DCIT, Bangalore V. M/s shetron Limited, Bangalore

ITA 720/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60743 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K AMBASTHA CITI
• Section: 43B; 115JB

Judgement Text

PAGE 1 OF 11 ITA NO.720 /BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.720/BANG/2010 (ASSESSMENT YEAR 2005-06) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE- 12(3), BANGALORE. VS M/S SHETRON LIMITED, PLOT NO.1, BOMMASANDRA INDUSTRIAL AREA, HOSUR ROAD, BANGALORE. PA NO. AACCS9650F (APPELLANT) (RESPONDENT) DATE OF HEARING : 07.06.2012 DATE OF PRONOUNCEMENT : 15.06.2012 APPELLANT BY : SHRI S K AMBASTHA, CIT-I REVENUE BY : SHRI BALRAM R RAO, ADVOCATE OR DER PER GEORGE GEORGE K : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED CIT (A)-III, BANGALORE, DATED 17.2.2010. TH E RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE REVENUE HAD RAISED FIVE GROUNDS, OUT OF WH ICH, GROUND NOS. 1, 4 AND 5 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUES INV OLVED, THEY DESERVE TO THE DISMISSED AS NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS, THE CRUX OF THE ISSUE IS THAT PAGE 2 OF 11 ITA NO.720 /BANG/2010 2 THE LD. CIT (A) ERRED IN HOLDING THAT INCOME IN TH E NATURE OF INTEREST WAIVED OF RS.5.24 CRORES CREDIT ED TO P & L ACCOUNT HAD TO BE REDUCED FROM NET PROFIT AS SHOWN IN P& L ACCOUNT FOR COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 3. BRIEFLY STATED, THE ASSESSEE IS A COMPANY. IT I S ENGAGED IN THE BUSINESS OF MANUFACTURING OF METAL PACKAGING. THE RETURN OF INCOME WAS FILED ON 30/10/2005 ADMITTING A TAXABLE INCOME OF R S.10,14,272/- AND BOOK PROFIT COMPUTED U/S 115JB OF THE ACT AT RS.2,65,72, 073/-. DURING THE COURSE OF HEARING, IT WAS NOTED BY THE AO THAT THE A SSESSEES ANNUAL REPORT SHOWED A NET PROFIT OF RS.7,64,82,695/- WHICH INCLU DES WRITE BACK OF LIABILITIES OF EARLIER YEARS OF RS.5.24 CRORES BEING THE INTEREST RELIEF FROM KSIIDC. THE ASSESSEE HAD WRITTEN BACK THE RELIEF O F RS.5.24 CRORES GRANTED BY KSIIDC AS OUTSTANDING DUES TOWARDS INTERE ST AS INCOME UNDER THE HEAD LIABILITIES WRITTEN BACK IN ITS AUDITED P & L ACCOUNT FOR THE YEAR ENDING 31.3.2005. THE ASSESSEE HAD OFFERED THE PRO VISION MADE TOWARDS INTEREST PAYABLE TO FINANCIAL INSTITUTION AS DISALLO WANCE U/S43B OF THE ACT IN ITS RETURNS OF INCOME OF THE EARLIER YEARS. THE A SSESSEE HAD REDUCED THE AMOUNT OF RS.5.24 CRORES RECOGNIZED AS REVENUE IN T HE BOOKS FROM THE BOOK PROFITS SINCE THE ENTIRE PROVISION MADE BUT NOT PA ID TOWARDS THE INTEREST DUES, WAS DISALLOWED UNDER SECTION 43B AND INCLUDED IN THE INCOME OF THE EARLIER YEAR. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, IT WAS CONTENDED BY THE ASSESSEE THAT THE INTEREST DEBITED TO P & L A CCOUNT IN THE RESPECTIVE YEARS PAYABLE ON THE LOAN OBTAINED FROM KSIIDC WAS A PROVISION AND NOT AN ACCRUED LIABILITY AND, THEREFORE, IT HAS TO BE REDU CED FROM THE BOOK PROFITS U/S 115JB (I). IT WAS ALSO CONTENDED THAT THE LIAB ILITIES WRITTEN BACK WERE PAGE 3 OF 11 ITA NO.720 /BANG/2010 3 ONLY ARTIFICIAL PROFITS AND NOT REAL PROFITS AND IT WAS ARGUED THAT IT WAS NOT THE INTENTION OF THE LEGISLATURE TO CHARGE TAX ON S UCH ARTIFICIAL PROFITS. 3.1 REJECTING THE ASSESSEES CONTENTIONS, THE LEA RNED AO HELD THAT THE AMOUNT DISALLOWED U/S 43B WAS CRYSTALLIZED LIABI LITY WHICH REMAINS UNPAID ON THE LAST DATE OF ACCOUNTING YEAR AND NOT A PROVIS ION AND, HENCE, CANNOT FALL UNDER THE EXCEPTIONAL ITEMS U/S 115JB. THE AO HAD, FURTHER, HELD THAT THE WRITING BACK OF THE LIABILITY BEING INTEREST WA IVER WAS RECOGNIZED AS INCOME BY THE ASSESSEE BASED ON THE ACCOUNTING PRINC IPLES AND IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT. TAKING SUPPO RT FROM THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF APO LLO TYRES LTD V. CIT REPORTED IN 255 ITR 273 (SC), THE AO HAD DISALLOWED OF RS.5.24 CRORES WHICH WAS DEDUCTED FROM THE BOOK PROFITS AND RE-COM PUTED THE BOOK PROFIT AT RS.7,89,91,205/-. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WITH THE LEARNED CIT(A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE ELABORATE ARGUMENTS PUT FORTH BY THE ASSESSEE COUPLED WITH THE FINDINGS OF ( I) THE HONBLE ITAT, MUMBAI BENCH IN HITKARI FIBRES LTD V. JCIT (2004) 9 0 ITD 654 (MUM); AND (II) THE HONBLE ITAT, DELHI BENCH IN VASUNDHARA LP G (P) LTD V. ITO (2005) 146 TAXMANN 23 (DELHI), THE LEARNED CIT (A) HAD, BY EXTENSIVELY QUOTING THE FINDINGS OF THE HONBLE ITAT OF MUMBAI BENCH CITED SUPRA , DEALT WITH THE ISSUE ON TWO PARTS, THE RELEVANT PORTIONS OF WHICH ARE REPRODUCED AS UNDER: 6.2. .AS CONTENDED BY THE APPELLANT, THE APPELLAN T HAS NOT EARNED THE INCOME OF RS.5,24,19,132/-. THIS WA S PROVISION WHICH HAD BEEN WRITTEN BACK TO THE PROFI T AND LOSS ACCOUNT AS PER THE ACCOUNTING PRINCIPLES. FUR THER, PAGE 4 OF 11 ITA NO.720 /BANG/2010 4 THE PROVISIONS MADE IN RESPECT OF INTEREST LIABILIT Y THE DEPARTMENT HAS NOT ALLOWED IN THE RESPECTIVE YEAR ON THE BASIS OF THAT THE LIABILITY PROVIDED FOR NOT PAID DU RING THE RELEVANT YEAR. HENCE, THE APPELLANT IS JUSTIFIED TO REDUCE THE AMOUNT CREDIT TO THE PROFIT AND LOSS ACCOUNT FO R THE PURPOSES OF COMPUTING THE BOOK PROFITS. 5. WITH REGARD TO THE PROVISION MADE TOWARDS UNAS CERTAINED LIABILITY, THE LEARNED CIT (A) HAD DISAGREED WITH TH E AOS OBSERVATION THAT THE PROVISION FOR INTEREST COULD NOT BE SAID TO BE PROVISION FOR MEETING AN UNASCERTAINED LIABILITY; THAT THE AMOUNT DEBITED BY T HE ASSESSEE IN THE RESPECTIVE PREVIOUS YEARS AMOUNTING TO RSW.5.24 CRO RES CANNOT BE CALLED AS PROVISION; THAT THE AMOUNTS REQUIRED TO BE DISALLOW ED U/S 43B WAS A CRYSTALLIZED LIABILITY WHICH REMAINS UNPAID ON THE LA ST DATE OF THE ACCOUNTING YEAR AND NEITHER A PROVISION NOR A CONTINGENT LIABIL ITY BUT AN ASCERTAINED LIABILITY; AND, ACCORDINGLY, THE AO HAD HELD THAT AMO UNT CREDITED TO THE P & L ACCOUNT BEING THE LIABILITIES WRITTEN BACK CANNOT B E REGARDED AS AMOUNT WITHDRAWN FROM ANY RESERVES/PROVISIONS MADE AND REJE CTED THE ASSESSEES CLAIM THAT THE AMOUNT WAS COVERED U/S 115JB (I). 5.1 THE LEARNED CIT(A) HAD, BY COMPREHENSIVELY QUOT ING THE FINDINGS OF THE HONBLE ITAT, MUMBAI BENCH IN HITKA RI CASE REFERRED SUPRA, OBSERVED THUS: 6.5. THE TRIBUNAL GOES ON DISCUSSION FURTHER AND EXPLAINED THAT SO FAR AS THE EXPRESSION PROVISION IS CONCERNED IT HAS TO BE CREATED IN THE ACCOUNTS IN R ESPECT OF THE LIABILITIES WHOSE NATURE IS MORE OR LESS ASC ERTAINED ALTHOUGH, THE EXACT QUANTUM INVOLVED MAY BE UNCERTAI N. THIS VIEW IS FULLY SUPPORTED WITH THE DECISION OF TH E PAGE 5 OF 11 ITA NO.720 /BANG/2010 5 SUPREME COURT IN THE CASE OF METAL BOX CO. OF INDI A LTD. (SUPRA). 6.6. SO FAR AS THE PRESENT CASE IS CONCERNED, THE LIABILITIES TOWARDS PAYMENT OF INTEREST TO THE FINAN CIAL INSTITUTIONS WERE PROVIDED IN THE ACCOUNTS OF THE APPELLANT IN DIFFERENT YEARS PRIOR TO ASSESSMENT YEAR 2004-05. THE LIABILITIES WERE EXISTING LIABILITIES . THE SUBSEQUENT FACT THAT THE LIABILITIES WERE ULTIMATEL Y WAIVED SHOWS THAT THE ACTUAL LIABILITIES COULD NOT HAVE BEEN ASCERTAINED EXACTLY. THEREFORE, THE PROVISION W AS MADE IN THE ACCOUNTS OF THE APPELLANT IN RESPECT OF LIABILITIES TOWARDS PAYMENT OF INTEREST TO THE FINAN CIAL INSTITUTIONS. DURING THE YEAR CORRESPONDING AMOUNT WAS WRITTEN BACK IN THE ACCOUNTS OF THE APPELLANT. THU S, THE AMOUNT WAS WITHDRAWN FROM THE EARLIER PROVISIONS CREATED IN RESPECT OF MEETING THE LIABILITY TOWARDS PAYMENT OF INTEREST TO THE FINANCIAL INSTITUTIONS. I DO NOT FIND SUBSTANCE IN THE ASSESSING OFFICER THAT THE WO RD PROVISION HAS BEEN USED IN CLAUSE (I) OF THE EXP LANATION. THE TRIBUNAL IN HITKARI CASE HAS HELD THAT THE PRO VISION HAS NOT BEEN USED WITH ANY FURTHER QUALIFICATION AS IT HAS BEEN DONE IN CLAUSE OF THE EXPLANATION. SIMILAR WORD PROVISION HAS BEEN USED IN CLAUSES (A) AND (D) WI THOUT ANY QUALIFICATION. THEREFORE, THE WORD PROVISION IN THESE CLAUSES HAS TO BE UNDERSTOOD IN GENERAL TERMS UNLIK E THE SAME WORD USED IN CLAUSE (C) OF THE EXPLANATION WHE REIN IT HAS BEEN QUALIFIED WITH THE EXPRESSION OTHER THA N ASCERTAINED LIABILITIES. THEREFORE, THE WORDS ASCE RTAINED AND UNASCERTAINED LIABILITIES CANNOT BE INTRODUCED IN CLAUSES (A), (D) AND (I) OF THE EXPLANATION. THERE FORE, SO FAR AS THE APPLICABILITY OF CLAUSE (I) IS CONCERNED, IT WOULD BE SUFFICIENT IF THE AMOUNT BE WITHDRAWN FROM ANY RESERVE OR PROVISION AND IF THE AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT. 6.7. THE DECISION OF THE HONBLE ITAT, DELHI BENCH IN VASUNDHARA LPG (P) LTD V. ITO (2005) 146 TAXMANN 23 PAGE 6 OF 11 ITA NO.720 /BANG/2010 6 (DELHI) HAS ALSO SUPPORTED THE APPELLANT CONTENTION S THAT THE LIABILITIES WRITTEN BACK OF RS.5,24,19,132/- WA S ONLY A REVERSAL OF PROVISIONS EARLIER MADE BY THE APPELLANT COMPANY FOR THE UNASCERTAINED LIABILITY AND, HENCE, NEEDS TO BE REDUCED FROM THE COMPUTATION OF BOOK PROFITS UNDER SEC.115JB TO ARRIVE AT REAL PROFITS AND NOT ARTIFICIAL PROFITS. 6.8. IN VIEW OF THE DISCUSSION ABOVE AND THE DECIS IONS OF ITAT, MUMBAI BENCH IN THE CASE OF HITAKRI FIBRES LT D WHICH SUPPORTS THE CLAIM OF THE APPELLANT, THE AMO UNT OF RS.5,24,19,132/- WRITTEN BACK SATISFIES ALL THE CON DITIONS LAID DOWN IN CLAUSE (I) OF THE EXPLANATION TO SECTI ON 115JB(2). THEREFORE, THE ASSESSING OFFICER IS DIRE CTED TO DEDUCT THE AMOUNT OF WRITE BACK OF RS.5,24,19,13 2/- FROM THE BOOK PROFITS FOR THE PURPOSE OF COMPUTATIO N OF INCOME UNDER SECTION 115JB OF THE ACT. 6. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE REVENUE HAS COME UP WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED DR HAD FULLY SUPPORTED THE CONCLUSION OF THE AO, BUT , FOUND FAULT WITH THE STAND OF THE LEARNED CIT(A) IN HOLDING THAT THE INC OME IN THE NATURE OF INTEREST WAIVED OF RS.5.24 CRORES CREDITED TO P & L ACCOUNT FOR COMPUTING BOOK PROFIT U/S 115JB OF THE ACT WITHOUT APPRECIATI NG THE FACT THAT THE INTEREST DEBITED IN THE PRECEDING YEARS WAS A NOT A PROVISION BEING AN ASCERTAINED LIABILITY. IT WAS, FURTHER, CONTENDED T HAT THE CIT (A) OUGHT TO HAVE APPRECIATED THAT ADDING BACK THE UNPAID INTERE ST U/S 43B FOR COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS SHOU LD NOT PREJUDICE THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. THE LEARNED D R HAD ALSO DISAGREED WITH THE PERCEPTION OF THE LEARNED CIT (A ) IN RELYING ON THE FINDINGS OF THE HONBLE ITAT OF MUMBAI BENCH IN THE CASE OF HITARI FIBRES V. JCIT REFERRED SUPRA BY HOLDING THAT WAIVED INTEREST CREDITED TO P & L PAGE 7 OF 11 ITA NO.720 /BANG/2010 7 ACCOUNT SHOULD BE REDUCED FOR COMPUTING BOOK PROFIT U/S 115JB OF THE ACT . HOWEVER, IT WAS ARGUED THAT THE LEARNED CIT(A) HAD FAILED TO NOTICE THAT THE CASES QUOTED BY HIM WERE DISTINGUISHABLE FROM TH E FACTS OF THE ISSUE ON HAND. IT WAS, THEREFORE, PLEADED THAT THE FINDINGS OF THE LEARNED CIT(A) DESERVE TO BE QUASHED AND THAT OF THE LEARNED AO BE RESTORED. THE DR HAD PLACED RELIANCE ON THE FINDINGS OF THE HONBLE ITAT , VISAKHAPATNAM BENCH IN THE CASE OF HINDUSTAN SHIPYARD LTD V. DCIT REPORTED IN (2010) 6 ITR 407 / (2010) 36 DTR 357. 7. ON THE OTHER HAND, THE LEARNED A R FULLY SUPPOR TED THE FINDINGS OF THE LEARNED CIT(A) WHICH, ACCORDING TO HIM, HAS THE BACKING OF THE JUDICIARY ON A SIMILAR ISSUE. THE LEARNED CIT (A) H AD RECORDED HIS FINDINGS IN A JUDICIOUS MANNER; IT WAS ARGUED THAT THEY REQUIRE NO INTERVENTION OF THIS BENCH. A PAPER BOOK WHICH CONTAINS, INTER ALIA, C OPIES OF (I) EXTRACT OF P & L ACCOUNT; (II) P & L ACCOUNT FOR THE YEARS-ENDED 31.3 .2003 & 31.3.2004; (III) DETAILS OF KSIIDC INTEREST DISALLOWED U/S 43B OF TH E ACT WAS FURNISHED DURING THE COURSE OF HEARING. 8. AT THE OUTSET, WE WOULD LIKE TO REITERATE THAT A SIMILAR ISSUE TO THAT OF THE PRESENT ISSUE UNDER CONSIDERATION HAD C ROPPED UP BEFORE THE HONBLE ITAT, MUMBAI BENCH IN THE CASE OF HITKARI F IBRES LTD V. JCIT REFERRED SUPRA. THE HONBLE BENCH HAD, AFTER EXAMI NING THE ISSUE EXPLICITLY OBSERVED THUS: 12..THE INTENTION OF THE LEGISLATURE WAS TO LEV Y THE MINIMUM ALTERNATE TAX (MAT) ON THE REAL BOOK-PROFI T. AS THE UNASCERTAINED LIABILITY HAS NOT ACCRUED DURIN G THE YEAR UNDER CONSIDERATION, THEREFORE, THE SAME HAS TO BE PAGE 8 OF 11 ITA NO.720 /BANG/2010 8 ADDED BACK IF THE SAME IS CLAIMED IN THE P & L A/C TO ARRIVE AT THE REAL PROFITS. SO FAR AS CL. (I) IS C ONCERNED, IT ONLY PERTAINS TO THE WITHDRAWAL OF THE AMOUNT FROM RESERVES OR PROVISIONS AND CREDITED TO P & L A/C. THIS AMOUNT HAS TO BE REDUCED FROM THE NET PROFIT AS SHO WN IN THE P & L A/C TO ARRIVE AT THE CORRECT BOOK PROFIT FOR THE PURPOSE OF S. 115JA OF THE ACT. THE INTENTION OF THE LEGISLATURE IS TO CHARGE MINIMUM ALTERNATE TAX ON T HE REAL PROFITS AND NOT ON ARTIFICIAL PROFITS. THESE PROVISIONS WERE MADE IN THE EARLIER YEARS FOR THE EXPENDITURE INCURRED IN THOSE YEARS, BUT THE DEPARTM ENT DID NOT ALLOW IT ON THE BASIS THAT THE LIABILITY PRO VIDED FOR WAS UNASCERTAINED OR THE SAME WAS NOT PAID DURING T HE RELEVANT YEAR. THEREFORE, THESE AMOUNTS HAVE ALREAD Y BEEN INCLUDED IN THE BOOK PROFITS OF THE EARLIER YEA RS AND, ACCORDINGLY, THE TAX HAS BEEN LEVIED ON THESE AMOUNTS. THEREFORE, IF THESE AMOUNTS ARE NOT EXCLU DED FROM THE NET PROFIT AS SHOWN IN THE P & L A/C, THEY WOULD BE SUBJECT TO TAX AGAIN. THE LEGISLATURE IN THEIR WISDOM HAS BROUGHT THIS PROVISION ON THE STATUTE TO AVOID THE SITUATION OF TAXING THE SAME AMOUNT TWICE. IN FACT , THE MAT HAS TO BE LEVIED ON THE REAL BOOK PROFITS WHICH HAVE BEEN EARNED BY THE COMPANIES DURING THE RELEVANT ASSESSMENT YEARS AND NOT ON ARTIFICIAL INCOME WHICH HAS NOT ACCRUED TO THE COMPANIES BUT HAS BEEN CREDITED TO THE P & L A/C AS PER THE ACCOUNTING PRINCIPLES. IN THE PRESENT CASE, THE ASSESSEE HAS NOT EARNED THE INCOM E OF RS.4.18 CRORES. THIS WAS PROVISION WHICH HAD BEEN WRITTEN BACK TO THE P & L A/C AS PER THE ACCOUNTING PRINCIPLES. THE DEPARTMENT WOULD HAVE BEEN FULLY JUSTIFIED IN MAKING THE DISALLOWANCE IF THESE PROVI SIONS WOULD HAVE BEEN ALLOWED AS EXPENDITURE IN THE P & L A/C IN THE RESPECTIVE EARLIER ASSESSMENT YEARS. THEREFO RE, IN OUR OPINION, THE LEARNED CIT (A) IS NOT JUSTIFIED I N COMPARING THE TWO PROVISIONS OF THE EXPLANATION GIV EN IN CL.L (C) AND CL. (I). IN FACT, THESE TWO PROVISIONS HAVE BEEN BROUGHT ON THE STATUTE FOR DETERMINING THE REAL BOO K PROFITS FOR THE PURPOSE OF LEVYING THE MAT. THE PAGE 9 OF 11 ITA NO.720 /BANG/2010 9 COMPARISON DRAWN BY THE LEARNED CIT (A) IS, THEREFO RE, WITHOUT ANY BASIS AND THE SAME DOES NOT REQUIRED ANY CONSIDERATION. 13. THE NEXT IMPORTANT ISSUE IS REGARDING THE PROV ISION MADE TOWARDS UNASCERTAINED LIABILITY. ACCORDING TO THE CIT (A), A PROVISION FOR INTEREST COULD NOT BE SAID TO BE A PROVISION FOR MEETING AN UNASCERTAINED LIABILITY WIT HIN THE MEANING OF CL. (C) OF THE EXPLANATION. IT IS STATE D THAT IF THE INTEREST WAS NOT ALLOWED AS DEDUCTION UNDER THE I T ACT BY VIRTUE OF S. 43B, IT DOES NOT RENDER IT A PRO VISION TOWARDS UNASCERTAINED LIABILITY WITHIN THE MEANING O F THE COMPANIES ACT. WE DO NOT FIND ANY FORCE IN THE FINDI NGS OF THE LEARNED CIT (A). A PROVISION MADE FOR A CER TAIN FUTURE LIABILITY WHICH CAN BE ASCERTAINED WITH SUBST ANTIAL ACCURACY IS AN ACCRUED LIABILITY. IF SUCH KNOWN LIAB ILITY CANNOT BE ASCERTAINED AND CAN ONLY BE ESTIMATED AND A PROVISION IS MADE, SUCH PROVISION BEING A CHARGE ON THE PROFITS WILL BE DEDUCTIBLE. IF THE LIABILITY IS AN TICIPATED BUT CANNOT BE DETERMINED, IT MAY BE ONLY CONTINGENT F OR WHICH A RESERVE MAY BE CREATED BY WAY OF APPROPRIATE FROM PROFITS AND, HENCE, SUCH AMOUNT WILL NOT BE EL IGIBLE FOR DEDUCTION. IN THE PRESENT CASE, THE ASSESSEE ANTICIPATED THE INTEREST BUT IT WAS NOT DETERMINABL E. THEREFORE, THE ASSESSEE CREATED A PROVISION FOR SUC H UNASCERTAINED LIABILITY. THE ASSESSEE WAS NOT ENTIT LED FOR ANY DEDUCTION FOR THIS UNCERTAIN LIABILITY. THE VERY FACT THAT THE DEPARTMENT DID NOT ALLOW THIS LIABILITY ON THE BASIS OF NON-PAYMENT UNDER S. 43B OF THE ACT SUPPORT S THIS VIEW THAT THE LIABILITY WAS NOT EXACTLY KNOWN TO THE ASSESSEE, THEREFORE, THE SAME WAS NOT PAID. IF THE LIABILITY WOULD HAVE BEEN EXACTLY DETERMINABLE, THE ASSESSEE WOULD HAVE NOT CREATED THE PROVISION BUT W OULD HAVE PAID THE SAME AND THE CLAIM WOULD HAVE BEEN MA DE IN THE P & L A/C ON THE BASIS THAT THE LIABILITY IS ASCERTAINABLE. THE FACT THAT THE LIABILITY HAS NOT BEEN ALLOWED UNDER S. 43B, DOES NOT CHANGE THE CHARACTER OF THE LIABILITY WHICH WAS UNASCERTAINABLE. PAGE 10 OF 11 ITA NO.72 0/BANG/2010 10 14. SO FAR AS THE EXPRESSION PROVISION IS CONCER NED, THE LEARNED COUNSEL HAS RIGHTLY POINTED OUT THAT A PROVI SION HAS TO BE CREATED IN THE ACCOUNTS IN RESPECT OF THE LIABILITIES WHOSE NATURE IS MORE OR LESS ASCERTAINE D ALTHOUGH, THE EXACT QUANTUM INVOLVED MAY BE UNCERTAI N. THIS VIEW IS FULLY SUPPORTED WITH THE DECISION OF TH E SUPREME COURT IN THE CASE OF METAL BOX COMPANY OF INDIA LTD. (SUPRA). SO FAR AS THE PRESENT CASE IS CONCERNED, THE LIABILITIES TOWARDS PAYMENT OF INTERE ST TO THE FINANCIAL INSTITUTIONS WERE PROVIDED IN THE ACC OUNTS OF THE ASSESSEE IN DIFFERENT YEARS PRIOR TO ASST. YR. 1997- 98. THE LIABILITIES WERE EXISTING LIABILITIES. TH E SUBSEQUENT FACT THAT THE LIABILITIES WERE ULTIMATEL Y WAIVED SHOWS THAT THE ACTUAL LIABILITIES COULD NOT HAVE BEEN ASCERTAINED EXACTLY. THEREFORE, THE PROVISION WAS MADE IN THE ACCOUNTS OF THE ASSESSEE IN RESPECT OF LIABILITIES TOWARDS PAYMENT OF INTEREST TO THE FINAN CIAL INSTITUTIONS. DURING THE YEAR CORRESPONDING AMOUNT WAS WRITTEN BACK IN THE ACCOUNTS OF THE ASSESSEE. THUS , THE AMOUNT WAS WITHDRAWN FROM THE EARLIER PROVISIONS CREATED IN RESPECT OF MEETING THE LIABILITY TOWARDS PAYMENT OF INTEREST TO THE FINANCIAL INSTITUTIONS. WE ALSO FIND SUBSTANCE IN THE ARGUMENTS OF THE LEARNED COUN SEL THAT THE WORD PROVISION HAS BEEN USED IN CL. (I) OF THE EXPLANATION. THIS PROVISION HAS NOT BEEN USED WI TH ANY FURTHER QUALIFICATION AS IT HAS BEEN DONE IN CL. OF THE EXPLANATION. SIMILAR WORD PROVISION HAS BEEN USE D IN CLS. (A) AND (D) WITHOUT ANY QUALIFICATION. THEREFORE, T HE WORD PROVISION IN THESE CLAUSES HAS TO BE UNDERSTOOD I N GENERAL TERMS UNLIKE THE SAME WORD USED IN CL. (C) OF THE EXPLANATION WHEREIN IT HAS BEEN QUALIFIED WITH THE EXPRESSION OTHER THAN ASCERTAINED LIABILITIES. THE REFORE, THE WORDS ASCERTAINED AND UNASCERTAINED LIABILITIES CANNOT BE INTRODUCED IN CLS. (A), (D) AND (I) OF TH E EXPLANATION. THEREFORE, SO FAR AS THE APPLICABILIT Y OF CL. (I) IS CONCERNED, IT WOULD BE SUFFICIENT IF THE AMO UNT BE WITHDRAWN FROM ANY RESERVE OR PROVISION AND IF THE AMOUNT IS CREDITED TO THE P & L A/C. PAGE 11 OF 11 ITA NO.72 0/BANG/2010 11 9. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMST ANCES OF THE ISSUE AND ALSO IN CONFORMITY WITH THE FINDINGS OF THE HON BLE MUMBAI BENCH OF ITAT CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THA T THE LIABILITIES WRITTEN BACK OF RS.5.24 CRORES WAS ONLY A REVERSAL OF PROVIS IONS EARLIER MADE BY THE ASSESSEE FOR THE UNASCERTAINED LIABILITY AND, THERE FORE, REQUIRES TO BE REDUCED FROM THE COMPUTATION OF BOOK PROFITS U/S 11 5JB OF THE ACT TO ARRIVE AT REAL PROFITS AND NOT ARTIFICIAL PROFITS A S PROJECTED BY THE REVENUE. 9.1 BEFORE COMING TO THE ABOVE CONCLUSION, WITH D UE RESPECTS, WE HAVE PERUSED THE FINDINGS OF HONBLE ITAT, VISAKHAP ATNAM BENCH IN THE CASE OF HINDUSTAN SHIPYARD LTD CITED SUPRA. IN THE HON BLE VISAKHAPATNAM BENCHS ORDER, THE TRIBUNAL WAS NOT CONSIDERING A C ASE, WHERE INTEREST EXPENDITURE WAS DISALLOWED INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT AND ADDING BACK THE SAME AS INCOME IN THE PAST YEAR. IN THIS CONTEXT, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE STANDS ON A D IFFERENT FOOTING FROM THAT OF THE FACTS OF THIS CASE. 10. IN THE RESULT, THE REVENUES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JUNE, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.