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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI JASON P.BOAZ
Date of hearing : 20/01/2015. Date of pronouncement: 30/01/2015. O R D E R Per Smt. P.MADHAVI DEVI, JM:
This is an appeal filed by the assessee against the order of the CIT(A)-I, Bangalore, dated 12/09/2011 for the assessment year 2008-09. This appeal was initially heard and disposed of by an order dated 16/01/2013. However, by order dated 10/10/2014 in Misc. Petn. No.24/Bang/2014 the appeal was recalled for hearing on merits.
M/s.Kudremukh Iron Ore Co. Ltd. Page 2 of 7 2. During the course of hearing, the learned counsel for the assessee submitted that the assessee is a public sector undertaking and is carrying on the business of manufacture of iron ore concentrates and pellets. It was submitted that for the relevant assessment year 2008-09, the assessee filed its return of income on 19/09/2008 declaring ‘nil’ income under normal provisions of the Income-tax Act, 1961[hereinafter referred to as the Act'] and Rs.3,92,71,808/- as book profits under the provisions of 115JB of the Act. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer (AO) made various additions and disallowances to the income returned as well as book profits computed u/s 115JB of the Act. Under the normal provisions of the Act, the income assessed was Rs.1,31,52,91,845/- and the book profits u/s 115JB were determined at Rs.1,53,26,05,723/-. Since income under normal provisions was computed without considering the set off of brought forward losses, tax payable as per normal computation was more than the MAT payable and hence it was adopted.
Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A), who by order dated 25/01/2011 partially allowed the appeal by deleting the additions made to the returned income to the extent of Rs.1,46,52,581/- and confirmed the balance addition and also M/s.Kudremukh Iron Ore Co. Ltd. Page 3 of 7 confirmed the addition made to the book profit u/s 115JB of the Act.
Aggrieved, the assessee preferred an appeal before the Tribunal. The Tribunal, vide orders dated 12/09/2011, dismissed the appeal holding that the tax calculated under the normal provisions is more than that of the MAT and therefore the issue raised in the appeal with reference to the re-computation of book profit u/s 115JB is only academic and no adjudication is called for. Mean while, the AO passed an order giving effect to the CIT(A)’s order and after allowing set off of brought forward losses resulting in ‘nil’ income under normal provisions of the Act, the tax liability was computed u/s 115JB of the Act. Bringing this fact to the notice of the Tribunal, MP No.24/Bang/2014 was filed and this Tribunal has recalled the order of the Tribunal for fresh hearing.
The issues raised in this appeal are against the computation of book profit u/s 115JB by adding back i) Provisions for leave encashment, ii) Leave travel concession, and iii) Gratuity etc., treating these provisions as provisions for unascertained liability. It is the case of the assessee that these provisions are made on actuarial valuation and are not unascertained liability and therefore adjustment to the book profit u/s 115JB of the Act is M/s.Kudremukh Iron Ore Co. Ltd. Page 4 of 7 not in accordance with law. Before the CIT(A), the assessee submitted that the employees benefits such as gratuity, leave encashment and leave travel concession are provided in the books as per accounting standard 15 and that they are arrived at on actuarial valuation and calculated on a scientific method. The assessee also submitted the factual details in respect of various provisions made. The CIT(A), however, held that the details do not show the scientific or reliable ascertainable method for making the provisions. Therefore, he confirmed the order of the AO.
The learned counsel for the assessee Shri H.N.Khincha, has filed before us additional evidence which are the copies of the actuarial valuation for the provisions and has sought admission of the same and re-consideration by the assessing authority. An affidavit of the Director (Finance), has been filed in support of the said application for admission of additional evidence. It is stated therein that since the AO or the CIT(A) had not called for them, the actual valuation reports were not filed before the lower authorities. The learned counsel for the assessee submitted that this evidence goes to the root of the matter and satisfies the conditions of making the provision on scientific method for ascertained liability and should therefore be admitted and considered for adjudication of the issue.
M/s.Kudremukh Iron Ore Co. Ltd. Page 5 of 7 7. At the time of hearing, the learned Departmental Representative Shri Patanjali had brought to our notice that the figures given by the assessee before the CIT(A) were at variance with the figures given by the assessee in the chart before us. We, therefore, directed the learned counsel for the assessee to ascertain and re-concile the figures.
7.1 In reply, the assessee has filed a letter dated 19/01/2015 stating that the details of provisions given in the chart filed before us are supported by actuarial valuation report and therefore are correct and that on re-conciliation it is found that the figures furnished by the assessee before the CIT(A) are not correct and it is not possible to figure out as to from where the figures as given to the CIT(A) were taken out. It is also stated that the figures as per chart now filed are correct figures which are re-conciliable both with the accounts and actuarial report. It is also further stated that the actuarial valuation report with regard to leave travel concession and long term compensated absence do not constitute additional evidence as the same were available with the CIT(A) but the actuarial valuation report with respect to gratuity and sick leave under the head leave encashment only constitute additional evidence and prayed that the same may be admitted and remanded to the AO for re-consideration.
M/s.Kudremukh Iron Ore Co. Ltd. Page 6 of 7 7.2 The learned Departmental Representative, however, opposed the admission of additional evidence.
Having regard to the rival contentions and the material on record, we find that the AO and the CIT(A) have made the disallowances and additions of various provisions for computing book profit u/s 115JB of the Act under the premise that these provisions are made for unascertained liabilities. However, it is not clear from records as to whether the AO or the CIT(A) have verified the records of the assessee or the actuarial valuation report to ascertain whether these provisions are for ascertained or unascertained liabilities. As the assessee has filed the actuarial valuation reports for the various provisions made in the books and since that these evidences relate to the root of the matter, we deem it fit and proper to admit the additional evidence and remand the issue to the file of the AO for verification of the same and de novo consideration in accordance with law and the judicial precedents on the issue. Grounds No.1 and 2 are allowed.
As regards the ground No.3, we remand this ground also to the file of the AO for reconsideration of the same in accordance with law.
M/s.Kudremukh Iron Ore Co. Ltd. Page 7 of 7 10. In the result, the assessee’s appeal is allowed for statistical purposes.