TaxTMI 
TaxTMI 
2008 (9) TMI 419
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. 3906/Del/2004-Appeal of the Revenue 2. Ground No. 1 takes offence against the order of the learned CIT(A), in which the AO was directed to allow deduction of the interest liability of Rs. 1,79,26,028 although the auditors had clarified that this was unascertained and unascertainable and, therefore, a contingent liability. 2.1 In this connection, it is mentioned in the assessment order that the assessee claimed deduction of Rs. 2.10 crores, being interest payable to M/s Pearless General Finance & Investment Co. Ltd. ("Pearless" for short). This matter was dealt with by the auditors in notes on accounts and it was mentioned that the interest-expenditure of Rs. 2.10 crore and interest income of Rs. 1,19,07,474 for the period 1st Apri....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ltd. vs. CIT (1997) 139 CTR (SC) 564 : (l997) 225 ITR 746 (SC). Based upon the aforesaid decisions, the assessee had offered accrued interest of Rs. 1,19,07,474 for tax and also claimed interest expenditure of Rs. 2.10 crores at the time of filing the return of income. However, the AO adopted different approaches in respect of the expenditure and income. While the expenditure was disallowed, the income was taxed. The learned CIT(A) considered the facts of the case and the submissions made before him. It was pointed out that as per the order of the Court passed in December, 2000, the liability to the extent of Rs. 1,79,26,028 was fastened on the assessee. He also referred to the decision of Hon'ble Supreme Court in the case of Kedarnath Ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t at Rs. 1,51,31,507, while the liability from 20th Dec., 2000 to 31st March, 2001 @ 10 per cent p.a., as per order of the Court, was worked out at Rs. 27,94,521. Thus. the total liability amounted to Rs. 1,79,26,028. This liability was an ascertained liability, allowed in favour of the Pearless by the Court. Therefore, it was agitated that the assessee was entitled to deduct the impugned liability in computing the income. 2.4 We have considered the facts of the case and rival submissions. We find that the assessee had taken loan from the Pearless and there was some dispute pending in respect thereof in the Court. The dispute came to an end in this year. The Court directed the assessee to pay interest @ 21 per cent p.a. till the date of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in nature. From the assessment order, it is seen that the AO added a sum of Rs. 1,19,67,474 to the figure of profit shown in P&L a/c, amounting to Rs. 17,32,495. However, no deduction was made in respect of the impugned interest liability due to the Pearless. The learned CIT(A) referred to his finding in respect of computation of total income of the assessee, in which it was held that accrued liability of interest was deductible in computing the income. Accordingly, this liability was allowed to be deducted from the book profits for the purpose of computation of income under s. 115JB. 3.1 Before us, the learned Departmental Representative relied on his argument furnished in connection with ground No. 1 of the appeal. In reply, the lear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany in general body meeting, filed before the RoC, and to which he has not taken any objection under that Act. The impugned amount was not entered in the books as liability and the auditor had made certain remarks only in regard to the impugned amount. No objection has been taken by the Registrar to the accounts filed before him. Therefore, the book profit has to be taken as per the aforesaid P&L a/c. No adjustment is permissible in the book profit in respect of aforesaid amount under any of the cls. (i) to (vii) of the Explanation to s. 115JB. In view thereof, it is held that the learned CIT(A) erred in directing the AO to reduce this amount from the book profit. Thus, this ground is allowed. C.o. No. 90/Del/200B-Of the assessee 4. ....