Tribunal grants Revenue's appeals for 2006-07 and 2008-09, upholding some additions, deletions

The Tribunal partially allowed the Revenue's appeals for the assessment year 2006-07, granting some deletions and confirmations on various additions made by the AO under section 115JB and normal provisions. The Tribunal upheld similar decisions for the assessment year 2008-09, directing verification where needed. The order was pronounced on 17.10.2014.

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Issues Involved:
1. Deletion of addition on account of Tariff adjustment u/s 115JB.
2. Deletion of addition on account of Depreciation on land amortized u/s 115JB.
3. Deletion of addition on account of Provision for gratuity, leave encashment, and post-retirement benefits u/s 115JB.
4. Deletion of addition on account of Provision for doubtful and obsolescence in inventory u/s 115JB.
5. Confirmation of addition on account of 'Advance against depreciation' under normal provisions.
6. Deletion of addition on account of Provision for loss in hedged transactions for book profit u/s 115JB and normal provisions.
7. Deletion of disallowance u/s 14A in the computation of income under normal provisions and MAT provisions.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Tariff Adjustment u/s 115JB:
The assessee showed a tariff adjustment of Rs. 51.80 crore out of the sale of Rs. 1713.79 crore. The AO added back this amount to the book profit u/s 115JB, considering it not an ascertained liability. The CIT(A) reversed this action, relying on the order for the previous year. The Tribunal confirmed the deletion, following the precedent set in the assessment year 2005-06, as no distinguishing facts were presented.

2. Deletion of Addition on Account of Depreciation on Land Amortized u/s 115JB:
The assessee claimed depreciation on land amounting to Rs. 1.30 crore, with Rs. 1.00 crore debited to the Profit and Loss account. The AO added back this amount to the book profit u/s 115JB, stating no depreciation was admissible on land. The CIT(A) deleted this addition. The Tribunal upheld this decision, referencing its order for the assessment year 2004-05, where a similar addition was deleted.

3. Deletion of Addition on Account of Provision for Gratuity, Leave Encashment, and Post-Retirement Benefits u/s 115JB:
The assessee claimed deductions towards provisions for gratuity and leave encashment, supported by the Supreme Court judgment in Bharat Earth Movers Vs. CIT. The AO added back this amount in the computation of book profit u/s 115JB. The CIT(A) concurred with the assessee, and the Tribunal upheld this view, distinguishing between the normal provisions and the computation of book profit u/s 115JB, where such provisions are considered ascertained liabilities.

4. Deletion of Addition on Account of Provision for Doubtful and Obsolescence in Inventory u/s 115JB:
The AO added Rs. 7.74 crore towards provision for doubtful and obsolescence in inventory in the computation of book profit u/s 115JB. The Tribunal, referencing its decision for the assessment year 2004-05, overturned the CIT(A)'s order and allowed the Revenue's ground.

5. Confirmation of Addition on Account of 'Advance Against Depreciation' under Normal Provisions:
The assessee reduced sales by claiming that the advance against depreciation of Rs. 47.88 crore was not a revenue receipt. The AO treated it as a revenue receipt, upheld by the CIT(A). The Tribunal, referencing its previous orders and the Supreme Court judgment in the assessee's own case, held that the advance against depreciation cannot be treated as a revenue receipt. The AO was directed to verify the proper offering of this amount for taxation in the current year.

6. Deletion of Addition on Account of Provision for Loss in Hedged Transactions for Book Profit u/s 115JB and Normal Provisions:
The assessee provided for a loss of Rs. 22.99 crore on derivative exposure related to a loan not for the acquisition of any asset. The AO added this amount in the computation of book profit and normal income, considering it not an ascertained liability. The CIT(A) granted deduction, and the Tribunal upheld this view, referencing the Supreme Court judgment in CIT Vs. Woodward Governor India Pvt. Ltd., considering it an ascertained liability.

7. Deletion of Disallowance u/s 14A in the Computation of Income under Normal Provisions and MAT Provisions:
The AO computed disallowance u/s 14A by applying rule 8D, resulting in an additional disallowance of Rs. 7.01 crore. The CIT(A) deleted this disallowance. The Tribunal upheld this decision, referencing the Bombay High Court judgment in CIT Vs. HDFC Bank Ltd., and the Gujarat High Court judgment in CIT Vs. Suzlon Energy Ltd., which stated no disallowance of interest u/s 14A if the assessee's own capital exceeds the investments yielding exempt income.

Conclusion:
The appeals for the assessment year 2006-07 resulted in partial allowance for the Revenue and statistical allowance for the assessee. For the assessment year 2008-09, the Tribunal upheld similar decisions, providing directions for verification where necessary. The order was pronounced in the open court on 17.10.2014.

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