Caprihans India Ltd. Vs DCIT (ITAT Mumbai)
Conclusion: Provision for leave encashment being in the nature of an ascertained liability was to be reduced while computing the book profit under Section 115JB.
Held: Assessee company had e-filed its return of income. While computing the “book profit” under Sec. 115JB, assessee company had added back the amount of the leave encashment provision. In the course of the assessment proceedings, AO inter alia observed that the provision for leave encashment was not to be allowed while computing the „book profit‟ under Sec.1 15JB. It was held the issue involved in the present appeal remained the same as was there in appeal of the assessee for A.Y. 2005-06 in ITA No. 4252/Mum/2011. It was concluded that the provision for leave encashment being in the nature of an ascertained liability was to be reduced while computing the “book profit” under Sec. 115JB. As the facts and the issue involved in context of the present issue remained the same as were there in the appeal of the assessee for A.Y. 2005-06 in ITA No. 4252/Mum/201 1, therefore, our order therein passed should apply mutatis mutandis for the disposal of the same.
FULL TEXT OF THE ITAT JUDGEMENT
The assessee and the revenue being aggrieved with the order passed by the CIT(A)- 41, Mumbai, dated 31.12.2009 for A.Y. 2005-06 have preferred cross-appeals before us. Also, the assessee is in appeal against the respective orders of the CIT(A)-41 for A.Y. 2006-07 and A.Y. 2007-08, both dated 31.12.2009. As certain common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first advert to the appeal of the assessee for A.Y. 2005-06. The assessee has assailed the impugned order on the following revised grounds of appeal before us:
“1. The learned CIT(A) erred in holding that the notice issued u/s 153C was valid without appreciating that no incriminating document belonging to the appellant was found in the course of search of M/s Kalpataru Properties Pvt. Ltd. and others and therefore, there was no reason to issue the notice u/s 153C.
2. The learned CIT(A) erred in holding that the interest received of Rs. 1,22,77,025/- is taxable as income from other sources as against business income claimed by the assessee.
3. Without prejudice to the above grounds, the learned CIT(A) erred in not allowing netting off of the interest paid against the interest received and only the net interest should have been taxed as income from other sources.
4. The learned CIT(A) erred in confirming the disallowance of depreciation in respect of block of asset of residential building, of Rs.1,43,629/- without appreciating that the same was allowable as per law.
5. The learned CIT(A) erred in not appreciating that the provision for leave encashment of Rs.15,30,070/- was not to be added back to the book profit for computation u/s. 115JB as it is an ascertained liability determined on actuarial basis.
6. The learned CIT(A) erred in not accepting the method of computing the brought forward loss and depreciation for the purposes of section 115JB adopted by the assessee without appreciating that the said method followed by the assessee company was correct as per law.
7. The learned CIT(A) further erred in holding that the provision for wealth tax was not to be reduced from
book profit to be computed u/s. 115JB.
8. The learned CIT(A) erred in holding that the claim made by the assessee company that the amount of Rs.3,80,75,339/- being the difference between the payment of net present value of Rs.3,07,23,725/- as against future liability of Rs.6,87,99,064/- relating to deferred sales tax was not taxable since it was a capital receipt could not entertained since the said amount was offered to tax in the return by the assessee and since no revised return was filed, the claim could not be allowed in view of the Supreme Court decision in the case of Goetze India Ltd. [284 ITR 323].
9. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
2. Briefly stated, the assessee company which is engaged in the business of development/construction activity and manufacturing of rigid and flexible PVC films etc., had filed its return of income for A.Y 2005-06 on 16.10.2006, declaring its total income at 7,15,310/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act.
3. Search and seizure action was conducted under Sec. 132 on Kalpataru group of cases on 22.03.2007. In the course of the search proceedings certain incriminating documents belonging to the assessee relating to its non-core assets and arbitration proceedings with M/s Hindustan Spinning and Weaving Mills were seized. Consequently, a survey was also conducted at the assesse’s premises and certain documents were impounded. Notice under Sec.153C was served upon the assessee. In compliance, the assessee filed its return of income on 24.01.2008, declaring a total income of Rs.nil. In its return of income, the assessee while computing the “book profit” under Sec. 115JB had added back the amount of the wealth tax provision. Subsequently, notice under Sec.143(2) r.w.s. 153C was served upon the assessee.
4. The A.O while framing the assessment inter alia made the following additions/disallowances :
