DCIT 5(3)(2), MUMBAI V. TOLANI SHIPPING CO. LTD, MUMBAI

ITA 1251/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8648 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Capital receipt; Revised return
• Section: 143(3); 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1251/MUM/2015 ASSESSMENT YEAR : 2006-07 DY CIT 5(3)(2) MUMBAI VS. TOLANI SHIPPING CO. LTD., 10-A, BAKHTAWAR, NARIMAN POINT, MUMBAI 400 021 PAN AAACT4127C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V JUSTIN RESPONDENT BY : SHRI NEELKANTH KHANDELWAL DATE OF HEARING : 31.1 0 .2017 DATE OF PRONOUNCEMENT : 13 . 11 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-10, DATED 02.12.2014, FOR A.Y.2006-07, BY TA KING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ENHAN CEMENT OF BOOK PROFIT OF THE ASSESSEE U/S. 115JB(2) BY HOLDING THA T THE ENHANCEMENT MADE IN BOOK PROFIT WAS A DEBATABLE ISS UE AND ISSUES WHERE TWO OPINIONS ARE POSSIBLE CANNOT BE A SUBJECT MATTER OF RECTIFICATION U/S. 154 OF THE INCOME-TAX ACT, 1961. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAWS THE LD. CIT(A) FAILED TO APPRECIATE THAT THE R EDUCTION OF PROFIT ON SALE OF DEPRECIABLE ASSET FROM THE PROFIT AS PER PROFIT & LOSS ACCOUNT WAS NOT COVERED UNDER ANY OF THE CLAUSES (I ) TO (VIII) OF THE ITA NO.1251/MUM/2015 TOLANI SHIPPING CO. LTD. 2 EXPLANATION 1 TO SECTION 115JB(2) AND, THEREFORE, T HE ASSESSEE HAD ERRED IN REDUCING THE PROFIT ON SALE OF DEPRECIABLE ASSET WHILE COMPUTING THE BOOK PROFIT AND THIS WAS A MISTAKE AP PARENT FROM RECORD WHICH COULD BE RECTIFIED U/S. 154 OF THE INC OME-TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT U/S. 143(3) WAS COMPLETED, WHEREIN ADDITIONS ON ACCOUNT OF ORDER U/ S. 92CA(3) AMOUNTING TO ` 9,69,74,059/- AND DISALLOWANCE U/S.14A AMOUNTING T O ` 45,54,204/- WERE MADE. THE ASSESSING OFFICER NOTED THAT THERE ARE D ISCREPANCIES ON ACCOUNT OF IRREGULAR ALLOWANCE OF CHAPTER VIA DEDUCTION AND ESCAPEMENT OF BOOK PROFIT U/S. 115JB. ACCORDINGLY, NOTICE U/S. 154 WA S ISSUED TO THE ASSESSEE. THE ASSESSEE OBJECTED TO THE NOTICE STATING THAT TH ERE IS NO MISTAKE APPARENT WHICH REQUIRES RECTIFICATION. THE ASSESSING OFFICE R DID NOT AGREE WITH THE ASSESSEE AND OBSERVED THAT THE ASSESSEE IN ITS SECO ND REVISED RETURN FILED ON 05.03.2009 HAS DECLARED INCOME UNDER NORMAL PROVISI ONS OF THE ACT AT ` 18,30,43,646/- AND PROFIT TAXABLE U/S. 115JB AT L OSS OF ` 4,02,99,527/-. AS THE ASSESSEE IS A SHIPPING COMPANY INCOME AND HAS O FFERED TO PAY TAX ON ITS INCOME AS PER TONNAGE TAX SCHEME, INCOME IS TO BE C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115V-I OF THE INCOME TAX ACT. AS PER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 115VI, THE PROFITS FR OM CORE ACTIVITIES OF A COMPANY ARE FROM OPERATING QUALIFYING SHIPS. THE A SSESSING OFFICER THEREFORE ENHANCED THE BOOK PROFITS U/S 154 AND WORKED OUT TH E SAME TO ` 50,46,75,094/-. THE ASSESSEE WENT IN APPEAL BEFOR E THE CIT(A). THE ITA NO.1251/MUM/2015 TOLANI SHIPPING CO. LTD. 3 CIT(A) DID NOT AGREE WITH THE ASSESSING OFFICER AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SO FAR AS ENHANCEMENT OF INCOME ON ACCOUNT OF PROFIT ON DEPRECIABLE ASSET IS CONCERNED, THE CIT(A) DELETED IT. 3. WE HAVE HEARD THE RIVAL SUBMISSION AND HAVE GONE THROUGH THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW. IN THE APPEAL BEFORE US, THERE IS ONLY ONE ISSUE REGARDING THE ENHANCEMENT OF INCO ME U/S. 154 ON ACCOUNT OF THE REDUCTION OF PROFIT ON SALE OF DEPRECIABLE A SSETS. WE NOTED THAT THERE ARE TWO SPECIAL BENCH DECISIONS RELATING TO THE ISS UE. THE SPECIAL BENCH OF THE ITAT, KOLKATA, IN THE CASE OF SUTLEJ COTTON MIL LS (45 ITD 22) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SPECIAL BEN CH OF ITAT, HYDERABAD, IN THE CASE OF RAIN COMMODITIES LTD. (ITA NO.673/HYD/2 009) DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT. WE NOTED THAT THERE A RE TWO SPECIAL BENCH DECISIONS TAKING DIFFERENT VIEW, THEREFORE, THE ISS UE INVOLVED IS A DEBATABLE ONE. SINCE THE ISSUE IS A DEBATABLE ONE, IT CANNOT BE REGARDED TO BE A MISTAKE APPARENT ON RECORD. A MISTAKE APPARENT ON RECORD CAN ONLY BE ONE WHERE THERE CANNOT BE ANY TWO CONCEIVABLE OPINIONS. THIS IS A CASE WHERE EVEN THE SPECIAL BENCH HAS TAKEN TWO DIFFERENT VIEW S. WE FURTHER NOTED THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SU-RA JEWELLER INDIA LTD 21 SOT 79, TOOK A VIEW THAT CAPITAL RECEIPT WHI CH DO NOT CONSTITUTE INCOME UNDER THE ACT CANNOT BE BROUGHT TO TAX NET B Y EMPLOYING THE MECHANISM OF SECTION 115JB. SINCE THE ISSUE INVOLV ED IS A DEBATABLE ONE AND ITA NO.1251/MUM/2015 TOLANI SHIPPING CO. LTD. 4 DIFFERENT SPECIAL BENCH HAS TAKEN DIFFERENT VIEWS, THEREFORE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT (A) DELETING THE ENHANCEMENT MADE BY THE ASSESSING OFFICER IN THE INCOME OF THE ASSESSEE BY TAKING ACTION U/S. 154. WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A). 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF NOVEMBER, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 13 TH NOVEMBER, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, E BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI