TaxTMI 
TaxTMI 
2020 (2) TMI 981
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....iness liability has definitely arisen during the financial year 2008-09, the Ld. CIT(A) was not justified in deleting the addition of Rs. 2,82,00,000/- made by the AO in the assessment, following disallowance of the claim of provision made by the assessee towards salary liability of employees pending pay revision. 4. Having regard to the specific comments by the Statutory Auditor, under point No. 9.3 of the 'Notes on Account' referred to by the AO at Page-10 of the assessment order, and in absence of any evidence produced by the assessee to establish that a business liability has definitely arisen during the financial year 2008-09, the Ld. CIT(A) was not justified in deleting the disallowance of Rs. 2,82,00,000/- towards a contingent liability. 5. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceedings. 3. Brief facts of the case are that the assessee is an undertaking of Government of Odisha and derives income from corporate services and mining business. The assessee filed its original return of income electronically on 24.09.2009 disclosing the total income at Rs. 53,50,20,000/- which was later....
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....order, the assessee appealed before the CIT(A) and the CIT(A) deleted the addition of Rs. 282.73 lakhs on account of admissibility of provisions created for unforeseen and unascertained expenditure and confirmed the addition made on account of admissibility of claim of loan and advance written off at Rs. 50 crroes. Accordingly, the CIT(A) partly allowed the appeal of the assessee. 4. Against the deletion of addition made on account of admissibility of provisions created for unforeseen and unascertained expenditure, the Revenue is in appeal and the assessee is in appeal against the confirmation of addition on account of admissibility of claim of loan and advance written off before the Income Tax Appellate Tribunal. 5. Before us, ld. DR before us relied on the order of Assessing Officer and submitted that when the assessee has not been able to establish that a business liability has definitely arisen during the financial year 2008-09, the CIT(A) was not justified in deleting the addition of Rs. 2,82,00,000/- made by the AO in the assessment, following disallowance of the claim of provision made by the assessee towards salary liability of employees pending pay revision. It was also ....
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....r. Therefore, ld. AR submitted that the appeal of the Revenue being devoid of merits, deserves to be dismissed. 7. After carefully considering the submissions of both the sides and perusing the entire material available on record along with the orders of authorities below, we find that during the course of assessment proceeding, the AO noticed that the assessee has made a provisions of Rs. 282.73 lakh towards revision of pay and debited the same to the profit and loss account of the year and the same being purely a contingent and unascertained liability, therefore, the AO stated that it was not admissible as a deduction for computing the income for the relevant assessment year. However, the CIT(A) deleted the impugned addition relying on the decision of Haryana Agro Industries Corporation Ltd. (2017) 391 ITR 127 (P&H) and Bharat Heavy Electrical Ltd. 245 ITR 428 (Delhi), held that the provision towards pay revision debited to the P&L Account is an ascertained liability crystallized in the year under appeal and the same is an admissible deduction. The relevant observations of the CIT(A) in this regard are as under :- "Decision :The Hon'ble Apex Court in the case of Meal Box C....
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....poration Ltd. (2017) 391 ITR 127 (P&H) HC and Bharat Heavy Electrical Ltd. 245 ITR 428( Delhi), it is held that the provision towards pay revision debited to the P&L Account is an ascertained liability crystallized in the year under appeal and hence it is an admissible deduction. This ground of appeal of the appellant is allowed." From the above observations of the CIT(A), we find that the CIT(A) while dealing with the issue has observed that the Board of Directors of assessee company on 323rd meeting held on 23.12.2008 has constituted a committee to examine and recommend the revision of sale of pay of the employees of IKIWL and IFCAL w.e.f.01.01.2006 in the line with State Government employees. The committee has mentioned that the corporation is in a position to bear the additional financial burden and the amount payable in F.Y.2008-2009 is crystallized when the Board of Directors of assessee company and the committees of the Board had taken the decision on 11.02.2009 & 16.02.2009 on the basis of ascertained liabilities to pay arrear salary to the employees as per the recommendation of 6th Pay Commission w.e.f. 01.06.2006. Therefore, the CIT(A) has rightly allowed the deduction ....
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....onourable Income Tax Appellate Tribunal (ITAT), Cuttack, and the assessee's own case for the AYs. 1989-90 & 1990-91. The operating part of the order of the ITAT, Cuttack Bench, contained in page no.- 14, para-20 of the order is as under. "Object set out in the memorandum covers all activities for promotion of industrial development in Odisha. Loans and advances, promotional activities etc, in our opinions, are not outside of the objects of assessee's company as per its Memorandum of Association and hence, the loss arising in writing off the loans and advances is liable to be treated as loss incurred in the course of carrying on its business and allowable as deduction in the years of consideration. In Para-18 and 19 of the ITAT order" The Honourable Members have vividly discussed about the subsidiary companies and reasons forgiving loan & advances and also reasons for write up off advances. The Learned Assessing Officer while framing his order in para - ii, discussed about the loan amounting to Rs. 50.00 crore, advance by the appellant for one of its subsidiary (IKIWL) was written off as the certainty of realization was doubtful on account of continuous loss because of g....
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....sion of the Honourable ITAT, Cuttack. It is to be noted that the survival of its subsidiary is very much the business of the appellant as the goodwill and creditworthiness of the subsidiary is the same as those of its own. The technical distinction between the two is limited only to the purposes of the Companies Act. For the outside world, both the parent company and the subsidiary company are one and the same. For example, no bank or businessman will do business with the subsidiary without the guarantee of the parent company. The purposes of both are concurrent. This is especially true of a losing and sick subsidiary vis-a-vis its wholly owned parent company. In the case of this very appellant, the same question came up for decision by the ITAT in the assessment years 1989-90 and 1990-91. By common order dt.25.09.1997, the Tribunal has decided the issue in favour of the assessee relying on the decisions mentioned at Para - 14, Page no. - 7 of the order which, we believe, has become final". 5. The Learned Commissioner of Income Tax (Appeal), while disposing appeal discussed in detail the Income Tax Appellate Tribunal (ITAT) order ITA No. ITA No,69&70(CTK) of 1994, 25.09.1997,....
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....f Income Tax (Appeal) without understanding the principle of accounts, has loosely commented that advance to IKIWL written off does not match with the amount actually written off. The first allegation of the Learned Commissioner of Income Tax (Appeal) is " On perusal of the Schedule - 8 of the Balance Sheet, it transpires that the opening and closing balance under the head Unsecured considered doubtful is Rs. 20,18,01,000/- meaning thereby that the corresponding contra entry of Rs. 50,03,67,000/- has not been shown in Balance Sheet under the above head". It is explained to him that advance given to IKIWL has been written off without making any provision by crediting to the loan account. He further commented that in Schedule- 8, loan and advance, given to subsidiaries were having opening balance of 98,54,97,000/- and the closing balance was Rs. 93,87,80,000/-, and thus, the total reduction was Rs. 4,67,17,000/-. He concluded that it cannot be said that the alleged sum was written off. This comment of Learned Commissioner of Income Tax (Appeals) is purely on surmise and imagination. In Schedule-8, relating to advance made to number of subsidiaries, the opening and closing balance rel....
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....ot applicable basically for infirmities, notice in writing off the loan and advance to the subsidiary. The question of res judicata was not part of the order of the Learned Commissioner of Income Tax. In the written submission, which is reproduced in the order of the Learned Commissioner of Income Tax (Appeal) in page -10, referred the case of Delhi Tribunal in the case of Patanjali Yoga Pitha vs ADIT where, it is pronounced that though the principle of resjudication does not apply to Income Tax proceeding, but Revenue Authorities are bound to follow rule of consistency in Income Tax proceeding where facts are remaining same under the principle that "judicial propriety requires consistency". Delhi High Court in its order has cited plethora of judgments starting from judgment of Supreme Court to Odisha High Court. Therefore, the Learned Commissioner of Income Tax (Appeal) ignoring the judgment cited, concluded that principle of res judicata shall apply to the case of the appellant. The above issues were argued at the time of hearing on 14.08.2018. The Learned Commissioner of Income Tax (A) in prima facie respecting two nos of ITAT appeal orders bearing ITA No,69&70(CTK) of 1994 25....
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....rts with opening balance of Rs. 86,39,42,458/-. In page no. - 14 of ledger account on 31st March 2009, Rs. 50.00 crore is written off and in the same page the closing balance stands at Rs. 80,83,02,337/-. Therefore there is no accounting mistake in write off of advance given to IKIWL. The same may kindly be accepted. Moreover, in the IKIWL account in other income head contained in schedule - 12, given in the note no. - 6, page no. - 73 of the account statement of IKIWL discloses written off of amount of Rs. 50.00 crore. 12. On the other hand, ld. DR relied on the orders of both the authorities below. 13. After hearing both the sides and perusing the entire material available on record along with the observations made by both the lower authorities in their respective orders and the paper book filed by the assessee, we find that during the course of assessment proceedings the AO found that the allowance of doubtful loans/advances in the scrutiny assessment was irregular and therefore, he disallowed the inadmissible claim of the assessee. The CIT(A) observed that the total income in normal computation is higher than the book profit, therefore, the provisions of Section 115JB of ....