Ita/1603/2009 Of The Commissioner Of Income Tax, Cochin v. Cochin Shipyard Ltd,Kochi

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 24TH DAY OF MAY 2018 / 3RD JYAISHTA, 1940 ITA.No. 1603 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 382/COCH/2006 of I.T.A.TRIBUNAL,COCHIN BENCHDATED 27-02-2009 APPELLANT(S)/RESPONDENT/REVENUE THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.PKR MENON, SR. COUNSEL, GOVERNMENT OF INDIA (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S):/APPELLANT/ASSESSEE M/S.COCHIN SHIPYARD LTD, PERUMANOOR PO, KOCHI-15. BY ADV. SRI.P.GOPINATH BY ADV. SRI.P.BENNY THOMAS BY ADV. SRI.K.JOHN MATHAI BY ADV. SRI.E.K.NANDAKUMAR (SR.) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24-05-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A :COPY OF REASSESSMENT ORDER 143(3) READ WITH SECTION 147 DATED 28.7.2005 FOR THE ASSESSMENT YEAR 2001-02. ANNEXURE-B :COPY OF ORDER DATED 28.3.2006 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEXURE-C :COPY OF ORDER DATED 27.2.2009 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA NO.382/COCH/2006. //TRUE COPY// jg-12/6 PS TO JUDGE. K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA No.1603 of 2009 ------------------------------------------- Dated this the 24[th] day of May, 2018 J U D G M E N T Vinod Chandran, J. The issue agitated in the appeal relates to addingbackofprovisionsforguaranteerepairs(Rs.18,50,000/-)andliquidateddamages(Rs.31,68,187/-). The Assessing Officer found thatthese are all provisions which are to be added back asprovided under Explanation 1 (c) of Section 115JB (2)of the Income Tax Act, 1961, which reads as “the amountor amounts set aside to provisions made for meetingliabilities, other than ascertained liabilities”. TheTribunal went on the premise that the liquidateddamages is an ascertained liability, the same being acontractual liability. Insofar as the provision forguarantee repairs, two decisions were relied on withrespect to warranties and it was held that that thesame too was an ascertained liability. 2.The learned Senior Counsel appearing for theRevenue submits that these are not ascertainedliabilities, especially since only provisions were made. The delay in execution of a contract; on whichalone the liquidated damages would be payable is a mereanticipated liability and there cannot be said to beany ascertained liability. The provision for guaranteerepairs also is not ascertained, since there is noreference to any claims having been made. 3.The learned counsel appearing for therespondent/assessee would, however, point out thatthese are all ascertained liabilities for whichprovisions have been made, but payment has not beeneffected for one reason or another. 4.We are of the opinion that factually there hasnot been examination of the nature of the liabilitiesby any of the authorities. The Assessing Officer hasmerely added back the provisions assuming that it isnot an ascertained liability. In such circumstances,necessarily, facts would have to be gone into and eachof the provisions made would have to be examined by theAssessing Officer. It needs also to be verified as tothe payments made subsequently and whether the sametallies with the provision. If it does not, definitelythere can be no claim made in the subject year and the expenses can be claimed only in the relevant year inwhich the payment was effected. 4.We are of the opinion that factually there hasnot been examination of the nature of the liabilitiesby any of the authorities. The Assessing Officer hasmerely added back the provisions assuming that it isnot an ascertained liability. In such circumstances,necessarily, facts would have to be gone into and eachof the provisions made would have to be examined by theAssessing Officer. It needs also to be verified as tothe payments made subsequently and whether the sametallies with the provision. If it does not, definitelythere can be no claim made in the subject year and the expenses can be claimed only in the relevant year inwhich the payment was effected. We are of the opinion that the issue has to beremanded to the Assessing Officer leaving the questionsof law open and we do so. The Assessing Officer wouldtake up the matter within a period of one month fromthe date of receipt of certified copy of this judgmentand issue notice granting sufficient time for theassessee to produce details regarding the twoprovisions made. Considering the fact that the appealis of the year 2009, we are of the opinion that theassessee may be granted two months time to produce thedetails, by the Assessing Officer. The matter shall beexpedited. We make it clear that the issue remanded isonly with respect to the two provisions indicatedabove. The IT Appeal is disposed of as above. Nocosts. Sd/- K.VINOD CHANDRAN JUDGE jg Sd/- ASHOK MENON JUDGE