M/s Cooper Standard India Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 47/DEL/2017

• Counselvise Citation: [2019] 129 COUNSELVISE.COM (IT) 9916 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: A K BATRA
• Keywords: Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion
• Section: 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 609/DEL./2017 : ASSTT. YEAR : 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-6(2), NEW DELHI VS M/S COOPER STANDARD INDIA PVT. LTD., (FORMERLY KNOWN AS METZELER AUTOMATIVE PROFILES INDIA LTD.), 301- 302, TOLSTOY HOUSE, TOLSTOY MARG, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. A A ACW0019N CO NO. 47/DEL./2017 : ASSTT. YEAR : 2008-09 M/S COOPER STANDARD INDIA PVT. LTD., (FORMERLY KNOWN AS METZELER AUTOMATIVE PROFILES INDIA LTD.), 301-302, TOLSTOY HOUSE, TOLSTOY MARG, NEW DELHI-110001 VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-6(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACW0019N ASSESSEE BY : SH. A. K. BATRA, CA REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEAR ING: 03 . 10 .201 9 DATE OF PRONOUNCEMENT: 30 .10 .201 9 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-6, DELHI DATED 25.11.20 16. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 2 HOLDING THAT THE PROVISION OF SECTION 79 OF THE ACT WILL NOT APPLY FOR THE PURPOSE OF COMPUTATION OF BO OK PROFIT U/S 115JB IN VIEW OF THE FACT THAT THE PROVI SION OF SECTION 115JB(5) STATES THAT AIL OTHER PROVISION S OF THE ACT SHALL APPLY. 3. THE ASSESSING OFFICER COMPUTED BOOK PROFITS AS UNDER: '..IN CONSENT TO THE OBSERVATION MADE FOR THE ASSESSMENT Y EAR 2010-11 BY MY PREDECESSOR ASSESSING OFFICER, THE BENEFIT OF UNABSORBED BUSINESS LOSSES FOR THE CALCULATION OF BOOK PROFI T IS DENIED AND BOOK PROFIT U/SLL5JB IS WORKED OUT AS UNDER :- PROFIT AS PER P & L ACCOUNT RS. 6,74 ,35,132/- LESS: LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS NI L BOOK PROFIT U/S 115JB RS. 6,74,35,132/- ..' THE ASSESSING OFFICER DID NOT VIEW THE PROVISION FOR BROU GHT FORWARD OR UNABSORBED DEPRECIATION WHILE COMPUTING THE BOOK PROFITS UNDER 115JB. AGGRIEVED THE ASSESSEE FILED APPE AL BEFORE THE LD. CIT(A) FOR NOT GIVING THE BENEFIT OF BROUGH T FORWARD OR UNABSORBED DEPRECIATION WHILE COMPUTING THE PROFITS UND ER SECTION 115JB. 4. THE LD. CIT (A) DELETED THE COMPUTATION MADE BY T HE ASSESSING OFFICER AND HELD THAT WHILE COMPUTING THE PROFITS U/S 1 15JB THE BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION HAS TO BE TAKEN INTO CONSIDERATION AND BE DETECTED FROM THE PROFITS COMPUTED AS PER THE P&L ACCOUNT. AGGRIEVED THE REVENUE FILED APPEAL BEFORE T HE TRIBUNAL. 5. BEFORE US, DURING THE ARGUMENTS, THE LD. AR REITER ATED THE SUBMISSIONS TAKEN UP BEFORE THE REVENUE AUTHORITIES AND RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) WHICH ARE AS UNDE R: '...UNDER SECTION 115 JB ONLY BOOK PROFITS ARE TO BE T AKEN INTO ACCOUNT AND NOT THE PROFIT OR LOSS AS PER THE INCOME TAX ACT. THE ASSESSEE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 3 THAT UNDER SECTION 79 IT IS CLEARLY STATED 'NOTWITHSTAN DING ANYTHING CONTAINED IN THIS CHAPTER' WHICH CLEARLY SHOWS T HAT THE PROVISIONS OF SECTION 72 TO 78 WERE APPLICABLE FOR THE CARRY FORWARD LOSS AND UNABSORBED DEPRECIATION UNDER THE INCO ME TAX ACT. THE ASSESSEE FURTHER SUBMITTED BEFORE THE ASSESSING OFFICER THAT SECTION 115 JB IS A CODE ITSELF WHICH CLEARLY STATES 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROV ISIONS OF THIS ACT'. THE ASSESSEE FURTHER POINTED OUT THAT THIS CLEARLY INDICA TES THAT THE PROVISIONS OF SECTION 115 JB ARE CODE BY ITSELF AND OVERRIDES THE PROVISIONS OF SECTION 79. THIS WAS NOTICED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT IN THE ASSESSMENT YEAR 2010-11 AND DID NOT ALLOW THE ASSESSEE TO CARRY FORWARD BUSINESS LOSS BUT ALLOWED ONLY CARRY FORWARD BUSINESS LOSS AND THUS AS THE BOOK PROFIT WAS AS ACCORDING TO HIM THERE WAS NO BUSINESS LOSS AND ONLY DEPRECIATION LOSS TH E SAME CANNOT BE SET OFF AND ON THAT BASIS THE PROVISIONS OF SECTION 147 WAS APPLIED. IN THE ASSESSMENT FOR 2010-11 THE ID. COMMISSIONER (A) HE LD THAT THE PROVISIONS OF SECTION 115 JB OVERRIDES THE PRO VISIONS OF SECTION 79 AND FOR THIS PURPOSE HE HAS RELIED ON THE JUDGMENT OF THE AHMADABAD HIGH COURT IN THE CASE OF F ASCEL LTD. VS. ITO (2008) 305 ITR (368). THE PROVISIONS OF SECTION 115 JB MENTIONS THAT IT IS THE BOOK PROFIT/LOSS WHICH HAS TO BE TAKEN INTO ACCOUNT AND NOT T HE PROFITS AS PER INCOME TAX ACT. THE REVENUE IS IN APPEAL AGAINST THE SAID JUDGMENT AND THE APPEAL IS PENDING. IT IS FURTHER SUBMITTED THAT UNDER SECTION 148 IN THE O RIGINAL ASSESSMENT WHICH WAS COMPLETED BY THE ASSESSING OFFICER HAD ALLOWED THE LOSS / UNABSORBED DEPRECIATION TO BE CARRIED FORWARD. THEREFORE, IT IS SUBMITTED THAT IT IS A MERE CHANGE OF OPINION AND THEREFORE, IT IS SUBMITTED THAT THE PROVI SIONS OF SECTION 147/148 ARE NOT APPLICABLE. IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 115 JB I S A CODE BY ITSELF AND IS NOT DEPENDENT ON THE OTHER SECTIONS OF THE ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 4 INCOME TAX ACT. THIS VIEW HAS ALSO BEEN CONFIRMED BY THE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. VS. CI T 327 ITR 305 WHERE THE HON'BLE SUPREME COURT HELD THAT TH E PROVISIONS OF SECTION 115 JA IS A SELF CONTAINED CODE. SECT ION 115 JB IS THE SUCCESSOR SECTION TO SECTION 115JA. SECTION 115 JB CONTINUES TO REMAIN A SELF CONTAINED CODE. THE ABOVE VIEW IS ALSO CONFIRMED BY THE CBDT IN CIRCULA R NO. 13 OF 2001 DATED 09.11.2001 WHERE IT IS CLEARLY MENTI ONED 'IT MAY BE EMPHASIZED THAT THE NEW PROVISIONS OF SECTION 115 JB IS A SELF CONTAINED CODE. SUB SECTION (1) LAYS DOWN THE M ANNER IN WHICH THE INCOME TAX IS PAYABLE IS TO BE COMPUTED. IN THIS CONNECTION WE ALSO INVITE YOUR ATTENTION TO TH E DECISION OF THE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. \/S. CIT (2002) 255 ITR 273 WHERE THE SUPREME COURT IN THE CA SE OF APOLLO TYRES LTD. HAS CLEARLY MENTIONED THAT 'THERE CAN NOT BE TWO INCOMES ONE FOR THE PURPOSE OF COMPANIES ACT AND ANOTHER FOR THE PURPOSE OF INCOME TAX BOTH MAINTAINED UNDER THE SAME ACT. IF THE LEGISLATURE INTENDED THE ASSESSING OF FICER TO REASSESS THE COMPANY'S INCOME, THEN IT WOULD HAVE STATED IN SECTION 115-J THAT 'INCOME OF THE COMPANY AS ACCEPTE D BY THE ASSESSING OFFICER'. IN THE ABSENCE OF THE SAME AND ON T HE LANGUAGE OF SECTION 115-J, IT WILL HAVE TO HELD THAT VIEW TAKEN BY THE TRIBUNAL IS CORRECT. THEREFORE, IN THE ABOVE BACKGROUND THE SUPREME COURT FURTHER 'IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III O F SCHEDULE VI TO THE COMPANIES ACT' WAS MADE FOR THE LIMI TED PURPOSE OF EMPOWERING THE ASSESSING AUTHORITY TO RELY U PON THE AUTHENTIC STATEMENT OF ACCOUNTS OF THE COMPANY. WHIL E SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, AN ASSESSING OFFI CER UNDER THE INCOME TAX ACT HAS TO ACCEPT THE AUTHENTICITY O F THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANI ES ACT WHICH OBLIGATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN A MANNER PROVIDED BY THE COMPANIES ACT AND THE SAME TO B E SCRUTINIZED AND CERTIFIED BY STATUTORY AUDITORS AND WIL L HAVE TO BE APPROVED BY THE COMPANY IN ITS GENERAL MEETING AN D THEREAFTER TO BE FILED BEFORE THE REGISTRAR OF COMPA NIES WHO HAS A STATUTORY OBLIGATION ALSO TO EXAMINE AND SATISFY THAT THE ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT. INSPITE OF ALL THESE PROCEDURES CONTEMPLATED UNDER THE PROVISIONS OF THE COMPANIES ACT, WE FIND IT DIFFICULT TO ACCEPT THE ARGUM ENT OF ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 5 THE REVENUE THAT IT IS STILL OPEN TO THE ASSESSING OFFICE R TO RE- SCRUTINIZE THIS ACCOUNT AND SATISFY HIMSELF THAT THESE ACCOUNT S HAVE BEEN MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT. IN OUR OPINION, RELIANCE PLACED BY THE REVENUE ON SUB-SECTION (1A) OF SECTION 115-J OF THE IT ACT IN SU PPORT OF THE ABOVE CONTENTION IS MISPLACED. SUB-SECTION (1A) OF SECTION 115-J DOES NOT EMPOWER THE ASSESSING OFFICER TO EMBARK UPON A FRESH INQUIRY IN REGARD TO THE ENTRIE S MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE SAID SUB-SECTION , AS A MATTER OF FACT, MANDATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPAN IES ACT WHICH MANDATE, ACCORDING TO US, IS BODILY LIFTED FR OM THE COMPANIES ACT INTO THE IT ACT FOR THE LIMITED PURPOSE O F MAKING THE SAID ACCOUNT SO MAINTAINED AS A BASIS FOR COMPUTING THE COMPANY'S INCOME FOR LEVY OF INCOME-TAX. BEYOND THAT, WE DO NOT THINK THAT THE SAID SUB-SECTION EMPOWERS THE AUTHORITY UNDER THE INCOME-TAX ACT TO P ROBE INTO THE ACCOUNTS ACCEPTED BY THE AUTHORITIES UNDER THE COMPANIES ACT. IF THE STATUTE MANDATES THAT INCOME PREP ARED IN ACCORDANCE WITH THE COMPANIES ACT SHALL BE DEEMED INCO ME FOR THE PURPOSE OF SECTION 115-J OF THE ACT, THEN IT SH OULD BE THAT INCOME WHICH IS ACCEPTABLE TO THE AUTHORITIES UNDER THE COMPANIES ACT. THERE CANNOT BE TWO INCOMES ONE FOR THE PURPOSE OF COMPANIES ACT AND ANOTHER FOR THE PURPOSE O F INCOME TAX BOTH MAINTAINED UNDER THE SAME ACT. IF THE LEGISLATURE INTENDED THE ASSESSING OFFICER TO REASSESS THE COMPANY'S INCOME, THEN IT WOULD HAVE STATED IN SECTION 1 15-J THAT 'INCOME OF THE COMPANY AS ACCEPTED BY THE ASSESSING OFFICER'. IN THE ABSENCE OF THE SAME AND ON THE LANGUA GE OF SECTION 115-J, IT WILL HAVE TO HELD THAT VIEW TAKEN BY THE TRIBUNAL IS CORRECT AND THE HIGH COURT HAS ERRED IN REVE RSING THE SAID VIEW OF THE TRIBUNAL. THEREFORE, WE ARE OF THE OPINION, THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 115-J HAS ONLY THE P OWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIE D BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PRO PERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAK ING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATI ON TO THE SAID SECTION. TO PUT IT DIFFERENTLY, THE ASSESSING OFF ICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PR OFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115-J. ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 6 THEREFORE, THE ASSESSING OFFICER IS BOUND TO COMPUTE THE PROFITS AS PER THE COMPANIES ACT UNDER SECTION 115 JB IT IS THE BOOK PROFITS AND NOT THE PROFITS AS PER INCOME TAX ACT. IN VIEW OF THE ABOVE IT IS THE SUBMISSION OF THE ASSESSEE THAT SINCE THE BOOK PROFIT OR LOSS AS PER COMPUTATION THE SAME SHOULD BE TAKEN INTO ACCOUNT AS SET OFF AGAINST THE PROF ITS WORKED OUT UNDER THE COMPANIES ACT..' 6. ON THE OTHER HAND, THE LD. SR. DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 7. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE PERUSED THE JUDGMENT OF THE AHMADABAD HIGH COURT IN THE CASE OF FASCEL LTD. VS. ITO (2008) 305 ITR (368) RELIED BY THE LD. CIT (A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE ON THIS GROUND. THE HONBLE HIGH COURT HELD AS UNDER: .THIS IS A NON-OBSTANTE CLAUSE DEALING WITH ALLOWANCE OF CARRY FORWARD LOSS TO AN ASSESSEE. THIS IS A PROVISION APPLICABLE TO AN ASSESSEE WHILE COMPUTING THE NORMAL INCO ME OF THE ASSESSEE AND THAT IS WHY THE ASSESSEE ITSELF HAS REDUCED THE LOSS FOR ASSESSMENT YEAR 2000-01 AND PRIOR IN COMPUTING ITS NORMAL INCOME. BUT IN SO FAR AS MINIMUM ALTERNATIVE TAX IS CONCERNED, IT IS TO BE LEVIED WITH R EFERENCE TO BOOK PROFIT AND IN ARRIVING AT THE BOOK PROFIT, THE LOWER OF THE AMOUNT AT BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATI ON WHICH IS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAS TO BE ALLOWED AND AS AFORESAID, IRRESPECTIVE OF THE FACT, WHETHER, THE SAME IS ALLOWABLE UNDER THE OTHER PROVISI ONS OF THE ACT OR NOT. 16. SUB-SECTION (5) OF SECTION 115JB OF THE ACT, ON FIR ST BRUSH OF READING, GIVES AN IMPRESSION THAT IT IS RE-INCORPORAT ION OF THE PROVISIONS OF THE ACT TO A COMPANY WHICH ARE EXCLUDE D BY SUB-SECTION (1) OF SECTION 115JB. A CLOSURE LOOK, HOWEV ER, MAKES IT CLEAR THAT IT REINCORPORATE ONLY THOSE PROVISI ONS WHICH ARE NOT OTHERWISE PROVIDED IN SECTION 115JB. CLAUSE (I II) OF THE EXPLANATION SPECIFICALLY PROVIDES FOR THE ALLOWANCE OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AND, THERE FORE, THE OTHER PROVISIONS OF THE ACT RELATING TO THE EARLIE R YEARS' ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 7 LOSS OR UNABSORBED DEPRECIATION WOULD NOT BE APPLICABLE . BECAUSE CLAUSE (III) OF THE EXPLANATION STATES THAT SUCH L OSS OR UNABSORBED DEPRECIATION HAS TO BE AS PER THE BOOKS OF ACCOUNTS AND NOT AS COMPUTED UNDER INCOME TAX ACT, THEREFORE, IN OUR OPINION, SUB-SECTION (5) IS ALSO OF N O HELP TO THE REVENUE. IN ANY CASE, AS UNDERSTOOD, VIDE CBDT CIRC ULAR NO. 13 OF 2001 DATED 9.11.2001, THIS CLAUSE APPLIES ON LY FOR PROVISIONS OTHER THAN COMPUTATION AND SINCE THE LOSS OR UNABSORBED DEPRECIATION IS A PART OF THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB ITSELF, THE PROVISIONS OF SE CTION 115JB(5) WOULD NOT ENROPE OTHER PROVISIONS OF THE ACT. 8. THE HONBLE HIGH COURT AFTER EXAMINING THE PROVISIO NS OF SUB-SECTION (5) OF SECTION 115JB AND THE CLAUSE (III) HELD THAT, TH E LOSS OR THE UNABSORBED DEPRECIATION IS A PART OF COMPUTATION OF BOO K PROFITS AND THE PROVISIONS OF SECTION 115JB(5) WOULD NOT ENROPE OTHER P ROVISIONS OF THE OF THE ACT, WE HEREBY HOLD THAT THE ASSESSEE IS ELIGIBLE FO R DEDUCTION OF CARRY FORWARD BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION WHICHEVER IS LESS WHILE COMPUTING BOOK PROFITS U/S 115JB. 9. AS, THE APPEAL OF THE REVENUE IS DISMISSED ON MERIT S, ANY ADJUDICATION ON THE TECHNICAL GROUND TAKEN UP BY THE A SSESSEE WOULD BE INFRUCTUOUS AND HENCE NOT RESORTED TO. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED AND CO OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2019. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 30/10/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ITA NO. 609/DEL/2017 CO NO. 47/DEL/2017 COOPER STANDARD INDI A PVT. LTD. 8 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR