DCIT, Hyderabad V. M/s Ushodaya Enterprises Ltd., Hyderabad

ITA 1419/HYD/2008

• Counselvise Citation: 141922514 RSA 2008
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D D GOYAL
• Assessee Lawyers: V SIVA KUMAR
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AN D SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO. 1419/HYD/2008 (ASSESSMENT YEAR 2004-05) THE DCIT CIRCLE-16(2), HYDERABAD VS M/S. USHODAYA ENTERPRISES LTD., HYDERABAD PAN: AAACU2690P APPELLANT RESPONDENT APPELLANT BY: SHRI D.D. GOYAL RESPONDENT BY: SHRI V.SIVA KUMAR DATE OF HEARING: 22.09.2011 DATE OF PRONOUNCEMENT: 28.09.2011 ORDER PER ASHA VIJAYARAGHAVAN, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, HYDERAB AD DATED 30.06.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE-COMPANY DERIVES INCOME FROM BUSINES S OF PUBLISHING NEWSPAPERS, TELECASTING AND MANUFACTURE OF FOOD PRODUCTS. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 AND THE ASSESSING OFFICER WHIL E COMPUTING THE PROFIT U/S. 115JB OF THE ACT COMPUTED THE BOOK PROFIT AT RS. 223.34 LAKHS WITHOUT CONSIDERING PRIOR PERIOD EXPEN DITURE OF RS. 312.92 LAKHS DEBITED TO THE PROFIT AND LOSS A/C. ST ATING THAT THE NET PROFIT AS PER PROFIT AND LOSS A/C. IS RS. 223.34 LA KHS. 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) AND SUBMITTED THAT IN THE CASE OF THE ASSESS EE, THERE IS LOSS OF RS. 89.63 LAKHS AS PER PROFIT AND LOSS A/C. FOR THE A.Y. 2004-05 AFTER CONSIDERING THE PRIOR PERIOD EXPENDITURE AND EXTRAORDINARY ITEMS DEBITED TO PROFIT AND LOSS A/C.. IT WAS STAT ED THAT THE I.T.A. NO. 1419/HYD/2008 M/S. USHODAYA ENTERPRISES LTD. ======================= 2 ASSESSING OFFICER WAS NOT JUSTIFIED IN TAKING RS. 2 23.34 LAKHS AS NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFITS IG NORING THE PRIOR PERIOD EXPENDITURE OF RS. 312.7 LAKHS DEBITED TO PR OFIT AND LOSS A/C. THE LEARNED AR FURTHER STATED THAT NON-CONSID ERATION OF PRIOR PERIOD EXPENDITURE OF RS. 312.97 LAKHS DEBITED TO P ROFIT AND LOSS A/C. IS AGAINST THE DECISION OF THE HONBLE APEX CO URT IN APOLLO TYRES LTD. VS. CIT (255 ITR 273). HE FURTHER SUBMI TTED THAT PRIOR PERIOD EXPENDITURE DEBITED TO PROFIT AND LOSS A/C. HAS TO BE CONSIDERED FOR COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, AS PER THE DECISION OF THE HONBLE ITAT HYDERABAD, IN GULF OIL CORPORATION LTD. VS. ACIT IN ITA NO. 1158/HYD/2002 DATED 21.09. 2006 FOR A.Y. 2002-03 REPORTED IN 112 TTJ 135. 4. THE CIT(A) HELD AS FOLLOWS: 'I HAVE GONE THROUGH THE SAID DECISION OF THE HONB LE SUPREME COURT IN APOLLO TYRES LTD. VS. CIT (SUPRA) AND THE DECISION OF THE HONBLE ITAT, HYDERABAD 'B' BENCH IN THE CASE OF GULF OIL CORPORATION LTD. (SUP RA). IN THIS CASE BEFORE THE HONBLE ITAT, THE MATTER RELATES TO BOOK PROFIT U/S. 115JB. WHILE COMPUTING BOOK PROFIT, THE ASSESSEE STARTED WITH THE FIGURE O F NET PROFITS OF RS. 978.55 LAKHS WHICH WAS THE PROFIT BE FORE TAXATION AS SHOWN IN THE PROFIT AND LOSS A/C. THIS PROFIT WAS ARRIVED AT AFTER CREDITING RS. 3.06 LAKH S AS WRITE OFF/PROVISION AND AFTER CHARGING RS. 109.96 L AKHS AS ADDITIONAL ADVISORY FEE FOR SALE OF INVESTMENTS, CLASSIFYING THESE TWO ITEMS AS EXTRAORDINARY ITEMS IN THE PROFIT AND LOSS A/C. PROFIT BEFORE THE EXTRAORDINARY ITEMS AMOUNTED TO RS. 1,085.45 LAKHS. THE ASSESSING OFFICER TOOK THE FIGURE OF RS. 1,085. 45 LAKHS AS THE BASE FIGURE FOR CALCULATING BOOK PROFI T, STATING THAT THE ASSESSEE WAS NOT ENTITLED TO REDUC E THE AMOUNT OF RS. 109.96 LAKHS PAID TOWARDS ADDITIONAL ADVISORY FEE. THE HONBLE ITAT OBSERVED THAT SCHEDULE IV OF THE COMPANIES ACT, 1956, IN ACCORDANCE WITH WHICH PROFIT AND LOSS A/C. OF THE COMPANY HAS TO BE PREPARED FOR THE PURPOSES OF SECTION 115JB, DOES NOT MAKE ANY DISTINCTION BETWEEN PROFIT AND LOSS A/C. AND PROFIT AND LOSS APPROPRIATION ACCOUNT. ALL THE ITEMS WHICH ARE GENERALLY CLASSIFIED IN THE APPROPRIATION ACCOUNT A RE IN FACT TO BE INCLUDED IN THE PROFIT AND LOSS A/C. PREPARED AS PER PARTS II AND III OF SCHEDULE VI. T HE I.T.A. NO. 1419/HYD/2008 M/S. USHODAYA ENTERPRISES LTD. ======================= 3 HONBLE ITAT FURTHER OBSERVED, THEREFORE, THE START ING POINT FOR COMPUTATION OF BOOK PROFITS FOR PURPOSES OF SECTION 115JB SHOULD BE THE AMOUNT WHICH IS THE FIN AL BALANCE IN THE PROFIT AND LOSS A/C. CARRIED TO BALA NCE SHEET AND IN DOING SO, EVEN THE EXTRAORDINARY ITEMS HAVE TO BE DEBITED TO THE PROFIT AND LOSS A/C.. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL ITAT, I HOLD THAT PRIOR PERIOD EXPEN DITURE OF RS. 312.97 LAKHS HAS TO BE CONSIDERED FOR COMPUTING THE BOOK PROFIT AND ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE SAME AND ALSO TO CONSIDER THE AMOUNT WHICH IS THE FINAL BALANCE IN THE PROFIT AND LOSS A/C. CARRIED TO BALA NCE SHEET AS THE STARTING POINT FOR COMPUTING BOOK PROF IT U/S. 115JB IN THIS CASE.' AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US. 5. THE LEARNED DR RELIED ON THE DECISION OF THE MAD RAS ITAT 'B' BENCH DECISION IN THE CASE OF SHRI RAJENDRA MILLS L TD. VS. DCIT, 63 TTJ (MAD) 697. 6. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E CIT(A) HAS FOLLOWED THE DECISION OF HYDERABAD BENCH IN THE CAS E OF GULF OIL CORPORATION VS. ACIT REPORTED IN 112 TTJ 135 WHILE DECIDING THE ISSUE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDE R OF THE CIT(A) AND THE SAME IS UPHELD. THE GROUNDS RAISED BY THE DEPA RTMENT ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2011. SD/- (AKBER BASHA) ACCOUNTANT MEMBER SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 28 TH SEPTEMBER, 2011 TPRAO I.T.A. NO. 1419/HYD/2008 M/S. USHODAYA ENTERPRISES LTD. ======================= 4 COPY FORWARDED TO: 1. DY. COMMISSIONER OF I.T.-16(2), 6 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 2. M/S. USHODAYA ENTERPRISES LTD., 6-3-570, EENADU COMPLEX, SOMAJIGUDA, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD 4. THE CIT-IV, HYDERABAD 5. DR, B-BENCH, ITAT, HYDERABAD.