Itxa/775/2016 Of Pr. Commissioner Of Income Tax-14 v. New Holland Fiat (India) Pvt. Ltd

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.775 OF 2016 Pr.Commissioner of Income Tax-14 V/s. New Holland Fiat (India) Pvt. Ltd. --- Mr.Suresh Kumar for the Appellant.--- … Appellant … Respondent CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : DECEMBER 04, 2018. P.C.:- 1.Revenue has filed this appeal against the judgment ofIncome Tax Appellate Tribunal dated 31[st] July, 2015. Followingquestions are presented for our consideration. “a) Whether on the facts and circumstances of thecase and in law, the Hon'ble Tribunal was justifiedin deleting the disallowance of warranty provisionmade by AO while computing book profit Undersection 115JB of the IT Act 1961?b) Whether on the facts and circumstances ofthe case and in law, the Hon'ble Tribunal wasjustified in deleting the disallowance of warrantyamounting to Rs.4,91,77,891/- made by the AOwhile computing the deduction under section 115JB of the IT Act 1961?” 2.The issue pertains to the disallowance of warrantyprovision made by the Assessing Officer while computing thebook profit under Section 115JB the Income Tax Act, 1961 (“theAct” for short). We notice that the Tribunal in the impugnedjudgment has relied on the decision in case of this very assesseefor earlier assessment years. A copy of the judgment passed bythe Tribunal in the earlier assessment year is made available tous by the counsel for the Revenue. He stated that the Revenuehad filed appeal against the said judgment also. However, theappeal was dismissed for non-removal of office objections. 3.Notwithstanding the manner of disposal of the Revenue'searlier appeal, we have perused the materials on record with theassistance of learned counsel for the Revenue. We notice that theTribunal in the earlier judgment in a detailed consideration heldthat the warranty liability was ascertained liability and therefore,could not have been added while computing the assessee's bookprofit. In the process, the Tribunal referred to and relied upon the Priya Soparkar 330 itxa 775-16-o judgment of Supreme Court in case of Rotork Controls IndiaPrivate Limited[1]. The Tribunal also placed reliance on thedecision of the Gujrat High Court in case of Inox LeisureLimited[2] and the decision of Himachal Pradesh High Court in caseof H P Tourism Development Corporation Ltd.[3]. In theconcluding portion the Tribunal had in the earlier yearobserved as under : “3.3 We have heard the rival submissions andperused the material before us. We are aware thatSection 115JB of the Act was incorporated in thestatute with a specific purposes and it deals withspecial provision for payment of tax by certaincompanies. Explanation to section 2 provides thelist of the items that are to be included or excludedwhile computing book profit. As per explanationthe amount or amounts set aside to provisions madefor meeting liabilities, other than ascertainedliabilities have to be included while computing bookprofit. In other words if ascertained liabilities arethere same cannot be added while computingalternate minimum tax. In the case underconsideration, provisions made under the headgratuity, warranty and leave encashment are notcontingent/unascertained and therefore samecannot be adjusted while computing book-profitu/s. 115JB of the Act. We find that in the case of Indian Oil Tanking Ltd.(supra) Mumbai Tribunal has held that provisionfor warranty is an ascertained liability and cannot 1314 ITR 62 284 CCH 70 335 taxmann.com 450 We find that in the case of Indian Oil Tanking Ltd.(supra) Mumbai Tribunal has held that provisionfor warranty is an ascertained liability and cannot 1314 ITR 62 284 CCH 70 335 taxmann.com 450 be added back for computing book profit u/s.115JB of the Act. Dealing with the issue ofprovision for gratuity to be considered for MATpurposes, Hon'ble Gujarat HC in the case of InoxLeisure Ltd.(supra) has held that addition ofgratuity as unascertained liability under clause (c)to explanation 1 to section 115JB was notwarranted. We further find that the Hon'ble HPHigh Court has decided the issue, of leaveencashment with reference to the computation ofbook profit, in favour of the assessee. In thatmatter AO had held that provision towards leaveencahsment of employees was unascertainedliability and added it book profit. FAA upheld hisorder. In the appeal filed by the assessee, Tribunalreversed his order. Dismissing the appeal filed bythe Revenue, Hon'ble High Court held that theTribunal had rightly held that provision for leaveencashment could not be considered contingentliability for computing book-profit u/s 115JB ofthe Act. Respectfully following the above judgmentsof the Hon'ble High Courts and the decision ofcoordinate Bench we decide Grounds of appealno.2,3 and 4 against the AO.” 4.It can thus be seen that the warranty was an ascertainedliability and allowable deduction. No question of law arises. TaxAppeal is dismissed. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)….