TaxTMI 
TaxTMI 
2016 (5) TMI 1519
X X X X Extracts X X X X
X X X X Extracts X X X X
....normal provisions of the Act: Income as per return (-) Rs. 135,54,53,820 Add: (i) Preliminary expenses disallowed 8,02,000 (ii) Expenditure on glow sign/neon sign 11,83,07,422 (iii) On a/c of determination of Arm's Length Price for international Transaction 5,40,589 Rs. 11,96,50,011 Less: Depreciation claim allowed to the assessee Rs. 3,42,32,624 Total income under normal provision of the Act (-) Rs. 127,00,36,433 B. Income under section 115JB of the Act: Book profit as per return (-) Rs. 143,04,28,448 Add: (i) Provision for gratuity 3,49,10,315 (ii) Provision for leave encashment 1,79,69,702 (iii) Preliminary expenses 8,02,000 (iv) Expenditure on glow sign/neon sign 11,83,07,422 Rs. 17,19,89,439 Total income under section 115JB (-) Rs. 125,84,39,009 3. Ld. CIT(A) partly allowed the assessee's appeal. 4. Being aggrieved with the order of ld. CIT(A), the assessee is in appeal before us and has taken following grounds of appeal: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, the same is dismissed as not pressed. 6. Brief facts apropos ground no. 2 are that during the year the assessee had created a provision for gratuity of Rs. 34,910,315/- and for leave encashment of Rs. 17,969,702/-. These provisions were added back by assessee while computing income under normal provisions of the Act. However, the same were not added while computing the book profit u/s 115JB. The assessee submitted that the provision for gratuity and leave encashment were created scientifically on the basis of actuarial valuation and, therefore, in the nature of ascertained liability. The assessee had relied on the case laws noted by the AO in the assessment order. The AO, after considering the assessee's submissions and examining the report of actuarial valuer, concluded that the provision for gratuity and leave encashment were based on estimates and presumed figures and were uncertain as far as their quantum was concerned. He, accordingly, added back both the provisions for computing book profit u/s 115JB. 7. Ld. CIT(A), following the order of the Tribunal for A.Y. 2001-02 in assessee's own case, vide ITA No. 5722, 5663, 4989/Del/2004 dated December 31, 2009, upheld th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial placed before us. It has been the contention of the assessee right from the beginning that a cumulative sum of Rs. 97,84,178/- (Rs. 68,23,350/- on a/c of gratuity and Rs. 29,60,828/- on account of leave encashment) was debited to the Profit & Loss Account. Out of the said sum assessee itself has added back the gratuity of Rs. 68,23,350/- while computing the income under the normal provisions and thus, effectively the only amount remained to be debited to the P&L account was a sum of Rs. 29,60,828/-. If the amount was not debited to P&L account during the year under consideration, then the same is not subject to adjustment made while computing book profit u/s 115JA. To that extent there could be any dispute. Therefore, it has to be held that to the extent the amount which was not debited during the year under consideration to the profit and loss account relating to schedule 10 in the balance sheet of the assessee, the addition cannot be made for computing book profit u/s 115JA. It is the case of the assessee that provision of gratuity of Rs. 68,23,350/- was though debited to the P&L account but it was again added while computing the income under the normal provisions. Copy of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the record, therefore, the provisions should not be treated as unascertained liability. This report has not been relied upon by the revenue authorities below. There are specific defect in the report. Taking into consideration the findings of the ITAT in AY 2000-01, defects in the report and the claim of assessee that in assessment year 2000-01, a miscellaneous application has already been filed. We deem it appropriate to set aside this issue to the file of the AO for re-adjudication. Assessee will submit the actuarial report afresh to the AO. AO shall consider the order of the ITAT in AY 2000-01 also. This ground of appeal is partly allowed." 9. Ld. Counsel further referred to page 171 and 172 of the Paper Book, wherein the Hon'ble High Court has admitted the following substantial questions of law for adjudication: 1. "Whether the Income Tax Appellate Tribunal was justified in law in holding that an amount of Rs. 68,23,350/- representing the liability towards gratuity and payable to employees and duly debited in the Profit & Loss account represented an unascertained liability so as to enhance the book profit in terms of provisions of Clause (c ) of Explanation to Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Tribunal in assessee's own case. 15. The facts as noted by the ld. CIT(A) in his order are as under: The assessee is a subsidiary of Pepsico Inc., USA and is mainly involved in the production of aerated and non-aerated soft drink beverages and snack food. It also exports guar gums, pet chips, rice, peanut butter and chilly paste etc. to overseas markets. During the year under consideration, the assessee exported gua gums and pet chips to its Associated Enterprise, PWT. The assessee undertook the export of guar gums and pet chips to its AE in order to meet its exports turnover obligations to help assessee in achieving Star Export House Status. AE-PWT further sold the same guar gum to unrelated enterprises outside India. The PWT was selected as tested party for the economic analysis of this transaction. TNMM was adopted for TP analysis with OP/Sales as relevant PLI. The assessee claimed that the results from the economic analysis conducted by the assessee provided evidence that both the pricing basis itself of the international transactions that impacted the profitability of the Company and the outcome of that pricing, i.e., the profitability were at arm's length and hence satis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AT Delhi Bench in the case of DCIT vs. Global Vantedge P. Ltd. in ITA Nos. 1432 & 2321/Del/2009 and 116/Del/2011 (supra), held that adjustment on account of arm's length price of international transactions cannot exceed the amount received by the Associated Enterprises from the customer and the actual value of international transactions i.e. amount received by the assessee in respect of international transactions. The said decision of the ITAT Delhi Bench has been affiremed by the Hon'ble Jurisdictional High Court vide order dated 14.03.2013 in ITA Nos. 1828 & 1829/2010 and 1254/2011 against the said order of the Hon'ble High Court. The Special Leave Petition (SLP) of the Revenue had been dismissed by the Hon'ble Surpeme Court vide order dated 02.01.2014 in CC No. 22166 of 2013. The ITAT Delhi Bench, 'I-2', New Delhi in the case of HCL Technologies BPO Services Ltd. vs. ACIT, CC-2, New Delhi (supra) by following the aforesaid decision of the ITAT in the case of DCIT vs. Global Vantedge Pvt. Ltd. has dismissed the appeal of the Revenue. In the present case also the assessee had not gained, the AE had not paid anything and the commodities were sold to the AE at the same price at whic....