TaxTMI 
TaxTMI 
2022 (3) TMI 538
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....m? (ii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in not allowing the entire claim for leave encashment and post retirement medical benefit which has been determined as an accrued liability and computed on the basis of actuarial valuation?" Question (i) 3. The background facts are that the Appellant-Assessee is a Government of India enterprise engaged in the business of mining, manufacturing, production, generation and dealing in Bauxite Alumina, Aluminium and Power and operating under the Ministry of Mines, Government of India. The Assessee follows a mercantile system of accounting and its accounts are maintained on accrual basis. 4. The Profit and Loss Account (P&L Account) of the Assessee is drawn up in accordance with the provisions contained in Parts II and III of Schedule VI to the Companies Act. After the accounts are scrutinized and certified by the statutory auditors as well as by the Comptroller and Auditor General of India (C&AG), it is approved by the Appellant in its general meeting and thereafter filed with the Registrar of Companies as required under the Companies Act, 1956. 5. It is not in dispute that f....
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....1187 of 2005 (Commissioner of Income Tax Delhi-IV, New Delhi v. M/s. DCM Sriram Consolidated Ltd.) to urge that power profit cannot be determined by excluding the component of power generated and consumed by the Assessee. On the other hand, Mr. Satpathy, learned Senior Standing Counsel appearing for the Department-Respondents supported the view of the CIT (A), which has been endorsed in toto by the ITAT. 11. The above submissions have been considered. The CIT (A) has in the order dismissing the Assessee's appeal gone by the logic of the Assessee not being able to sell power to itself and derive profit therefrom. It was held that "the words 'derived by' used in Clause (iv) cannot have a wide import so as to include any income which can in some manner be attributed to the business. The profit derived by the eligible business has to mean profit and gains "includible in the computation of total income chargeable to tax." It was held that "it will be difficult to hold that the appellant has derived profit from internal consumption of power." 12. The ITAT has adopted the above reasoning in toto and observed that Section 115JA(2)(iv) of the Act "does not mean that a person can sell to h....
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....ount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; (g) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (g) is debited to the profit and loss account, and as reduced by,- (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 [but ending before the 1st day of April, 2001] shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or (iii) the amount of loss brought forward or unabsorbed depreciation, which....
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.... 115JA of the Act. 11.1 The aforesaid principle as evolved by the Supreme Court in the case of Tata Iron & Steel Ltd (supra) has been applied by it in a later decision entitled Textile Machinery Corporation Ltd. v. CIT, West Bengal :107 ITR 195(SC) as also, by a Division Bench of this Court in CIT v. Orissa Cement Ltd :254 ITR 412 (Del). 12. In view of the ratio of the judgments of the Supreme Court referred to above, i.e., Tata Iron & Steel Ltd (supra), Textile Machinery Corporation Ltd (supra), as well as, that of the Division Bench of this Court in Orissa Cement (supra) it is quite evident that assessee's CPPs can as a matter of principle derive profits which is in point of fact embedded in the ultimate profit earned on the sale of the final product." 16. On the issue whether the Assessee could be denied the power profit as computed by it on the ground that power generation was not its main line of business, the Delhi High Court held that "the term business which prefixes generation of power in Clause (iv) of the Explanation to Section 115JA is not limited to one which is prosecuted only by engaging with an outside third party. The meaning of the word 'business' ....
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.... the Assessee placed reliance on the decision of the Supreme Court dated 23rd September, 2008 in Civil Appeal No.5800 of 2008 (Commissioner of Income Tax-IV, Delhi v. M/s. HCL Comnet Systems & Services Ltd.) to urge that since Chapter XII-B contains Special provisions relating to companies for which 'Deemed income' is to be determined under Section 115JA for the purposes of MAT, the manner of treating certain liabilities on accrual basis for using the actuarial system should be accepted as 'ascertained liability.' 21. Mr. T. K. Satpathy, on the other hand, referred to Clause (c) of the Explanation below Section 115JA(2) of the Act and submitted that 'ascertained liabilities' i.e. only the amount actually paid will be eligible for deduction from the profits on which MAT has to be paid. He accordingly submitted that the AO was justified in allowing only such amount that was actually paid on this score in the previous year and not the entire amount as claimed by the Assessee. 22. Having considered the above submissions, the Court is of the view that the reasoning of the Supreme Court in HCL Comnet Systems & Services Ltd. (supra) should prevail. The Supreme Court there was considerin....