THE DCIT, Hyderabad V. M/s Sangam Healthcare Products Ltd, Secunderabad

ITA 1206/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9829 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 29-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: F M MONTHY
• Section: 115JB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1206 /H/2009 ASSESSMENT YEAR 2005-06 THE DY. CIT, CIRCLE 3(1), HYDERABAD VS M/S SANGAM HEALTHCARE PRODUCTS LTD., SECUNDERABAD. (PAN AADCS 4069 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI F.M. MONTHY RESPONDENT BY : NONE O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE REVENU E IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) TIRUPATHI DATED 25.9.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE MAIN GRIEVANCE OF THE REVENUE IN IT S APPEAL IS THAT THE CIT(A) OUGHT TO HAVE UPHELD THE DISALLOWANCE OF RS.1,54,29,213/- BEING INTEREST ACTUALLY PAID OUT OF DEDUCTION CLAIMED U/S 115JB(2)(I) OF THE IT ACT. 3. BRIEF FACTS OF THE ISSUE ARE THAT TH E ASSESSEE IS A COMPANY HAS TAKEN UNSECURED LOAN FROM INDUSTRIES DEVELOPMENT BANK OF INDIA SOMEWHERE IN THE YEAR 1996-97. THE ASSESSEE COMPANY HAS BEEN DEFAUL TING IN THE PAYMENT OF INTEREST SINCE THEN. DURING THE ASSESSMENT YEAR 20 05-06 THE ASSESSEE COMPANY ENTERED INTO ONE TIME SETTLEMENT AGREEMENT WITH IDB I ACCORDING TO WHICH THE ASSESSEE COMPANY RECEIVED WAIVER OF INTEREST AMOUNT ING TO RS.7,49,28,338/- WHICH WAS NOT CREDITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE COMPANY HAS NET PROFIT OF RS.1,51,51,478/- FOR THE YEAR UNDER CONSI DERATION. SINCE THERE IS HUGE AMOUNT OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRE CIATION FOR EARLIER YEARS ITA NO.1206/H/2009 M/S SANGAM HEALTH CARE PRODUCTS, S. BAD 2 2 THERE WAS NO TAXABLE INCOME AS PER NORMAL PROVISION S OF IT ACT. HENCE THE ASSESSEE COMPANY CALCULATED TAXABLE INCOME U/S 115J B OF THE IT ACT. HOWEVER, WHILE COMPUTING THE INCOME IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF IT ACT, THE ASSESSEE COMPANY CONSIDERED WAIVER OF INTE REST RECEIVED RS.7,49,28,338/- AT NET PROFIT OF RS.9,42,34,886/-. 4. AS PER PROVISIONS OF SECTION 115JB, A COMPANY IS REQUIRED TO PREPARE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR IN ACCORDANCE WITH THE PROVISIONS OF PART II & III OF SCHEDULE VI TO THE C OMPANIES ACT, 1956. THE NET PROFIT THUS ARRIVED IS TO BE INCREASED BY ITEMS MEN TIONED FROM (A) TO (G) AND REDUCED BY ITEMS FROM (I) TO (VII) TO ARRIVE AT TAX ABLE BOOK PROFIT FOR THE YEAR. THE NET PROFIT OF THE ASSESSEE COMPANY AS PER PROFIT AN D LOSS ACCOUNT PREPARED IN ACCORDANCE WITH SCHEDULE VI OF COMPANIES ACT WAS RS .9,42,34,886/-. IN THE COMPUTATION STATEMENT FILED FOR THE COMPANY REDUCED THE NET PROFIT BY AN AMOUNT OF RS.7,92,06,876/- U/S 115JB(I) OF THE ACT. LATER , THE ASSESSING OFFICER NOTED THE PROVISIONS OF SECTION 115JB(I) OF THE ACT AND OBSER VED THAT THE ASSESSEE HAS NOT COMPLIED THIS CONDITION AND AS SUCH WAIVER OF THE I NTEREST RECEIVED BY THE ASSESSEE COMPANY CANNOT BE ALLOWED AS DEDUCTION U/S 115JB(I) OF THE ACT. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(A). THE CIT(A) REVERSED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING ON 9.2. 2011, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HEARD THE LEARNED DEPARTMENTAL R EPRESENTATIVE AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISIONS OF SECTION 115JB 2(1) WHICH READS A S FOLLOWS: THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION (EXCLUDING A RESERVE CREATED BEFORE 1 ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PRO FIT AND LOSS ACCOUNT: ITA NO.1206/H/2009 M/S SANGAM HEALTH CARE PRODUCTS, S. BAD 3 3 PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVI SIONS MADE IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON AFTER THE 1 ST DAY OF APRIL, 1997 SHALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS TH E BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION B ELOW SECOND PROVISO TO SECTION 115JA, AS THE CASE MAY BE; 6. FROM THE PLAIN READING OF SECTION, IT IS CLEAR THAT PROVISO TO SECTION 115JB (2)(I) OF THE IT ACT ALLOWS DEDUCTION OF PROV ISION AND RESERVES CREATED IN EARLIER YEARS FROM THE NET PROFIT OF CURRENT YEAR O NLY IF THE AMOUNTS WITHDRAWN FROM RESERVES OR PROVISO IN THOSE RESPECTIVE YEARS WERE ADDED BACK TO BOOK PROFITS OF THOSE YEARS. THIS CONDITION LAID DOWN UNDER PRO VISO IS APPLICABLE TO THE ASSESSEE COMPANY IF THERE WAS BOOK PROFIT IN THAT Y EAR. THE CIT(A) HAS NOT CONSIDERED THE ABOVE PROVISO IN PROPER PERSPECTIVE AND THE ORDER PASSED BY THE CIT(A) IS CRYPTIC IN NATURE. AS SUCH, WE SET ASIDE THE APPEAL OF THE REVENUE TO THE FILE OF CIT(A) TO GIVE HIS FINDINGS ON THE APPLICAB ILITY OF THE PROVISIONS OF SECTION 115JB (2) (I) OF THE IT ACT AS ENUMERATED ABOVE. 7. IN THE RESULT, THE APPEAL OF THE R EVENUE IN ITA NO.1206/H/2009 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 11.2.2011 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 11 TH FEBRUARY, 2011 ITA NO.1206/H/2009 M/S SANGAM HEALTH CARE PRODUCTS, S. BAD 4 4 COPY FORWARDED TO: 1. THE DCIT, CIRCLE 3(1), HYDERABAD 2. M/S SANGAM HEALTHCARE PRODUCTS LTD., 205 & 206 AMARCHAND SHARMA COMPLEX, SP ROAD, SECUNDERABAD 3. CIT(A)- TIRUPATHI 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP