BHAGWAN INDUSTRIES LTD, MUMBAI V. ITO WD 3(1)(2), MUMBAI

CO 158/MUM/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9877 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 08-09-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 30-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUJIT BUNGAR
• Assessee Lawyers: CO M; S ATISH MODY ITA M
• Keywords: Depreciation; Deemed to accrue or arise in india; Question of law
• Section: 115JB

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, J.M. ./ I.T.A. NO.6665 /MUM/2008 ( / ASSESSMENT YEAR : 2004-2005 INCOME TAX OFFICER 3(1)(2), ROOM NO. 666, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. M/S BHAGWAN INDUSTRIES LTD., C/O VIJAY RUNGTA & CO., 4/88 NITYANAND NAGAR NO. 4, GROUND FLOOR, OPP. RAILWAY STATION, S.N. MARG, ANDHERI (E), MUMBAI 400 069. ./ PAN : AAACB5797J ( / APPELLANT ) .. ( / RESPONDENT ) /C.O. NO. 158/MUM/2014 ARISING OUT OF ITA NO. 6665/MUM/2008 M/S BHAGWAN INDUSTRIES LTD., C/O VIJAY RUNGTA & CO., 4/88 NITYANAND NAGAR NO. 4, GROUND FLOOR, OPP. RAILWAY STATION, S.N. MARG, ANDHERI (E), MUMBAI 400 069. / VS. INCOME TAX OFFICER 3(1)(2), ROOM NO. 666, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AAACB5797J CROSS OBJECTOR .. ( / RESPONDENT ) DEPARTMENT BY SHRI SUJIT BUNGAR ASSESSEE BY SHRI S ATISH MODY ITA 6665/M/2008 & CO 158/M/14 2 / 012 3 45 / DATE OF HEARING : 08-09-2014 6789 3 45 / DATE OF PRONOUNCEMENT : 08-09-2014 [ :; / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE REVENUE AND C.O. FIL ED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) - XXVI I, MUMBAI DATED 28-8-2008 FOR THE A.Y. 2004-05. 2. THE ONLY GRIEVANCE RAISED BY THE REVENUE RELATE S TO THE DELETION OF ADDITION MADE TO THE BOOK PROFIT ON ACCOUNT OF PROF IT MADE ON SALE OF LAND AMOUNTING TO RS. 2,84,84,000/- WHICH WAS NOT CREDIT ED TO THE PROFIT AND LOSS ACCOUNT. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS EARNED CA PITAL GAIN ON SALE OF LAND. AS PER THE PROVISIONS OF SECTION 45, NO CAPITAL GAI N TAX WAS PAYABLE. SINCE THE PROCEEDS OF THE LAND ARE NOT AVAILABLE FOR THE DISTRIBUTION OF DIVIDEND, THE SAME WAS NOT CREDITED TO THE P&L ACCOUNT BUT TAKEN DIRECTLY TO THE CAPITAL RESERVE ACCOUNT. THE P&L ACCOUNT WAS PREPARED BY TH E COMPANY IN ACCORDANCE WITH THE PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND IS AUDITED UNDER THE COMPAN IES ACT. 4. WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961, THE A.O. ADDED THIS SUM IN THE BOOK PROFIT. B Y THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION BY OBSER VING THAT THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. HELD THAT WHILE COMPUTING THE INCOME U/S 115J, THE A.O. HAS ONLY LI MITED POWER TO EXAMINE WHETHER BOOKS OF ACCOUNT ARE CERTIFIED BY T HE AUTHORITIES UNDER COMPANIES ACT, 1956 AS HAVING BEEN PROPERLY MAINTAI NED IN ACCORDANCE WITH THE COMPANIES ACT. IT WAS FURTHER OBSERVED TH AT THE A.O. HAS ITA 6665/M/2008 & CO 158/M/14 3 LIMITED POWER OF MAKING INCREASES OR DEDUCTIONS IN THE BOOK PROFIT AS PROVIDED FOR IN EXPLANATION TO SECTION 115J OF THE ACT. SINCE IN THE INSTANT CASE, THE PROFIT WAS NOT CREDITED TO THE P& L ACCOUNT AND THE BOOKS OF ASSESSEE COMPANY WAS CERTIFIED BY THE BOAR D OF DIRECTORS OF THE COMPANY, IN TERMS OF DECISION BY THE HONBLE SUPREM E COURT IN THE CASE APOLLO TYRES LTD. (SUPRA), THE A.O. WAS NOT JUSTIFI ED IN TWINKLING THE P&L ACCOUNT PREPARED BY THE ASSESSEE. THE ADJUSTMENTS S O MADE BY A.O. DOES NOT FALL WITHIN ANY OF THE CLAUSES OF EXPLANAT ION PROVIDED BELOW SECTION 115JA. WE FIND THAT THE ISSUE RAISED BEFORE US HAS ALREADY BEEN CONSIDERED AND DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT(255 ITR 273). IN THAT CAS E, THE ASSESSEE HAD CLAIMED ARREARS OF DEPRECIATION IN THE P&L ACCOUNT PREPARED UNDER THE COMPANIES ACT. THE AO HELD THAT THE ACCOUNTS PREPAR ED WERE NOT IN ACCORDANCE WITH PART-II AND PART-III OF SCHEDULE- V I OF THE COMPANIES ACT AND, THEREFORE, DISALLOWED THE ARREARS OF DEPRE CIATION WHICH HAD BEEN UPHELD UP TO THE LEVEL OF THE HIGH COURT. THE HON'BLE SUPREME COURT OBSERVED THAT SECTION 115J PROVISIONS OF WHIC H WERE SIMILAR TO THOSE OF 115 JB WAS INTRODUCED IN THE INCOME TAX AC T WITH A DEEMING PROVISION WHICH MADE COMPANIES LIABLE TO PAY TAX AT LEAST 30% OF BOOK PROFIT AS SHOWN IN ITS OWN ACCOUNTS. FOR THE SAID P URPOSE, THE SECTION 115J MADE INCOME REFLECTED IN THE COMPANY'S BOOKS O F ACCOUNT, THE DEEMED INCOME FOR THE PURPOSE OF ASSESSING THE TAX. THE HON'BLE SUPREME COURT FURTHER OBSERVED THAT THE USE OF THE WORDS 'IN ACCORDANCE WITH THE PROVISIONS OF PART-II AND PART- III OF SCHEDULE- VI OF THE COMPANIES ACT' WAS MADE FOR THE LIMITED PURPOSE OF EMPOWERING THE ASSESSING AUTHORITY TO RELY UPON THE AUTHENTIC STAT EMENT OF ACCOUNTS OF THE COMPANY AND WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, THE AO HAD TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS. IT WAS SO HELD BY THE HON'BLE SUPREME COURT THAT THE AO HAS ONLY THE POWE R TO EXAMINE WHETHER BOOKS OF ACCOUNT ARE CERTIFIED BY AUTHORITI ES UNDER THE ITA 6665/M/2008 & CO 158/M/14 4 COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT. THE AO, THEREA FTER, HAS LIMITED POWER OF MAKING ADJUSTMENTS AS PROVIDED IN EXPLANAT ION TO SECTION 115J. THE RELEVANT PORTION OF THE JUDGMENT OF THE H ON'BLE SUPREME COURT IS REPRODUCED BELOW AS A READY REFERENCE. ' THE ASSESSING OFFICER, WHILE COMPUTING THE BOOK PRO FITS OF A COMPANY UNDER SECTION 115J OF THE INCOME-TAX ACT, 1 961, HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVIN G BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. TH E ASSESSING OFFICER, THEREAFTER, HAS THE LIMITED POWER OF MAKIN G INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO SE CTION 115J. THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFITS SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION. THE USE OF THE WORDS ' IN ACCORDANCE WITH THE PROVISION OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT' IN SECTION 115J WAS MADE FOR THE LIMITED PURPO SE OF EMPOWERING THE ASSESSING OFFICER TO RELY UPON THE A UTHENTIC STATEMENT OF ACCOUNTS OF THE COMPANY. WHILE SO LOOK ING INTO THE ACCOUNTS OF THE COMPANY, THE ASSESSING OFFICER HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT, WHICH OBLIGATE THE COMPANY TO MAINTA IN ITS ACCOUNTS IN A MANNER PROVIDED BY THAT ACT AND THE S AME TO BE SCRUTINIZED AND CERTIFIED BY STATUTORY AUDITORS AND APPROVED BY THE COMPANY IN GENERAL MEETING AND THEREAFTER TO BE FIL ED BEFORE THE REGISTRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATI ON ALSO TO EXAMINE AND BE SATISFIED THAT THE ACCOUNTS OF R13 C OMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF T HE COMPANIES ACT. SUB-SECTION (1A) OF SECTION 115J DOES NOT EMPO WER THE ASSESSING OFFICER TO EMBARK UPON A FRESH ENQUIRY IN REGARD TO THE ENTRIES MADE IN THE BOOT. S OF ACCOUNT OF THE COMPA NY. ' 5. IN THE CASE OF AKSHAY TEXTILES TRADING AND AGENCIES PVT. LTD., 304 ITR 401 , WHEREIN EXACTLY SIMILAR ISSUE WAS BEFORE THE HON BLE BOMBAY HIGH COURT, WHICH READS AS UNDER :- C. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE TRIBUNAL WAS CORRECT IN UPHOLDI NG THE ORDER OF THE CIT(A) IN HOLDING THAT THE CAPITAL GAINS OF RS. 19,74,489/- ARE NOT TO BE TAKEN INTO ACCOUNT WHILE COMPUTING THE PR OFITS LIABLE TO BE ITA 6665/M/2008 & CO 158/M/14 5 TAXED UNDER S.115JA OF THE IT ACT, 1961 AND THAT TH E DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. VEEKAYLAL INV ESTMENT CO. (P) LTD., (2001) 166 CTR (BOM) 96: (2001) 249 ITR 597 ( BOM), WAS NOT APPLICABLE? THE ABOVE ISSUE WAS DECIDED BY THE HONBLE JURISDIC TIONAL HIGH COURT AS UNDER :- 2. INSOFAR AS QUESTION C, OUR ATTENTION IS INVIT ED TO THE JUDGMENT OF THE SUPREME COURT IN APOLLO TYRES LTD. VS. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC). THE QUE STION FRAMED THEREIN WHICH IS SIMILAR TO THE QUESTION C HAS BE EN ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE LIGHT OF THAT THE QUESTION OF LAW AS FRAMED WOULD NOT ARISE. 6. IN THE CASE OF ADBHUT TRADING CO. PVT. LTD. 338 ITR 94 , THE HONBLE BOMBAY HIGH COURT HELD THAT ONCE THE ACCOUNTS INCLU DING PROFIT AND LOSS ACCOUNT HAD BEEN PREPARED AND CERTIFIED BY THE AUTH ORITIES UNDER THE COMPANIES ACT, IT WAS NOT OPEN FOR THE AO TO STATE THAT P&L ACCOUNT HAS NOT BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT. 7. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE B OMBAY HIGH COURT IN `THE CASE OF ADBHUT TRADING CO. PVT. LTD. (SUPRA) AND IN THE CASE OF AKSHAY TEXTILES TRADING AND AGENCIES PVT. LTD (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) FOR DELETING THE ADDITIO N UNDER SECTION 115JB. 8. THERE WAS A DELAY OF 115 DAYS IN FILING THE C.O. BY THE ASSESSEE. THE SAME WAS NOT PRESSED DURING THE COURSE OF HEARING A ND ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. ITA 6665/M/2008 & CO 158/M/14 6 9. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS C.O. FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH SEPTEMBER, 2014. :; 3 6789 / < => ?:0 @ 8-09-2014 7 3 A2 B SD/- SD/- (AMIT SHUKLA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER = / J2 MUMBAI ; ?:0 DATED 8-09-2014 [ 1.M0../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / N4 () / THE CIT(A) XXVII, MUMBAI 4. / N4 / CIT CITY - 3, MUMBAI 5. Q1RA M4M0ST , 5 ST9 , = / J2 / DR, ITAT, MUMBAI B BENCH 6. AVW X2 / GUARD FILE. ' / BY ORDER, Q4 M4 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , = / J2 / ITAT, MUMBAI