DCIT, Central Circle - VII, Kolkata, Kolkata V. M/s. J.L. Morrison (India) Ltd., Kolkata

ITA 1095/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78357 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 12-08-2011
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: S JHAJHARIA
• Keywords: Depreciation; Fair market value; Valuation report
• Section: 143(3); 115JB; 154; 15

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1095/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2003-04 DEPUTY COMMISSIONER OF INCOME-TAX, VS. J. L. MORIS ON (INDIA) LTD. CENTRAL CIRCLE-VII, KOLKATA (PAN: AAACJ0248C) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 17.06.2014 DATE OF PRONOUNCEMENT: 30.06.2014 FOR THE APPELLANT: SHRI RAVI JAIN, CIT, DR FOR THE RESPONDENT: SHRI S. JHAJHARIA, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A), CENTRAL-1, KOLKATA IN APPEAL NO. 42/CC-VIICIT(A),C-1/10-11DATED 23.05.2011. ASS ESSMENT WAS FRAMED BY DCIT, CEN.CIR-VII, KOLKATA U/S. 154/251/143(3) OF THE INC OME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003-04 VIDE HIS ORDER DATED 31.03.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN RECTIFYING THE ASSESSMENT FRAMED BY AO U/S. 143(3) OF THE ACT BY ADDING THE REVALUATION PROFIT CARRIED TO REVALUATION RESERVE W HILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GR OUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE CIT(A) ERRED IN LAW IN DELETING THE ADDITION RS.14,37,53,242/- OF REVALUATION PROFIT CA RRIED TO REVALUATION RESERVE WHILE RECOMPUTING BOOK PROFIT U/S. 115JB. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE CIT(A) ERRED IN LAW IN HOLDING THAT THE QUESTIONS THAT DIFFERENCE OF THE REVALUED ASSET CAN BE ADDED BACK WHILE CALCULATING BOOK PROFIT UNDER SECTION 115JB OF THE ACT IS NOT FREE FROM THE MISCHIEF OF TWO POSSIBLE VIEWS AND THE ISSUE IS DEBATABLE. HENCE ON THIS GROUND S ECTION 154 CANNOT BE RESORTED TO. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY ON THE BASIS OF REVALUATION REPORT OF LAND AND BUILDING AS ON 01.04.2002 CREDITED THE SUR PLUS OF REVALUATION TO CAPITAL RESERVE ACCOUNT AND DEBITING THE SAME TO RESPECTIVE ASSETS. ACCORDING TO ASSESSEE, THERE IS NO DEBIT OR CREDIT TO P&L ACCOUNT DUE TO SUCH REVALUATION. WHE N THE ASSESSEE SOLD RELEVANT ASSETS DURING 2 ITA NO.1095/K/2011 J.L. MORISON (INDIA) LTD.. AY 2003-04 THE YEAR UNDER CONSIDERATION, THE DIFFERENCE BETWEE N THE REVALUED BOOK FIGURE AND SALE CONSIDERATION WAS CREDITED TO THE P&L ACCOUNT. THE AO WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 29.03.2002 ACCEPTED THE ASSESSEES CONTENTION WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT AND NO ADDITION W AS MADE TO THE BOOK PROFIT BY THE ASSESSEE IN ACCORDANCE WITH EXPLANATION (1) TO SECTION 115JB OF THE ACT. SUBSEQUENTLY, THE AO ASSUMED THAT THERE IS MISTAKE APPARENT FROM RECORD ON ACCOUNT OF SURPLUS ON REVALUATION OF LAND AND BUILDING AMOUNTING TO RS.14,37,53,252/- AS DEBI TED TO P&L ACCOUNT FOR THE YEAR UNDER CONSIDERATION AND AO ERRONEOUSLY COMPUTED THE BOOK PROFIT U/S. 115JB OF THE ACT. THE AO ACCORDINGLY ADDED THE SAID SURPLUS RS.14,37,53,242/ - TO NET PROFIT FOR THE YEAR UNDER CONSIDERATION BY RECTIFYING THE ORDER U/S. 154 OF T HE ACT. ACCORDING TO AO, THE ASSESSEE REVALUED THE LAND AND BUILDING ON THE 1 ST DAY OF THE PREVIOUS YEAR INCREASING THE VALUE OF T HE ASSET AND THE PROFIT ON SALE OF FIXED ASSET HAVE BE EN INCLUDED IN OTHER INCOMES AFTER DEDUCTING INCREASE IN VALUATION OF LAND. ACCORDING TO AO, TH IS IS NOT AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT AND THIS IS MISTAKE APPARENT FROM RECORD. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSE SSEE AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE VIDE PARA 5.1 AND 5.2 AS UNDER: 5.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. ARR. AS STATED ABOVE, THE PRINCIPLE GOVERNING THE APPLICABILITY OF SECTION 15 4 HAS BEEN LAID DOWN IN THE DECISION OF THE SUPREME COURT IN THE CASE OF T. S. BALARAM, INC OME-TAX OFFICER V. VOLKART BROTHERS. THE SUPREME COURT OBSERVED THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH HAD TO B E ESTABLISHED BY A LONG-DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MIGHT BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW WAS NOT A MIST AKE APPARENT FROM THE RECORD. HERE REFERENCE MAY ALSO BE MADE TO THE DECISION OF THE A PEX COURT IN THE CASE OF HARBANS LAL MALHOTRA & SONS PRIVATE LTD. V. INCOME-TAX OFFICER, WHERE IT WAS HELD THAT A QUESTION WHICH INVOLVED INTERPRETATION OF LAW AND DETERMINAT ION OF CONTROVERSIAL FACTS COULD NOT BE RECTIFIED UNDER SECTION 154 OF THE INCOME-TAX AC T, 1961. LIKEWISE IN DEVA METAL POWDERS (P.) LTD. V. COMMISSIONER, TRADE TAX, UP [2 008] 2 SCC 439, A DIVISION BENCH OF THE APEX COURT HELD THAT A RECTIFIABLE MISTAKE M UST EXIST AND THE SAME MUST BE APPARENT FROM THE RECORD. IT MUST BE A PATENT MISTA KE, WHICH IS OBVIOUS AND WHOSE DISCOVERY IS NOT DEPENDENT ON ELABORATE ARGUMENTS. TO THE SAME EFFECT IS THE JUDGMENT OF THE APEX COURT IN THE CASE OF CCE V. A.S. C. U LTD. 2003 (151) ELT 481, WHEREIN IT HAS BEEN HELD THAT A RECTIFIABLE MISTAKE IS A MISTAKE WHICH IS OBVIOUS AND NOT SOMETHING WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING OR WHERE TWO OPINONS ARE POSSIBLE. DECISION ON DEBATABLE POINT OF LAW CA NNOT BE TREATED AS MISTAKE APPARENT FROM THE RECORD. 5.2. NOW THE ISSUE TO BE EXAMINED IS, WHETHER THE V IEW TAKEN BY THE ASSESSING OFFICER PREVIOUSLY AND THE PRESENT VIEW ARE TWO CONCEIVABLE DIFFERENT POSSIBLE VIEWS OR WHETHER THE PREVIOUS VIEW OF THE ASSESSING OFFICER WAS A VI EW WHICH WAS NOT POSSIBLE BUT WAS ONLY A MISTAKE. HOWEVER IN THE CASE UNDER CONSIDERA TION THE ISSUE OF DISPUTE IS WHETHER THE DIFFERENCE OF THE REVALUED ASSET CAN BE ADDED B ACK WHILE CALCULATING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE ABOVE QUESTIONS IS NOT FREE FROM THE MISCHIEF OF TWO POSSIBLE VIEWS. MOREOVER DIFFERENT VEWS ON THE ISS UE OF RECALCULATION OF BOOK PROFIT HAS ALREADY BEEN DELIVERED BY VARIOUS COURTS. CONSIDERI NG ABOVE, I AM OF THE OPINION THAT THE ISSUE IS DEBATABLE. HENCE ON THIS GROUND SECTION 15 4 CANNOT BE RESORTED TO. ACCORDINGLY 3 ITA NO.1095/K/2011 J.L. MORISON (INDIA) LTD.. AY 2003-04 THE ADDITION MADE BY THE ASSESSING OFFICER IN CALCU LATION OF BOOK PROFIT UNDER SECTION 154 IS DELETED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE ON THE BASIS OF VALUATION REPORT DATED 25.04.2002 I.E. THE FAIR MARKET VALUE OF THE PROPERTY IN THE YEAR 2002 FOR KANDIVEL I FACTORY, LAND AND BUILDING BY CREDITING THE SURPLUS OF REVALUATION OF THOSE ASSETS TO CAPITAL R ESERVE AND DEBITING THE SAME TO RESPECTIVE ASSETS. ADMITTEDLY, THERE WAS NO DEBIT OR CREDIT T O P&L ACCOUNT DUE TO SUCH REVALUATION. IT IS ALSO TO BE STATED THAT WHEN THIS PARTICULAR ASSET W AS SOLD DURING THE YEAR, THE DIFFERENCE BETWEEN THE REVALUED BOOK FIGURE AND SALE CONSIDERATION WAS CREDITED TO P&L ACCOUNT. THE FINAL ACCOUNTS WERE APPROVED IN THE ANNUAL GENERAL MEETIN G OF THE ASSESSEE COMPANY AND ALSO FILED THE SAME WITH REGISTRAR OF COMPANIES. ALL THESE DO CUMENTS SHOW THAT FINAL ACCOUNTS OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION, WHICH INCLUDES P&L ACCOUNT, WAS PREPARED IN ACCORDANCE WITH PART II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND IN TERM OF PROVISIONS OF SECTION 115JB OF THE ACT. AS PER THE CLAIM OF ASSESSEE, THE AO IS NOT EMPOWERED TO ENQUIRE ABOUT THE ENTRIES MADE IN THE BOOKS OF A CCOUNT WHEN THE ACCOUNTS ARE DULY CERTIFIED BY CHARTERED ACCOUNTANT AND ARE PREPARED IN TERM OF PART II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 WHILE COMPUTING BOOK PROFIT U/S . 115JB OF THE ACT. WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE TRIBUNAL JUD GMENT IN THE CASE OF ITO VS. M/S. GALAXY SAWS P. LTD., ITA NO.3747/M/2010, FOR AY 2005-06 DA TED 11.03.2011, WHEREIN IT HAS BEEN HELD AS UNDER: 4.4 WE ALSO NOTE FROM THE PROVISIONS OF EXPLANATIO N 1 TO SECTION 115JB(2) THAT AMOUNT CARRIED TO ANY RESERVE BY WHATEVER NAME CALLED HAS TO BE ADDED TO THE NET PROFIT IF THE AMOUNT HAD BEEN DEBITED TO THE PROFIT AND LOSS ACCO UNT. IN THIS CASE THE REVALUATION RESERVE HAD BEEN DIRECTLY TAKEN TO THE BALANCE SHEE T AND NOT DEBTED TO THE PROFIT AND LOSS ACCOUNT AND THEREFORE THE AMOUNT COULD NOT BE ADDED UNDER CLAUSE (B) OF EXPLANATION 1 TO SECTION 115JB(2). IT IS ALSO PERTINENT TO NOTE THAT CLAUSE (IIA) WAS INSERTED TO THE EXPLANATION 1 WITH EFFECT FROM 1.4.2007 N WHCH IT WAS PROVIDED THAT AMOUNT OF DEPRECIATON DEBITED TO THE PROFIT AND LOSS ACCOUNT EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS HAS TO BE REDUCED FROM THE NET PROFIT. THUS THE LEGISLATURE THOUGH IT FIT TO EXCLUDE THE DEPRECIATION ON ACCOUNT OF RE VALUATION OF ASSETS FROM THE AMOUNT TO BE REDUCED FROM THE NET PROFIT BUT THERE WERE NO SIMIL AR PROVISION INSERTED FOR ADDITION OF REVALUATION RESERVE TO THE NET PROFIT EVEN IF THE S AME WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. THS SHOWS THAT THE LEGISLATURE HAD CONSCI OUSLY HAD MADE ANY PROVISION FOR ADDITION ON ACCOUNT OF REVALUATION RESERVE TAKEN TO THE BALANCE SHEET. EVEN OTHERWISE THIS ISSUE HAS BEEN SETTLED BY HONB LE APEX COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT 255 ITR 273, WHEREIN IT HAS BEEN HELD AS UNDER: THEREFORE, WE ARE OF THE OPINION, THE ASSESSING OF FICER WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXA MINING WHETHER THE 4 ITA NO.1095/K/2011 J.L. MORISON (INDIA) LTD.. AY 2003-04 BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES U NDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO TH E SAID SECTION. TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE TH E JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PRO- VIDED IN THE EXPLANATION TO SECTION 115J. IN TERM OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT NO TINKERING WITH THE ACCOUNTS OF THE ASSESSEE CAN BE MADE WHAT TO TALK OF REVALUATION OF PROPERTY AND THERE IS NO PROVISION FOR THE SAME. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.06.2 014. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH JUNE, 2014 -. #/0 1 JD.(SR.P.S.) 2 *3 4 3%5- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT J.L. MORISON (INDIA) LTD., 20, SIR R. N . MUKHERJEE ROAD, KOLKATA-700 001. 2 *+() / RESPONDENT DCIT, CENTRAL CIRCLE-VII, KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:; *# / DR, KOLKATA BENCHES, KOLKATA +3 */ TRUE COPY, #