2017 (8) TMI 132

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....e Act with a direction that if finally disallowance under Section 14A is to be made then the amount thereof in no case shall exceed the exempt income earned by the assessee during the year under consideration? 2. To be heard with Tax Appeal No. 548 of 2017. 3. We notice that the Revenue has proposed one more question which reads as under: Whether on the facts and in the circumstances of the case, the ITAT was right in law and on the facts in dismissing the grounds raised by the revenue, without appreciating the fact that such types of unascertained liabilities are covered by Explanation (c ) of Section 115JB of the Act and therefore the same was required to be added back for computation of book profit of the assessee? 4. C....

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...., other than ascertained liabilities; In other words, if an amount is specified for provision which is for meeting with the liabilities not ascertained such provision so made shall have to be added back to the book profit of the company. Put it differently, if such provision is made for ascertained liability, no such addition back shall be made. In this context, the Tribunal was called upon to decide whether the assessee having made provision of Rs. 5,10,000/- towards gratuity would be covered under Clause (c) to Explanation 1 to Section 115JB of the Act. The Tribunal relied on the decision of the Bombay High Court in case of Commissioner of Income Tax Vs. Echjay Forgings Pvt. Ltd. reported in 251 ITR 15 and confirmed the view of t....

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.... 19. Likewise in case of Metal Box Company of India Ltd. Vs. Their Workmen reported in 73 ITR 53, the Apex Court examined the question whether it is legitimate in such a scheme of gratuity to estimate the liability on an actuarial valuation and deduct the same in profit and loss account while working out the net profit of a company and further whether such appropriation amounts to a reserve or provision. The Supreme Court held that an assessee can while working out its net profits, provide from its gross receipts his liability to pay a certain sum towards gratuity liabilities of the employees. If such liability is properly ascertainable and it is possible to arrive at proper discounted present value. 20. In case of Rotork Controls ....