THE EXPLANATION 1 TO SE CTION 115JB WARRANTING NO ADDITION TO THE `BOOK PROFITS. ACCOR DINGLY, THE GROUND 4 OF THE ASSESSEE IS ALLOWED. FOLLOWING THE ABOVE SAID DECISION, WE HOLD THAT THE PROVISION FOR GRATUITY IS AN ASCERTAINED LIABILITY ELIGIBLE TO BE DEDUCTED FROM NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE A S WELL AS REVENUE ARE TREATED AS PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MARCH, 2020. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 5 TH MARCH, 2020. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. IT(TP)A NO.329 & 126 /BANG/2015 PAGE 13 OF 13 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED