| The Tax Publishers2021 TaxPub(DT) 1633 (Del-Trib) INCOME TAX ACT, 1961
Section 115JB
As per Cambridge Advanced Learner's Dictionary, the meaning of the word 'ascertain' is 'to make certain' and word 'ascertain' has been described as 'to make certain, clear or definitely known', at best, it was just an amount which was set aside for being spent towards CSR but without any further certainty of its end-use, hence, it cannot be said that the liability was an ascertained liability and disallowance under section 115JB was rightly made as an unascertained liability.
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MAT - Book profit under section 115JB - Disallowance of provision of CSR under section 115JB -
Assessee filed return of income declaring a loss under the normal provisions and paid taxes under the provisions of Minimum Alternate Tax (MAT) on declared book profit. The case of the assessee was selected for scrutiny and during course of assessment proceedings, AO observed that assessee had created a provision for Corporate Social Responsibility (CSR) in books of account. AO was of view that the said provision was an unascertained liability as assessee had only created the provision but where amount was to be spent was unascertained. It was the assessee's contention that provision was created on basis of the guidelines issued by Department of Public Enterprises which assessee was bound to follow. However, AO did not accept assessee's contention and disallowed provision of CSR under section 115JB considering it as an unascertained liability. Held: Although assessee had set-aside an amount ear-marked for spending towards the CSR obligation, how the ear-marked amount will be finally spent has not been determined. As per Cambridge Advanced Learner's Dictionary, the meaning of the word 'ascertain' is 'to make certain' and word 'ascertain' has been described as 'to make certain, clear or definitely known'. How the amount ear-marked for spending towards the CSR obligation will be spent is 'not certain', 'clear' or 'definitely known'. At best, it was just an amount which was set aside for being spent towards CSR but without any further certainty of its end-use. Thus, it cannot be said that liability was an ascertained liability. Therefore, disallowance under section 115JB was rightly made as an unascertained liability.
Relied:M/s. Rotork Controls India (P) Ltd. v. CIT (2009) 223 CTR 425 (SC) : 2009 TaxPub(DT) 1730 (SC), Apollo Tyres Ltd. v. CIT (2002) 122 Taxman 562 (SC) : 2002 TaxPub(DT) 1371 (SC), Bharat Earth Movers v. CIT [Civil Appeal No. 9271 of 1995] : 2000 TaxPub(DT) 1505 (SC), Housing and Urban Development Corporation Ltd. through its Authorised Signatory v. Additional CIT [ITA 541/2019, (Delhi HC)] : 2020 TaxPub(DT) 0800 (Del-HC), Pr. CIT, Faridabad v. M/s. NHPC Limited [ITA 356 of 2015, P&H High Court] : 2018 TaxPub(DT) 1931 (P&H-HC), Dy. CIT, Circle 1(2), Baroda v. Inox Leisure Ltd. (2013) 351 ITR 314 (Guj-HC) : 2013 TaxPub(DT) 0716 (Guj-HC), CIT. v. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom-HC) : 2001 TaxPub(DT) 1103 (Bom-HC), Ircon International Limited, v. Addl. CIT, Range-11, New Delhi. and Vice Versa 2019 TaxPub(DT) 7432 (Del-Trib), The National Small Industries Corp Ltd. v. The National Small Industries Corp Ltd. 2019 TaxPub(DT) 1977 (Del-Trib), M/s. HLL Lifecare Limited C/o. K. Venkatachalam Aiyer and Co. Chartered Accountants v. The Asst. CIT 2018 TaxPub(DT) 3230 (Coch-Trib), Dy. CIT, Range-1, Ranchi and Ad. CIT, Range-1 v. M/s. Central Coal fields Limited [ITA No. 235/Ran/2016] : 2018 TaxPub(DT) 2995 (Ranchi-Trib), Asahi India Glass Limited v. Dy. CIT [ITA No. 1637/Del/2014, ITAT Delhi] : 2018 TaxPub(DT) 0956 (Del-Trib)
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