TaxTMI 
TaxTMI 
2015 (12) TMI 1501
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....to have appreciated that the deduction u/s 10B has to be computed before setting off any carried forward losses. 2. The learned CIT(A) erred on facts and in law in upholding A.O.'s action of adding provision for outward freight of Rs. 2,65,57,598/- to the 'book profits' u/s 115JB as 'unascertained liability'. 3. Without prejudice to ground no.2 above, the learned CIT(A) ought to have appreciated that the said provision for outward freight admittedly related to the 'eligible undertaking' u/s 10B, thereby increasing the deduction u/s 10B and ought therefore have it excluded the same from the computation of 'book profits' in terms of clause (ii) to Explanation 1 to sec.115JB. 4. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal. 4. The Revenue in ITA No.7 2/PN/2012 has raised the following grounds of appeal :- 1) On the facts and circumstances of the case and in law, the Ld .CIT(A)- Ill, Pune has erred in deleting the addition of Rs. 1,34,49,817/- made by the AO on account of disallowance u/s.40(a)(ia) of the Income Ta x Act, 1961 and considered as business....
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....arly laid down that no deduction under section 10A/10AA/10B or under Chapter VIA, shall be allowed in respect of amount of income for which the total income of the assessee is enhanced after computation of income under the section. Further, reference was made to the decision of Hon'ble Bombay High Court in CIT Vs. Gem Plus Jewellery India Ltd. reported in 330 ITR 175 (Bom). 8. The learned Departmental Representative for the Revenue fairly placed reliance on the order of Assessing Officer. 9. However, the learned Authorized Representative for the assessee placed reliance on the CIT(A). 10. We find that the issue raised in the present appeal is in relation to the claim of deduction under section 10B of the Act on enhanced profits, which have been increased due to the disallowance made under section 40(a)(ia) of the Act. The said disallowance was made by the assessee suo motu in the return of income itself for the reason that the tax deductable on the said expenditure was not deposited within prescribed period and hence, the expenditure was not allowable under section 40(a)(ia) of the Act. Thereafter, in the said return of income itself, the assessee had claimed deduction und....
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....epresentative for the assessee pointed out that it has filed additional grounds of appeal which read as under:- 1] The learned CIT(A) erred in holding that the deduction u/s 10B is to be allowed only after set off of the brought forward losses and unabsorbed depreciation relating to the earlier years. 2] The learned CIT(A) erred in not appreciating that the deduction u/s 10B was to be allowed while computing the profits and gains of the undertaking and the unabsorbed losses and depreciation were to be set off only against the resultant profits and gains of the business, if any, after allowing deduction u/s 10B. 3] The assessee submits that the action of the Id A.O. in adding back the provision made on account of outward freight amounting to Rs. 2,65,57,598/- while computing the book profit amounts to double addition since the assessee itself had disallowed the said provision while computing the book profits u/s section 115JB in the revised Form 29B submitted to the Id A.O. and hence, the addition made by the Id A.O. amounts to double addition which should be deleted. 13. The perusal of the additional grounds of appeal reflect that the issue raised vide....
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.... identical to the facts before us, observed as under:- "27. We have heard the rival contentions and perused the record. The issue arising vide ground of appeal No.3 is in relation to the computation of deduction under section 10B of the Act after the amendment to section w.e.f. 01.04.2001. The persons invoking the said provisions are entitled to a deduction under the Act, as compared to the pre-amended provisions of the section, under which the income comprising under the said section was exempt from the total income. The issue arising before us is whether while computing deduction under section 10B of the Act, in cases where the assessee has unabsorbed losses or depreciation, brought forward from earlier years, then whether the said unabsorbed business losses / depreciation are to be adjusted from the gross total income before allowing the deduction under section 10B of the Act or the said losses or the deduction under section 10B of the Act is to be allowed in the hands of the assessee without considering the brought forward unabsorbed losses / depreciation, which can be set off against the other income of assessee. Both the authorities below had denied the claim to the ....
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....79 DTR (Bom) 356 and also by the Hon'ble High Court of Gujarat in CIT Vs. Ace Software Exports Ltd. in Tax Appeal No.687 of 2012, order dated 18.02.2013. The Mumbai Bench of Tribunal has also applied the said proposition in various cases. 29. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the ratio laid down by the Hon'ble Supreme Court in Synco Industries Ltd. Vs. AO, (2008) 299 ITR 444 (SC), wherein the issue was whether while computing the quantum of deduction under section 80I(6) of the Act, the Assessing Officer has to treat the profits derived from an industrial undertaking as only source of income in order to arrive at deduction under Chapter VI-A. The Hon'ble Supreme Court held that the gross total income under section 80B(5) of the Act, which is also referred to in section 80I(1) of the Act, was required to be computed in manner provided under the Act, which presupposes that gross total income shall be arrived at after adjusting losses of other division against profits derived from an industrial undertaking. The issue before the Hon'ble Supreme Court is at variance with the issue before us and the said ratio is not ap....
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..... 3,55,91,022/- towards outward freight, out of which sum of Rs. 2,65,57,598/- represented the provision on account of transportation charges, that was likely to be payable to M/s. General Motors, USA. The assessee was supplying goods to M/s. General Motors through G-Clancy where the expenditure on account of airborne transportation was borne by the assessee. However, after 1st April, 2006, the assessee started supplying goods directly to M/s. General Motors, transportation cost of which up to 28.02.2007 was borne by M/s. General Motors. According to the assessee, in case the transportation cost borne by M/s. General Motors would be claimed as reimbursement of cost later, the provision to that effect as a matter of prudence was made in the books of account. The Assessing Officer rejected the claim of the assessee since there was no agreement for supply in existence during the period 01.04.2006 to 28.02.2007 to that effect. Further, the liability being unascertained, could not be allowed. The Assessing Officer thus, held that the provision made amounting to Rs. 2.66 crores was to be added to the business profits shown in the Profit & Loss Account under the normal provisions and also....
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....eriod 01/04/2006 to 28/02/2007, the liability on account of transportation costs was no longer subsisting. Further, it is seen that the annual accounts of the company were finalized on 28th September, 2007 and the appellant ought to have reversed the provision in this year itself. Thus, the facts of the case clearly show that provision was made for meeting contingent liabilities and the same has to be added back to the book profits under clause (b) of Explanation 1 to Sec.115JB which clearly states that 'any amount set aside to provisions made for meeting liabilities, other than ascertained liabilities' is to be added to the book profit. In fact, no such liability existed as on 31.03.2007, much less an ascertained liability as it was known in March 2007 itself that transportation cost on sale of camshafts will be borne by General Motors for the entire period. Therefore, the Assessing Officer has rightly added back such provision made for contingent liability while computing the book profits under sec.115JB and the action of the Assessing Officer in this regard is upheld." 21. The assessee by way of additional ground of appeal No.3 has raised the issue that the addition made by t....
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.... or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or amounts of expenditure relatable to any income to which [section 10 (other than the provisions contained in clause (38) thereof) or [***] section 11 or section 12 apply; or] [(g) the amount of depreciation,] [(h) the amount of deferred tax and the provision therefor, [(i) the amount or amounts set aside as provision for diminution in the value of any asset, [(j) the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, if any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by,-]] [(i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account: Provided that where th....
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....ision for payment of tax by certain companies. For computing book profits under section 115JB of the Act, Explanation (1) under section 115JB of the Act lays down that to the net profit as shown in the Profit & Loss Account, certain adjustments are to be made i.e. by certain amounts as enlisted under Explanation (1), the net profits are to be increased by. For deciding the present appeal, reference is only being made to the relevant provision i.e. clause (c), which lays down that the amount(s) set aside to provisions made for meeting liabilities, other than ascertained liabilities, is to be added back. The Explanation further provided that certain amounts are to be reduced from the net profits as increased by the amounts referred in clauses (a) to (j). The relevant clause for deciding the present issue before us is clause (ii), under which the amount to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the Profit & Loss Account. The learned Authorized Representative for the assessee in this regard, drew our attention to the computation of book profits under sect....