DCIT, Udupi V. M/s ICDS Ltd., Manipal

ITA 1025/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5466 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1998-1999
• Appeal Filed On: 18-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Question of law
• Section: 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH AT MANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTA N T MEMBER AND SHRI SUDHANS H U SRIVASTAVA, JUDIC I AL MEMBER ITA NO S . 1025 TO 102 7 /BANG/2016 (ASS ESSMENT Y EAR S : 1998 - 99 TO 2000 - 01 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1, ... APPELLANT UDUPI. VS. M/S.ICDS LTD., SYNDICATE HOUSE, MANIPAL - 576104. PAN: AAACI 4355 H ... RESPONDENT APPELLANT BY : SHRI R.N.SIDDAPPAJI, ADDL.CIT RESPONDENT : MRS.SHEETAL BORKER, ADVOCATE. DATE OF HEARING : 01/02/2017 DATE OF PRONOUNCEMENT : 02/ 0 5 /2017 O R D E R PER INTURI RAMA RAO, AM : THESE ARE APPEALS FILED BY THE REVENUE DIRECTED AGAINST DIFFERENT ORDERS OF THE DATED FOR THE ASSESSMENT YEARS 1998 - 99 TO 2000 - 01. 2. THE FACTS RELEVANT TO ASSESSMENT YEAR 1998 - 99 ARE STATED HERE IN FOR THE SAKE OF CLARITY AND CONVENIENCE. ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 2 OF 7 BRIEF FACTS OF THE CASE ARE THAT THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT. IT IS ENGAGED IN NON - BANKING BUSINESS. RETURN OF INCOME FOR THE ASSESSMENT YEAR 1998 - 99 WAS FILED ON 30/11/1998 DECLARING A TOTAL INCOME OF R S.7 3 , 78 ,590/ - . THE SAID RETURN OF INCOME WAS REVISED AT A LOSS OF RS.15,86,75,345/ - . AGAINST SAID RETURN OF INCOME, ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) OF THE INCOME - TAX ACT, 1961 [ THE ACT FOR SHORT] VIDE ORDER DATED 30/03/2001 DETERMINING TH E TOTAL LOSS AT RS.1 , 13 , 0 4, 163 / - AND ASSESSED THE BOOK PROFIT S U/S 115JA OF THE ACT. THE AO ADDED BACK LEASE EQUALISATION CHARGES OF RS.11,09,04,763/ - TO THE BOOK PROFITS FOR THE PURPOSE OF DETERMINING TAX LIABILITY U/S 115J A OF THE ACT. 3. THE ASS ESSEE - COMPANY CARRIED THE MATTER IN APPEAL TO THE CIT(A) WHO VIDE ORDER DATED 27/0 5 /2003 ALLOWED THE APPEAL . T HE REVENUE FELT AGGRIEVED AND CARRIED THE MATTER TO THE TRIBUNAL. THE HON BLE TRIBUNAL, VIDE ORDER DATED 1 9/ 0 2/2007 IN ITA NO.996/ BANG/ 200 3 DISMI SSED THE REVENUE S APPEAL. T HE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE HON BLE HIGH COURT U/S 260A OF THE ACT. THE HON BLE HIGH COURT VIDE ORDER DATED 17/12/2013 IN ITA 580/2007 SET ASIDE THE MATTER TO THE FILE OF THE AO FOR DE NOVO ASSESSMENT IN THE LIGHT OF THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT (255 ITR 273). ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 3 OF 7 4. PURSUANT TO THE ORDER OF THE HON BLE HIGH COURT OF KARNATAKA, THE AO PASSED ASSESSMENT ORDER U/S 143(3) R.W.S. 26 0A OF THE ACT , VIDE ORDER DATED 11/02/2015 . FO LLOWING THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. WEIZMANN HOMES LTD. (357 ITR 74) AND THE CO - ORDINATE BENCH DECISION IN THE CASE OF CITI FINANCIAL RETAIL SERVICES (INDIA) LTD., [TC (A) NO. 701 OF 2009 DATED 31/08/2009 ] ADDED BACK LEASE EQUALI Z ATION CHARGES OF RS.11,09,04,763/ - TO THE BOOK PROFITS FOR THE PURPOSE OF COMPUTING TAX LIABILITY UNDER 115J A OF THE ACT. 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), MANGA LORE VIDE IMPUGNED ORDER ALLOWED THE APPEAL FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ICICI VENTURE FUNDS MANAGEMENT CO. LTD. (234 ITR 569). 6. BEING AGGRIEVED BY THIS ORDER OF THE CIT(A), THE REVENUE IS IN APPEA L BEFORE US IN THE PRESENT APPEAL. THE REVENUE RAISED THE FOLLOWING IDENTICAL GROUNDS OF APPEAL FOR ASSESSMENT YEARS 1998 - 99 TO 2000 - 01 : ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 4 OF 7 7. DURING THE COURSE OF HEARING OF THE APPEAL S , LEARNED DR VEHEMENTLY CONTENDED THAT THE HON BLE HIGH COURT OF KARNATAKA HAS SET ASIDE THE MATTER TO THE ASSESSING AUTHORITY ACCEPTING THE CONTENTION OF THE LEARNED COUNSEL FOR ASSESSEE THAT LEASE EQUALIZ ATION CHARGES IS NOTHING BUT DIMINUTION IN THE VALUE OF ASSETS. THEREFORE, NATURE OF THE ISSUE IS NOT OPEN FOR INQUIRY OR CONSIDERATION BEFORE THE ASSESSING AUTHORITY. THE ASSESSING AUTHORITY IS BOUND TO EXAMINE WHETHER DIMINUTION IN THE VALUE OF ASSETS CAN BE ADDED BACK TO BOOK PROFITS FOR THE PURPOSE OF C OMPUTING TAX LIABILITY U/S 115JA OF THE ACT. SINCE THE PRO VISIONS OF CLAUSE (G) TO EXPLANATION TO SUB - SECTION (2) OF SECTION 115J WAS ADDED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1/4/1998 PROVIDING FOR ADDITION OF ANY AMOUNT OR AMOUNTS SET ASIDE AS A PROVISION FOR DIMINUTION IN THE VALUE OF ASSET S TO BOOK PROFITS FOR THE PURPOSE OF C OMPUTING TAX LIABILITY U/S 115JA , SAME IS SQUARELY COVERED BY THE PLAIN PROVISIONS OF THE ACT. THUS HE SUBMITTED THAT THE CIT(A) PASSED THE IMPUGNED ORDER IGNORING THE PLAIN PROVISIONS OF THE ACT . HE FURTHER SUBMITTED THAT THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ICICI VENTURE LTD . (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE INASMUCH , IT IS ADMITTED BY THE ASSESSEE - COMPANY ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 5 OF 7 ITSELF BEFORE THE HON BLE HIGH COURT THAT LEASE EQU ALISATION CHARGES IS NOTHING BUT PROVISION FOR DIMINUTION IN THE VALUE OF ASSETS. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR ASSESSEE VEHEMENTLY CONTESTED THAT THE RATIO OF THE JUDGMENT IN THE CASE OF ICICI VENTURE LTD., AND THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN RAILWAY FINANCE CORPORATION LTD. (49 TAXMANN.COM 491)(DEL) IS SQUARELY APPLICABLE. 9. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WHETHER LEASE EQUALI Z ATION CHARGES , WHICH IS IN THE NATURE OF PROVISION FOR DIMINUTION IN THE VALUE OF ASSETS AS ADMITTED BY THE ASSESSEE HIMSELF BEFORE THE HON'BLE HIGH COURT CAN BE ADDED BACK TO BOOK PROFITS U/S 115JA OF THE ACT. THE HON BLE HIGH COURT HAS FRAMED THE FOLLOWI NG QUESTION OF LAW AS REGARDS LEASE EQUALISATION CHARGES: 1. WHETHER THE APPELLATE AUTHORITIES WERE CORRECT IN HOLDING THAT THE PROVISION FOR NON - PERFORMING ASSETS AND LEASE EQUALIZATION FUND CANNOT BE ADDED B ACK TO THE BOOK PROFITS AS PER EXPLANATION TO SECTION 115JA(2) OF THE ACT. THE SAID QUESTION WAS ANSWERED BY THE HON BLE HIGH COURT AS FOLLOWS: 8. INSOFAR AS THE SECOND SUBSTANTIAL QUESTION OF LAW IS CONCERNED, THAT WAS ALSO A SUBJECT MATTER OF THE APPEA L IN THE CASE OF THE COMMISSIONER OF INCOME TAX ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 6 OF 7 VS. WEIZMANN HOMES REPORTED IN (2013) 357 ITR 74 (KARN) WHEREIN, IT WAS HELD THAT BY FINANCE ACT NO.2 OF 2009 WITH EFFECT FROM 01.04.1998, THE CLAUSE (G) HAD BEEN SUBSTITUTED BY INCLUDING THE AMOUNT OR AMOUNT S SET - ASIDE AS PROVISIONS FOR DIMINUTION IN THE VALUE OF THE SAID ASSET. IT WAS HELD TO BE RETROSPECTIVE IN OPERATION AND THEREFORE, THE AMOUNT OR AMOUNTS SET - ASIDE AS PROVISIONS FOR DIMINUTION AND ANY VALUE OF THE ASSESSMENT NEEDS TO BE ADDED BACK TO BOOK PROFITS AS PER EXPLANATION TO SECTION 115JA(2)OF THE ACT. THUS THE NATURE OF PROVISION IS NOT OPEN FOR CONSIDERATION OR ADJUDICATION BEFORE THE AO. THE AO WAS BOUND TO ADJUDICATE WHETHER THIS PROVISION CAN BE ADDED BACK TO BOOK PROFITS FOR THE PURPOSE OF DETERMINING TAX LIABILITY U/S 115J A OF THE ACT IN THE LIGHT OF THE SUBMISSION MADE BY THE COUNSEL FOR ASSESSEE THAT IT IS NOTHING BUT PROVISION FOR DIMINUTION IN THE VALUE OF ASSETS. CLAUSE (G) TO EXPLANATION TO SUB - SECTION (2) OF SECTION 115J A WAS INS ERTED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1/4/1998 WHICH READS AS UNDER: (G) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, THEREFORE, HAVING REGARD TO THE PLAIN PROVISIONS OF THE ACT, THE SAID AMOUNT CAN BE ADDED BACK TO BOOK PROFITS FOR THE PURPOSE OF DETERMINING 115J A OF THE ACT, AS IT IS SPECIFICALLY AUTHORISED BY CLAUSE (G) TO EXPLANATION TO SUB - SECTION (2) OF SECTION 115J. THIS IS PERMISSIBLE AS PER LAW LAID DOWN BY THE HON BLE SUPREME COU RT IN THE CASE OF APOLLO TYRES (SUPRA) AND THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF WEIZMANN HOMES LTD. (SUPRA) . THE DECISION OF THE HON BLE DELHI HIGH C OURT IN THE CASE OF INDIAN RAILWAY FINANCE CORPORATION LTD. (SUPRA) IS NOT ITA NO S.1025 TO 102 7 /BANG/201 6 PAGE 7 OF 7 APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THAT DECISION, IT IS NOT ADMITTED THAT PROVISION FOR LEASE EQUALISATION CHARGES IS NOTHING BUT DIMINUTION IN THE VALUE OF ASSETS. THEREFORE, THE CIT(A) OUGHT NOT TO HAVE ALLOWED THE CLAIM OF THE ASSESSEE W ITHOUT EXAMINING THE ORDER OF THE HON BLE HIGH COURT OF KARNATAKA IN DETAIL. THEREFORE, THE ORDERS OF THE CIT(A) ARE REVERSED. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 N D M A Y , 201 7 S D / - S D / - (SUDHANSHU SRIVASTAVA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BENGALURU. DATE: 0 2 /0 5 /2017 SRINIVASULU, SR. PS COPY TO: 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT, 5) DR ITAT, BANGALORE, 6) GUARD FILE ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE