The Commissioner Of Income Tax,Chennai-Iii v. M/S Panasonic Home Appliances,Spic House, Annexe 6[Th] Floor

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 23.03.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE 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 6[th] floor,88, Mount Road,Chennai-600 032. ..Respondent Appeal is filed under section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Chennai 'B'Bench dated 27.06.2008 made in ITA No. 525(Mds.)/2008 against theorder of Commissioner of Income Tax in C.No.3033/7/III/06-07 dated22.01.2008 against the Assessment order for the Assessment year1998-99 of the Assistant Commissioner of Income Tax, Company CircleV(1) Chennai dated 24.03.2006.For Appellant:Mr.K.SubramaniamSenior Standing Counsel JUDGMENT (Judgment of the Court was deliveredby P.P.S.JANARTHANA RAJA,J) The above Tax Case Appeal is filed by the Revenue against theorder of the Income Tax Appellate Tribunal, Chennai 'B' Bench dated27.06.2008 made in ITA No. 525(Mds.)/2008 by raising the followingquestion of law: "Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that the provision for encashment of leave ofRs.1.19 lakhs claimed by the assessee was allowable onthe basis of the Supreme Court's decision in the case of https://hcservices.ecourts.gov.in/hcservices/ Bharath Earth Movers Ltd., Vs. Commissioner of Income Tax(245 ITR 428) since in the assesee's case the liabilitywas only a contingent liability as clearly mentioned inthe Tax Audit Report and not an ascertained liabilitywhich was capable of being quantified with reasonablecertainty?" 2.The assessee is engaged in manufacture and sale of ElectricRice cookers and Mixies. The relevant assessment year is 1998-1999and the corresponding accounting year ended on 31.03.1998. Theassessee had filed its return of income on 27.11.1998 returningtotal income of Rs.'Nil' and the same was processed by the AssessingOfficer under Section 143(1) of the Income Tax Act. Thereafter, theassessing officer noticed from the return that the assessee haddebited Profit and Loss Account with provision for warranty claimsamounting to Rs.5,23,197/- and had not added back for the purpose ofcalculation of profits under Section 115JA. The said provision forexpenditure was not allowable and there was reason to believe thatthe income chargeable to tax had escaped assessment by virtue ofallowing wrong claim of expenditure. Therefore, the assessment wasreopened under Section 147 by issuing notice under Section 148 of theAct on 31.08.2004. Later, the assessment was completed on24.03.2006 under Section 143(3) read with section 147 of the Actdetermining the book profit under Section 115JA at Rs.88,36,818/-and thereby arriving the deemed income at 30% of the book profit atRs.26,51,045/-. While completing the assessment, the assessingofficer has allowed the relief claimed in respect of provision madefor leave encashment of Rs.1.19 lakhs. The Commissioner of IncomeTax, Chennai-III, set aside the order of the assessment underSection 263 of the Income Tax Act, 1961 on the ground that it iserroneous and prejudicial to the interest of the revenue. TheCommissioner, while enhancing the assessment, has directed theAssessing Officer to modify the assessment by disallowing and addingback the provision for doubtful debts and the provision for leaveencashment in computing the book profits for the purpose of Section115JA. Aggrieved by the same, the assessee had filed an appealbefore the Income Tax Appellate Tribunal. The Tribunal, by followingthe decision of the Supreme Court in the case of BHARAT EARTH MOVERSVS. CIT (2000) 245 ITR 428, allowed the claim. Aggrieved by thatorder, the Revenue has filed the present appeal. 3. The learned counsel appearing for the revenue submitted thatthe Tribunal is wrong in allowing the appeal by relying on thedecision of the Supreme Court in the case of BHARAT EARTH MOVERS VS.CIT reported in (2000) 245 ITR 428. He further submitted that theTribunal erred in not observing that in the assessee's case, theliability in question was only contingent in nature and not theascertained/determined liability. He further submitted that theTribunal erred in not noticing that the tax auditors had qualifiedthe provision in the Tax Audit Report in Form 3CD as liability of contingent nature and hence, the order of the Tribunal is not inaccordance with law and the same has to be set aside. 4. Heard the learned counsel appearing for the revenue andperused the materials available on record. 5. It is seen that the issue involved in this appeal issquarely covered by the judgment of the Supreme Court in the caseof BHARAT EARTH MOVERS VS. CIT reported in (2000) 245 ITR 428,which is decided in favour of the assessee. Therefore, we are ofthe view that the Tribunal is correct in following the judgment ofthe Supreme Court cited supra and we do not find any error orillegality in the order of the Tribunal warranting interference. Thelearned counsel appearing for the revenue has not produced anymaterial or case law to take a contrary view of the Tribunal. Inthese circumstances, no question of law arises for consideration.Accordingly, the Tax Case Appeal is dismissed. sd/-Asst.Registrar /true copy/Sub Asst.Registrar raaTo 1.THE COMMISSIONER OF INCOME TAX, CHENNAI-III 2.THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(1) CHENNAI. 3.THE ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BENCH B, BESANT NAGAR, CHENNAI-90. 4. THE ADDITIONAL CIT COMPANY RANGE, CHENNAI. 5. THE ACIT, COM.CIRCLE V (1) CHENNAI. LA (CO)GSK 21.04.2009.