Madras High Court
The Commissioner Of Income Tax vs Commissioner Of Income Tax (245 Itr 428) ... on 23 March, 2009
Bench: K.Raviraja Pandian, P.P.S.Janarthana Raja
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 23.03.2009
Coram :
THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN
and
THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA
Tax Case (Appeal) No.108 of 2009
The Commissioner of Income Tax,
Chennai-III. Appellant
v.
M/s Panasonic Home Appliances,
SPIC House, Annexe 6th floor,
88, Mount Road,
Chennai-600 032. Respondent
Appeal is filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench dated 27.06.2008 made in ITA No. 525(Mds.)/2008.
For appellant : Mr.K.Subramaniam
Senior Standing Counsel
JUDGMENT
(Judgment of the Court was delivered by P.P.S.JANARTHANA RAJA,J) The above Tax Case Appeal is filed by the Revenue against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench dated 27.06.2008 made in ITA No. 525(Mds.)/2008 by raising the following question of law:
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the provision for encashment of leave of Rs.1.19 lakhs claimed by the assessee was allowable on the basis of the Supreme Court's decision in the case of Bharath Earth Movers Ltd., Vs. Commissioner of Income Tax (245 ITR 428) since in the assesee's case the liability was only a contingent liability as clearly mentioned in the Tax Audit Report and not an ascertained liability which was capable of being quantified with reasonable certainty?"
2.The assessee is engaged in manufacture and sale of Electric Rice cookers and Mixies. The relevant assessment year is 1998-1999 and the corresponding accounting year ended on 31.03.1998. The assessee had filed its return of income on 27.11.1998 returning total income of Rs.'Nil' and the same was processed by the Assessing Officer under Section 143(1) of the Income Tax Act. Thereafter, the assessing officer noticed from the return that the assessee had debited Profit and Loss Account with provision for warranty claims amounting to Rs.5,23,197/- and had not added back for the purpose of calculation of profits under Section 115JA. The said provision for expenditure was not allowable and there was reason to believe that the income chargeable to tax had escaped assessment by virtue of allowing wrong claim of expenditure. Therefore, the assessment was reopened under Section 147 by issuing notice under Section 148 of the Act on 31.08.2004. Later, the assessment was completed on 24.03.2006 under Section 143(3) read with section 147 of the Act determining the book profit under Section 115JA at Rs.88,36,818/- and thereby arriving the deemed income at 30% of the book profit at Rs.26,51,045/-. While completing the assessment, the assessing officer has allowed the relief claimed in respect of provision made for leave encashment of Rs.1.19 lakhs. The Commissioner of Income Tax, Chennai-III, set aside the order of the assessment under Section 263 of the Income Tax Act, 1961 on the ground that it is erroneous and prejudicial to the interest of the revenue. The Commissioner, while enhancing the assessment, has directed the Assessing Officer to modify the assessment by disallowing and adding back the provision for doubtful debts and the provision for leave encashment in computing the book profits for the purpose of Section 115JA. Aggrieved by the same, the assessee had filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by following the decision of the Supreme Court in the case of BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428, allowed the claim. Aggrieved by that order, the Revenue has filed the present appeal.
3. The learned counsel appearing for the revenue submitted that the Tribunal is wrong in allowing the appeal by relying on the decision of the Supreme Court in the case of BHARAT EARTH MOVERS VS. CIT reported in (2000) 245 ITR 428. He further submitted that the Tribunal erred in not observing that in the assessee's case, the liability in question was only contingent in nature and not the ascertained/determined liability. He further submitted that the Tribunal erred in not noticing that the tax auditors had qualified the provision in the Tax Audit Report in Form 3CD as liability of contingent nature and hence, the order of the Tribunal is not in accordance with law and the same has to be set aside.
4. Heard the learned counsel appearing for the revenue and perused the materials available on record.
5. It is seen that the issue involved in this appeal is squarely covered by the judgment of the Supreme Court in the case of BHARAT EARTH MOVERS VS. CIT reported in (2000) 245 ITR 428, which is decided in favour of the assessee. Therefore, we are of the view that the Tribunal is correct in following the judgment of the Supreme Court cited supra and we do not find any error or illegality in the order of the Tribunal warranting interference. The learned counsel appearing for the revenue has not produced any material or case law to take a contrary view of the Tribunal. In these circumstances, no question of law arises for consideration. Accordingly, the Tax Case Appeal is dismissed.
raa