HINDUSTAN COMPOSITES LTD, MUMBAI v. DCIT 10(2), MUMBAI

ITA 1632/MUM/2010 | 2003-2004
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 163219914 RSA 2010
Assessee PAN AAACH0973N
Bench Mumbai
Appeal Number ITA 1632/MUM/2010
Duration Of Justice 1 year(s) 24 day(s)
Appellant HINDUSTAN COMPOSITES LTD, MUMBAI
Respondent DCIT 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 25-03-2011
Date Of Final Hearing 21-03-2011
Next Hearing Date 21-03-2011
Assessment Year 2003-2004
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) & SHRI VIJAY PAL RAO (JM) I.T.A.NO.1632/MUM/2010 (A.Y. 2003-04) M/S. HINDUSTAN COMPOSITES LTD. B-11 PARAGON CONDOMINIUM PANDURANG BUDHKAR MARG WORLI MUMBAI-400 013. PAN : AAACH0973N VS. DY. COMMR. OF INCOME-TAX-10(2) R.NO.432 4 TH FLOOR AAYKAR BHAVAN M.K.RD. MUMBAI-20. APPELLANT RESPONDENT APPELLANT BY SHRI R.S. GORADIA. RESPONDENT BY SHRI S .T. BIDARI. O R D E R PER S.V. MEHROTRA JM : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-21 MUMBAI DATED 04-01-2010 IN RELATION TO ASSTT. YEAR 2003-0 4. 2. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INC OME DECLARING LOSS OF RS.87 10 407/- AND BOOK PROFIT U/S.115JB AT RS.2 11 140/-. THE AO NOTICED THAT THE ASSESSEE HAD DEBITED IN THE P & L A/C. AN AMOUN T OF RS.1 06 29 447/- ON ACCOUNT OF PROVISION FOR GRATUITY. HOWEVER THE SAM E WAS NOT ADJUSTED WHILE COMPUTING THE BOOK PROFIT TREATING THE SAME AS PROV ISION FOR ASCERTAINED LIABILITY AS PROVIDED UNDER CLAUSE (C) TO EXPLANATION 1 OF S EC. 115JB. THE AO ADDED THE SAME TREATING IT AS UNASCERTAINED LIABILITY. BEFOR E THE LD. CIT(A) IT WAS INTER ALIA SUBMITTED THAT THE PROVISION TOWARDS GRATUITY LIABILITY WAS AN ASCERTAINED LIABILITY AND THEREFORE OUTSIDE THE SCOPE OF ADJUST MENT MADE TO THE BOOK PROFIT. THE ASSESSEE RELIED ON THE DECISION OF THE BOMBAY H IGH COURT IN THE CASE OF CIT ITA NO.1632/M/10 HINDUSTAN COMPOSITES LTD. . 2 V. ECHJAY FORGINGS. THE ASSESSEE ALSO RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF APOLLO TYRES (255 ITR 273). THE LD. CIT (A) TAKING NOTE OF THE FACT THAT AS AGAINST THE PROVISION OF RS.1 06 29 447/- THE ACTUAL PAYMENT OF GRATUITY MADE TO THE RETIRING EMPLOYEES WAS ONLY RS.57 57 67 9/- OBSERVED THAT THERE WAS VAST DIFFERENCE BETWEEN THE PROVISION MADE AND THE ACTUAL EXPENDITURE INCURRED AND THEREFORE IT COULD NOT BE SAID THAT TH E PROVISION WAS BASED ON ACTUARIAL VALUATION. HE DIRECTED THE AO TO MAKE ADD ITION TO THE EXTENT OF NET PROVISION BEING RS.48 71 768/- ONLY AND THUS PARTLY ALLOWED THE ASSESSEES APPEAL. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISION FOR GRATUITY HAS BEEN MADE ON THE BASIS OF ACTUARIAL VALUATION A ND THEREFORE IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. ECHJAY FORGINGS P. LTD. (251 ITR 15) IT HAS TO BE TREATED AS ASCE RTAINED LIABILITY. HE REFERRED TO PAGE B-25 OF PAPER BOOK WHEREIN THE REPORT OF ACTUA RY DATED 31-03-2003 IS CONTAINED. IN THIS REPORT THE ACTUARIAL VALUE OF G RATUITY LIABILITY AS AT 31-03-2003 HAS BEEN DETERMINED AT RS.2 49 62 810/-. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE CASE. IT IS NOT DISPUTED THAT THE PRO VISION FOR GRATUITY LIABILITY HAS BEEN MADE ON THE BASIS OF ACTUARIAL VALUATION AND T HEREFORE IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF ECHCHJAY FORGINGS P. LTD. (SUPRA) IT IS TO BE TREATED AS ASCERTAINED LI ABILITY AND THEREFORE COULD NOT BE ADDED BACK FOR DETERMINING THE BOOK PROFIT IN VIEW OF CLAUSE (C) OF THE EXPLANATION TO SEC. 115J. MERELY BECAUSE THE ENTIRE LIABILITY HAD NOT BEEN DISCHARGED DURING THE RELEVANT ASSESSMENT YEAR ITSE LF IT DOES NOT FOLLOW THAT THE PROVISION HAD NOT BEEN MADE ON THE BASIS OF ACTUARI AL VALUATION. THIS GROUND IS ACCORDINGLY ALLOWED. ITA NO.1632/M/10 HINDUSTAN COMPOSITES LTD. . 3 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THE 25TH DAY OF MARCH 2011 . SD/- SD/- (VIJAY PAL RAO) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 25TH MARCH 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-21 MUMBAI. 4 CIT MC-X MUMBAI. 5.DR H BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA NO.1632/M/10 HINDUSTAN COMPOSITES LTD. . 4 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 21-03-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 22-03-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER