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Enterprises Ltd. vs. PCIT] A.Y. 2011-12 -3-

4. The Ld. PCIT noted that the assessee had provided for DPCO (The Drugs (Price Control) Order) liability in its book amounting to Rs.2,62,28,601/- on the basis of amount pre-deposited as directed by the Hon'ble Gujarat High Court and another Rs.2,62,28,601/- provided as DPCO liability on the basis of Bank Guarantee given as directed by the Hon'ble High Court. He noted that the Hon'ble Supreme Court had allowed the assessee's civil appeals against the judgment of the Hon'ble Gujarat High Court and had ordered to execute a guarantee favoring the bank in respect of the dues in the Suit filed by the Banks, which was pending before the Debt Recovery Tribunal (in short 'DRT'). Basis the aforesaid, the Ld. PCIT found that the aforestated liability relating to DPCO having been created for bank guarantee in response to the Suit filed by the Banks, they were not ascertained as at the close of the impugned year i.e. 31.03.2011 and, therefore, the entire amount of such liability i.e. Rs.5,24,57,202/- (2,62,28,601 + 2,62,28,601) was to be added back to the books profit u/s.115JB of the Act.

 The Drugs (Prices Control) Order (DPCO) came into force on 06.01 1995. DPCO was notified by the government to regul ate the equitable distribution and increasin g supplies of bulk drugs specified in the first schedule of th e DPCO and making them available at a fair price, from different man ufacturers, after making such inquiry as it deems fit, from time to ti me by notification in the official gazette, being a maximum price at which such bulk drugs shall be sold.

9. Ld.DR fairly agreed that the ITAT had held the DPCO liability of Rs.5.24 Crores to be an ascertained liability for the purposes of computing its income as per the normal provisions of law.

Enterprises Ltd. vs. PCIT] A.Y. 2011-12 -9-

10. In the light of the above fact alone, we hold, there remains no error in the order of the AO for having allowed claim of DPCO liability without examining its character, as held by the Ld.PCIT. The apprehension of the Ld.PCIT that the DPCO liability was an unascertained liability which ought not to be have been allowed for computing Book Profits of the assessee, now no longer remains since the said liability has been held to be ascertained liability by the ITAT eligible for deduction u/s 37(1) of the Act while computing income as per normal provisions in the case of assessee.

transfer of two divisions of the assesses undertaking. Even before us the assessee has demonstrated the DPCO issue to be still pending as on date before the Hon'ble High court.

13. It is amply clear therefore that the Ld.PCIT's finding of the assessee having been wrongly allowed deduction of an unascertained liability was based on incorrect appreciation of facts. For this reason also, his finding of error in the order of the AO is not sustainable.

14. In view of the above, we hold, that there is no case with the Ld. PCIT to hold the assessment order to be erroneous for having allowed deduction of DPCO liability for computing Book Profits of the assessee u/s.115JB of the Act without verifying its character whether ascertained or unascertained, since admittedly the AO's order is in consonance with that of the ITAT in the case of the assessee holding the DPCO liability ascertained and hence allowable for deduction u/s 37(1) of the Act for computing income as per normal provisions of law. Even otherwise, considering the decision of the ITAT in the case of the assessee, the AO, we find, has taken a plausible view on the issue and for that reason also there cannot be said to be any error in the order of the AO allowing the claim of DPCO liability while computing the assessee's books profits u/s.115JB of the Act.