ACIT, CHENNAI V. Megasoft Ltd., CHENNAI

ITA 1251/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8674 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: DR C P RAMASWAMY
• Keywords: Benefit of exemption
• Section: 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2560/MDS/2014 ./ ITA NOS.1250, 1251 & 1252/MDS/2015 ./ ITA NO. 1416/MDS/2015 ( )( / ASSESSMENT YEARS: 2007-08, 2006-07, 2008-09, 2010-1 1 & 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(2), THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(1), CHENNAI - 600 034. V. M/S MEGASOFT LIMITED, NO.85, KUTCHERY ROAD, MYLAPORE, CHENNAI - 600 004. PAN : AABCM 8933 A (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : DR. MILIND MADHUKAR BHUSARI, CIT -.+, / 0 / RESPONDENT BY : DR. C.P. RAMASWAMY, ADVOCATE 1 / 2% / DATE OF HEARING : 06.06.2016 3') / 2% / DATE OF PRONOUNCEMENT : 24.08.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THESE APPEALS OF THE REVENUE ARE DIRECTED AG AINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), CHENNAI, FOR THE ASSESSMENT YEARS 2007-08, 2006-07, 2008-09, 2010-11 AND 2011-12. SINCE COMMON ISSUE ARISES FOR CONSIDERATION 2 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETH ER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTA L REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND CLAIMED DEDUCTION UNDER SECTION 10A OF THE INCOME-TAX ACT, 1961 (IN S HORT 'THE ACT'). REFERRING TO THE ORDER OF THE ASSESSING OFFICER, TH E LD. D.R. SUBMITTED THAT THE UNABSORBED LOSS SHOULD NOT BE AD JUSTED BEFORE ALLOWING DEDUCTION UNDER SECTION 10A OF THE ACT. T HE ASSESSING OFFICER FOUND THAT THIS TRIBUNAL IN THE CASE OF AMN ET SYSTEMS HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. SINC E THE ISSUE WAS PENDING BEFORE THE HIGH COURT, TO KEEP THE MATTER A LIVE, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E. HOWEVER, ON APPEAL, THE CIT(APPEALS) BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN AMNET SYSTEMS (SUPRA), DIRECTED THE ASSESSING OFFIC ER TO DELETE ` 87,18,036/-. ACCORDING TO THE LD. D.R., SINCE THE MATTER IS PENDING BEFORE THE HIGH COURT, THE CIT(APPEALS) OUGHT NOT H AVE FOLLOWED THE ORDER OF THIS TRIBUNAL. 3 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 3. ON THE CONTRARY, DR. C.P. RAMASWAMI, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT SECTION 10A OF THE ACT IS A PROVISION FOR EXEMPTION AND NOT A DEDUCTION. THE LOSSES SUFFERED BY OTHER ELIGIBLE UNIT CANNOT BE SET OFF AGAINST THE PROFIT OF SECTION 10A UNIT BEFORE GIVING EXEMPTION. ACCORDING TO THE LD. COUN SEL, THE BENEFIT OF SECTION 10A OF THE ACT IS AVAILABLE TO THE ASSES SEE IN RESPECT OF ELIGIBLE UNIT INDEPENDENTLY AND THE LOSSES OF NON-E LIGIBLE UNIT NEEDS TO BE CARRIED FORWARD AND SET OFF AGAINST THE INCOM E IN THE SUBSEQUENT YEARS. A SIMILAR VIEW WAS TAKEN BY THIS TRIBUNAL IN AMNET SYSTEMS (SUPRA). THE CIT(APPEALS) HAS FOLLOW ED THE ORDER OF THIS TRIBUNAL. THE ASSESSING OFFICER, AFTER TAK ING NOTE OF THE DECISION OF THIS TRIBUNAL, DECIDED THE MATTER AGAIN ST THE ASSESSEE ONLY WITH AN INTENTION TO KEEP THE MATTER ALIVE. A CCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS BOUND TO FOLLOW T HE ORDER OF THIS TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ISSUE ARISES FOR CONSIDERATION IS SET OFF OF BUSINESS LOSS / DEP RECIATION OF THE OTHER UNITS FOR COMPUTING DEDUCTION UNDER SECTION 1 0A OF THE ACT. THIS TRIBUNAL IN AMNET SYSTEMS (SUPRA) EXAMINED THE ISSUE AND 4 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 FOUND THAT THE ELIGIBILITY OF EXEMPTION UNDER SECTI ON 10A OF THE ACT HAS TO BE CONSIDERED INDEPENDENTLY AND THE LOSSES O F OTHER UNITS CANNOT BE SET OFF. IN FACT, THE ORDER OF THIS TRIB UNAL IN AMNET SYSTEMS WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT THE DEPARTMENT HAD PRE FERRED APPEAL BEFOE THE HIGH COURT, THEREFORE, TO KEEP THE MATTER ALIVE, HE REJECTD THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE MATTER IS PENDING BEFORE THE HIGH COURT, THAT CANNOT BE A GROUND FOR NOT FOLLOWING THE ORDER OF T HIS TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT THE MADRAS HIGH CO URT HAS STAYED THE ORDER OF THIS TRIBUNAL IN AMNET SYSTEMS (COURT) . WHEN THE ORDER OF THIS TRIBUNAL IN AMNET SYSTEMS (SUPRA) IS NOT ST AYED, THE ASSESSING OFFICER OUGHT TO HAVE FOLLOWED THE ORDER OF THIS TRIBUNAL. SINCE THE ASSESSING OFFICER FAILED TO FOLLOW THE OR DER OF THIS TRIBUNAL, THE CIT(APPEALS) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO FOLLOW THE ORDER OF THIS TRIBUNAL AND DELETE THE ADDITION. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CLAI M OF THE ASSESSEE UNDER SECTION 10A OF THE ACT. 5 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 6. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTA L REPRESENTATIVE, SUBMITTED THAT IN RESPECT OF XIUS I NDIA LTD., THE ASSESSEE HAS NOT FILED ANY DECLARATION UPTO ASSESSM ENT YEAR 2005- 06 FOR OPTING OUT OF THE SCHEME. THE ASSESSEE HAS NOT OPTED FOR DEDUCTION UNDER SECTION 10A OF THE ACT IN THE INITI AL ASSESSMENT YEAR. THE FIRST YEAR OF THE OPERATION OF THE ASSES SEE-COMPANY WAS 2002-03. XIUS INDIA LTD. SUFFERED A LOSS OF ` 1,07,41,343/-. HOWEVER, THE BOOK PROFIT TO THE EXTENT OF ` 41,00,700/- WAS BROUGHT TO TAXATION UNDER SECTION 115JB OF THE ACT. FOR TH E ASSESSMENT YEAR 2004-05, THE INCOME OF THE ASSESSEE AS PER REG ULAR COMPUTATION WAS ` 79,82,112/-. HOWEVER, THE SAME WAS SET OFF AGAINST THE CARRY FORWARD LOSSES FOR ASSESSMENT YEA R 2002-03 AND THE BOOK PROFIT OF ` 78,09,173/- WAS TAXED UNDER SECTION 115JB OF THE ACT. THE INCOME DETERMINED UNDER REGULAR COMPU TATION TO THE EXTENT OF ` 79,82,112/- WAS SET OFF AGAINST THE CARRY FORWARD LOSS OF ` 78,09,173/-. THE ASSESSEE FILED FORM 56F CLAIMING THAT THE INITIAL DATE OF REGISTRATION OF STPI UNIT WAS 30.03.2001 AN D THE DATE OF COMMENCEMENT OF MANUFACTURING ACTIVITY WAS 01.11.20 03. ACCORDING TO THE LD. D.R., THE INFORMATION FURNISHE D BY THE ASSESSEE IN FORM 56F IS CONTRARY TO THE INFORMATION AVAILABLE ON 6 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 RECORD FOR THE ASSESSMENT YEAR 2002-03. THE ASSESS EE CLAIMED BEFORE THE ASSESSING OFFICER THAT EVEN THOUGH STPI UNIT WAS REGISTERED ON 30.03.2001, THE ASSESSEE HAD CHOSEN T O AVAIL EXEMPTION UNDER SECTION 10A OF THE ACT FROM THE ASS ESSMENT YEAR 2006-07. 7. REFERRING TO SECTION 10A(1) OF THE ACT, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT DEDUCTION UNDER SECTI ON 10A(1) OF THE ACT IS AVAILABLE IN RESPECT OF PROFITS AND GAIN S DERIVED BY AN UNDERTAKING FOR A PERIOD OF TEN CONSECUTIVE ASSESSM ENT YEARS BEGINNING WITH ASSESSMENT YEAR IN WHICH THE UNDERTA KING BEGAN TO MANUFACTURE OR PRODUCE THE COMPUTER SOFTWARE. THE LD. D.R. FURTHER SUBMITTED THAT SUB-SECTION (8) OF SECTION 1 0A PROVIDES AN OPTION TO THE ASSESSEE FOR OPTING OUT OF THE SCHEME BY FURNISHING RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. THE XIUS INDIA LTD. HAD NOT FURNISHED ANY DECLARATION UPTO ASSESSM ENT YEAR 2005- 06 FOR OPTING OUT THE SCHEME. HOWEVER, IT EXPRESSE D ITS NEGATIVE OPTION BY RETURNING THE BOOK PROFITS FOR TAXATION U NDER SECTION 115JB OF THE ACT FOR ASSESSMENT YEARS 2003-04 AND 2004-05 . IN THE ASSESSMENT YEAR 2005-06, XIUS INDIA LTD. WAS CLASSI FIED AS NON- STPI UNIT. THEREFORE, ACCORDING TO THE LD. D.R., T HE ASSESSEE IS NOT 7 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT . HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND THAT WHEN THERE WAS LOSS IN A PARTICULAR YEAR, THE QUESTION OF OPTI NG OUT OF THE SCHEME UNDER SECTION 10A OF THE ACT DOES NOT ARISE FOR CONSIDERATION. THE CIT(APPEALS) HAS ALSO FOUND THA T THE ASSESSEE HAS FILED FORM 56F ALONG WITH RETURN OF INCOME. TH E CIT(APPEALS) HAS FOUND THAT WHEN THERE IS STATUTORY OBLIGATION T O PAY TAX UNDER SECTION 115JB OF THE ACT, IT WOULD NOT TANTAMOUNT T O EXERCISING A NEGATIVE OPTION UNDER SECTION 10A OF THE ACT. THE OBSERVATION OF THE CIT(APPEALS) IS NOT CORRECT. WHEN THE ASSESSEE HAS NO TAXABLE INCOME AND PAID THE TAX UNDER SECTION 115JB OF THE ACT ON THE BOOK PROFIT, IT HAS TO BE PRESUMED THAT THE ASSESSEE HAD EXERCISED NEGATIVE OPTION. THEREFORE, ACCORDING TO THE LD. D .R., THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 8. ON THE CONTRARY, DR. C.P. RAMASWAMI, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER DENI ED THE CLAIM OF THE ASSESSEE UNDER SECTION 10A OF THE ACT ON THE GR OUND THAT THE ASSESSEE HAS NOT FURNISHED THE DECLARATION UPTO ASS ESSMENT YEAR 2005-06 FOR OPTING OUT THE SCHEME. ACCORDING TO TH E LD. COUNSEL, THE ASSESSING OFFICER HAS ALSO FOUND THAT XIUS INDI A LTD. WAS A 8 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 STPI UNIT. ACCORDING TO THE LD. COUNSEL, DECLARATI ON UNDER SECTION 10A(8) OF THE ACT, BEFORE THE DUE DATE FOR FILING O F THE RETURN UNDER SECTION 139(1) OF THE ACT WOULD BE NECESSARY IF THE ASSESSEE INTENDS TO KEEP AWAY ITSELF OF THE SCHEME. REFERRI NG TO SUB-SECTION (8) OF SECTION 10A OF THE ACT, THE LD.COUNSEL FOR T HE ASSESSEE SUBMITTED THAT IT MAY NOT BE NECESSARY FOR THE ASSE SSEE TO FILE EACH YEAR THE DECLARATION WITH THE DEPARTMENT FOR OPTING OUT OF THE SCHEME. SECTION 10A(8) OF THE ACT BEGINS WITH NON- OBSTANTE CLAUSE WHICH INDICATES THAT A RIGHT WAS CONFERRED ON THE A SSESSEE TO DECLARE THAT THE PROVISIONS OF THE ACT WOULD NOT BE APPLICABLE TO THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. COUNSEL, IT IS OBVIOUS THAT THE ASSESSEE CAN EXERCISE THE OPTION FOR OPTING OUT THE SCHEME UNDER SECTION 10A OF THE ACT. SECTION 10A OF THE A CT ALSO PROVIDES AN OPTION TO THE ASSESSEE TO SELECT FIRST YEAR OF T HE TEN YEARS AND ONCE THIS OPTION WAS EXERCISED, THE ASSESSEE WILL G ET THE BENEFIT OF EXEMPTION UNDER SECTION 10A OF THE ACT FOR THE NEXT CONSECUTIVE YEARS. ONCE FORM 56F WAS FILED WITHIN THE TIME LIM IT, IT WAS DEEMED THAT THE ASSESSEE HAS EXERCISED THE OPTION AND FROM THAT YEAR, THE BENEFIT IS AUTOMATIC. IT IS NOT NECESSARY THAT THE ASSESSEE HAS TO OPT OUT OF THE SCHEME IN THE EARLIER YEARS. ONCE T HE ASSESSEE 9 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 CHOSEN THE FIRST YEAR, THE SAME BENEFIT WOULD CONTI NUE FOR NEXT TEN CONSECUTIVE YEARS WITHOUT ANY INTERRUPTION. THE A SSESSEE, IN FACT, OPTED THE ASSESSMENT YEAR 2006-07 AS FIRST YEAR AND THEREFORE, IT WILL CONTINUE TO HAVE THE BENEFIT FOR THE NEXT CONS ECUTIVE TEN YEARS. 9. DR. C.P. RAMASWAMI, THE LD.COUNSEL FOR THE ASSES SEE, FURTHER SUBMITTED THAT THE DECLARATION IS REQUIRED TO BE FILED IN THE CASE THE ASSESSEE INTENDS TO OPT OUT OF THE SCHEME. THE SCHEME IS SPREAD OVER FOR A PERIOD OF FIFTEEN YEARS. THE ASS ESSEE WAS GIVEN THE OPTION OF SELECTING THE INITIAL YEAR. EVEN ASS UMING FOR ARGUMENT SAKE, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HA S OPTED OUT OF THE SCHEME, SUCH OPTION WOULD BE CONFINED ONLY TO T HAT PARTICULAR YEAR AND THE ASSESSEES OPTING OUT OF THE SCHEME MA Y DENY ITSELF THE BENEFIT OF SECTION 10A OF THE ACT FOR THAT PART ICULAR YEAR. IN THE SUBSEQUENT YEAR, IF IT DOES NOT OPT OUT AGAIN, BY V IRTUE OF DEFAULT CLAUSE IN SECTION 10A OF THE ACT, SHOULD AGAIN BE A PPLICABLE TO THE ASSESSEE. IN CASE THERE WAS NO PROFIT, THE PROVISI ONS OF SECTION 10A OF THE ACT SHOULD NOT BE APPLICABLE AT ALL. WH EN THE ASSESSEE SUFFERED A LOSS IN A PARTICULAR YEAR, THE QUESTION OF OPTING OUT OF THE SCHEME DOES NOT ARISE AT ALL SINCE SECTION 10A OF T HE ACT MAY NOT 10 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 BE APPLICABLE. ACCORDING TO THE LD. COUNSEL, SECTI ON 10A OF THE ACT WOULD COME INTO OPPORTUNITY WHEN THERE IS A POSITIV E INCOME. 10. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT SINCE THE ASSESSEE HAS OPTED THE BENEFIT FROM THE ASSESSM ENT YEAR 2006- 07, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE ASS ESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10A OF THE ACT. WHEN S ECTION 10A OF THE ACT PROVIDES AN OPTION TO THE ASSESSEE TO SELEC T THE FIRST YEAR OF OPERATION, AND THE ASSESSEE CHOOSES TO PREFER ASSES SMENT YEAR 2006-07, THERE IS NO REASON FOR REJECTING THE CLAIM OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISED THE OPTION FOR THE ASSE SSMENT YEAR 2006-07, THE BENEFIT WOULD CONTINUE FOR NEXT TEN CO NSECUTIVE YEAR. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(AP PEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10A OF THE ACT IN R ESPECT OF XIUS INDIA LTD., HYDERABAD, THE CLAIM OF THE REVENUE APP EARS TO BE THAT XIUS INDIA LTD., HYDERABAD WAS CLASSIFIED AS NON-ST PI UNIT IN THE ASSESSMENT YEAR 2005-06. THE REVENUE HAS ALSO CONT ENDED THAT 11 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 THE ASSESSEE HAS NOT FILED ANY DECLARATION UPTO ASS ESSMENT YEAR 2005-06 OPTING OUT OF THE SCHEME AS PROVIDED IN SEC TION 10A(8) OF THE ACT. THEREFORE, THE ASSESSING OFFICER DISALLOW ED THE CLAIM OF THE ASSESSEE. 12. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT(APPEALS) AND PROVISIONS OF SECTION 10A OF THE A CT. SECTION 10A OF THE ACT PROVIDES FOR DEDUCTION FOR TEN ASSESSMEN T YEARS OUT OF 15 ASSESSMENT YEARS. AN OPTION WAS GIVEN TO THE ASSES SEE TO SELECT THE ASSESSMENT YEAR IN WHICH THE DEDUCTION IS TO BE ALLOWED. WHEN THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION FOR EARL IER ASSESSMENT YEARS AND SELECTED THE ASSESSMENT YEAR 2006-07, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RI GHTLY ALLOWED THE CLAIM OF THE ASSESSEE. FOR THE ASSESSMENT YEAR 200 5-06, XIUS INDIA LTD. SUFFERED A LOSS. THE LOSS SUFFERED IN T HE ASSESSMENT YEAR 2005-06 WAS CARRIED OVER TO SET OFF AGAINST THE INC OME OF THE ASSESSMENT YEAR 2006-07. WHEN THE ASSESSEE SELECTE D THE INITIAL ASSESSMENT YEAR 2006-07, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 12 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 13. THE REVENUE HAS RAISED ONE MORE GROUND FOR THE ASSESSMENT YEAR 2006-07 TOWARDS BAD DEBT. 14. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENT AL REPRESENTATIVE, SUBMITTED THAT IT IS ONLY A PROVISI ON, THEREFORE, IT CANNOT BE ALLOWED. 15. ON THE CONTRARY, DR. C.P. RAMASWAMY, THE LD.COU NSEL FOR THE ASSESSEE, SUBMITTED THAT WHILE COMPUTING BOOK P ROFIT UNDER SECTION 115JB OF THE ACT, THE ASSESSING OFFICER DIS ALLOWED A PROVISION FOR DOUBTFUL DEBT TO THE EXTENT OF ` 1.30 CRORES. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER FAILED TO CONSIDER EXPLANATION 1 TO SECTION 115JB OF THE ACT. REFERRI NG TO THE JUDGMENT OF SUPREME COURT IN CIT V. HCL COMNET SYST EMS & SERVICES LTD. (305 ITR 409), THE LD.COUNSEL SUBMITT ED THAT THE DEBT PAYABLE BY THE ASSESSEE IS DIFFERENT FROM THE DEBT RECEIVABLE BY THE ASSESSEE. IN THIS CASE, THE DEBT IS NOT PAYABLE BY THE ASSESSEE BUT, RECEIVABLE BY THE ASSESSEE. THEREFORE, THE PROVISI ON FOR BAD AND DOUBTFUL DEBT WAS MADE TO COVER THE PROBABLE DIMINU TION IN THE VALUE OF ASSET. HENCE, THE CIT(APPEALS) HAS RIGHTL Y ALLOWED THE CLAIM OF THE ASSESSEE. 13 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT WHAT WAS CLAIMED AS BAD DEBT IS THE AM OUNT RECEIVABLE BY THE ASSESSEE AND NOT PAYABLE BY THE ASSESSEE. T HEREFORE, EXPLANATION 1 TO SECTION 115JB OF THE ACT MAY NOT B E APPLICABLE. THE DEBT PAYABLE BY THE ASSESSEE WAS REFLECTED IN T HE ASSET SIDE IN THE BALANCE SHEET WHICH IS NOT IN DISPUTE BEFORE TH E AUTHORITIES BELOW. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDING LY THE SAME IS CONFIRMED. 17. THE NEXT GROUND OF APPEAL RAISED FOR THE ASSESS MENT YEAR 2006-07 IS WITH REGARD TO ADJUSTMENT MADE BY THE AS SESSING OFFICER TOWARDS ARM'S LENGTH PRICE TO THE EXTENT OF ` 57,16,936/- ON CORPORATE GUARANTEE. 18. WE HAVE HEARD DR. C.P. RAMASWAMY, THE LD.COUNSE L FOR THE ASSESSEE ALSO. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO BEARING ON PROFITS, INCOME, LOSSES OR ASSETS OF THE ASSESSEE. THE CIT(APPEALS) BY FOLLOWING THE ORDER OF THIS TRI BUNAL IN REDINGTON (INDIA) LTD. V. JCIT (40 TAXMANN.COM 146) FOUND THAT 14 I.T.A. NO.2560/MDS/14 I.T.A. NOS.1250 TO 1 252/MDS/15 I.T.A. NO.1416/MDS/15 CORPORATE GUARANTEE GIVEN BY THE ASSESSEE DOES NOT HAVE BEARING ON PROFITS, INCOME OR ASSETS OF THE ASSESSEE. THER EFORE, THERE IS NO ANY ARM'S LENGTH PRICE ADJUSTMENT. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 19. IN THE RESULT, ALL THE APPEALS OF THE REVENUE S TAND DISMISSED. ORDER PRONOUNCED ON 24 TH AUGUST, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 24 TH AUGUST, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-IV, CHENNAI 4. 1 92 /CIT IV, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.