M/s. Claris Lifesciences Limited, Ahmedabad V. The ACIT,(OSD) Range-1, Ahmedabad

ITA 16/AHD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0530 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Keywords: Rectification of order; Retrospective amendment
• Section: 143(3); 80HHC; 234B; 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEVI , ACC OUNTANT MEMBER CLARIS LIFE SCIENCE LTD. CORPORATE TOWERS NR. PARIMAL CROSSING, ELLISBRIDGE, AHMEDABAD380006 PAN NO. AAACC6366Q (APPELLANT) VS . ACIT(OSD)&DCIT(OSD), RANGE-1 AHMEDABAD (RESPONDENT) REVENUE BY: SRI Y.P. VERMA, SR.D.R. ASSESSEE BY: SRI S.N. SOPARKAR, SR.A.R. WITH MS. URVASHI SHODHAN DATE OF HEARING : 06-3-2013 DATE OF PRONOUNCEMENT : 15-03-2013 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-VI, AHMEDABAD DATED 06/09/2010 & 18/05/2011. ITA NOS. 16/AHD/2011 &1949/AHD/2011 A.Y.:-2004-05 & 2005-06 RESPECTIVELY I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 2 2. SINCE IN BOTH THESE APPEALS ISSUE INVOLVED I.E. LEVYING OF INTEREST U/S 234B OF THE ACT IS SAME, WE ARE DISPOSING OF THESE APPEALS BY PASSING A CONSOLIDATED ORDER BY TAKING THE FACTS OF ASSESSMEN T YEAR 2005-06. 3. THE ASSESSING OFFICER HAS DEALT THE ISSUE AS UND ER:- 2.1 THE ASSESSEE HAS REQUESTED FOR RECTIFICATION OF MISTAKE U/S. 154 OF THE I.T. ACT TO THE ORDER DTD. 05/02/2009 IN CAL CULATION OF INTEREST U/S 234B & 234C OF THE I.T. ACT AND THE PORTION OF APPLICATION IS REPRODUCED AS UNDER:- KIND REFER TO THE ASSESSMENT ORDER U/S. 143(3) DAT ED 27/05/2008 FOR A.Y. 2005-06. ON PERUSAL OF THE SAM E, IT IS FOUND THAT INTEREST U/S. 234C OF RS. 4,65,319/- AND INTEREST U/S. 234C OF RS. 18,76,306/- HAD BEEN CHARGED AS PER THE DEMAND NOTICE. IN THIS CONNECTION, IT IS SUBMITTED THAT AN AMOUNT OF RS. 3,93,78,660/- BEING DEFERRED TAX LIABILITY PROVISIO N WAS ADDED BACK TO THE BOOK PROFIT U/S. 115JB IN VIEW OF THE A MENDMENT INTRODUCED BY THE FINANCE ACT, 2008. THE INTEREST U/S. 234B HAS BEEN CHARGED WITH REFERENCE TO THE SAID DISALLO WANCE OF DEFERRED TAX LIABILITY. IT IS RESPECTFULLY STATED THAT SINCE AT THE POINT OF TIME OF PAYMENT OF ADVANCE TAX FOR A.Y. 20 05-06 AND ALSO THE TIME FOR FILING THE RETURN OF INCOME FOR A .Y. 2005-06, THERE WAS NO LEGAL OBLIGATION TO ADD BACK DEFERRED TAX LIABILITY WHILE COMPUTING THE BOOK PROFIT U/S. 115JB. THE AM ENDMENT TO THE PROVISIONS OF SECTION 115JB WAS INTRODUCED BY F INANCE ACT, 2008. THEREFORE, SINCE AT THE TIME OF PAYMENT OF A DVANCE TAX AND FILING OF RETURN, THERE WAS NO LEGAL OBLIGATION TO CONSIDER THE DEFERRED TAX LIABILITY FOR THE PURPOSE OF SECTI ON 115JB, THE ASSESSEE IS NOT LIABLE TO LEVY OF ANY INTEREST U/S. 234B IN RELATION TO THE DEFERRED TAX LIABILITY. THE CHARGING OF INTEREST U/S. 234B IS THEREFORE A M ISTAKE OF LAW WHICH APPARENT FROM RECORD. IT IS THEREFORE REQUES TED TO KINDLY RECTIFY THE MISTAKE BY PASSING ORDER U/S. 154 AND D ELETE THE I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 3 INTEREST CHARGED U/S. 234B IN RELATION TO THE DISAL LOWANCE OF DEFERRED TAX LIABILITY. THE REQUEST OF THE ASSESSEE IS NOT ACCEPTABLE BECAU SE OF THE FACT THAT INTEREST U/S. 234B & 234C HAVE BEEN CHARGED AS PER PROVISIONS OF THE ACT. WHILE AMENDMENT INTRODUCED TO THE I.T. AC T BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT, THE AMOUNT OF DEFERRED TAX AND PROVISIONS THERE ARE IS REQUIRED TO BE ADDED TO THE BOOK PROFIT. NO SUCH AMENDMENT HAS BEEN INTRODUCED FOR CHARGING OF INTEREST IN THE INCOME TAX ACT. THE CLAIM OF THE ASSESSEE THAT IT IS ENTITLED TO THE BENEFIT OF CIRCULAR OF CBDT ISSUED WITH RESPECT TO SEC. 80HHC OF THE I.T. ACT IS ALSO NOT ACCEPTABLE BECAUSE NO SUCH CIR CULAR HAVE BEEN ISSUED WITH REGARD TO THIS AMENDMENT. HENCE, IT IS HELD THAT THERE IS NO MISTAKE APPAREN T FROM RECORD, THE APPLICATION MADE BY THE ASSESSEE U/S. 154 OF TH E I.T. ACT IS HEREBY REJECTED. 4. ASSESSEE HAS PLACED RELIANCE ON THE WRITTEN SUBM ISSIONS AS UNDER:- 2.2 THE PRESENT APPEAL IS AGAINST THE LEVY OF INTE REST U/S 234B AS IT IS NOT THE CASE THAT A.O. HAS REJECTED THE APPLICAT ION OF RECTIFICATION U/S 154 AND THEREFORE THIS APPEAL. WHILE DISPOSING THE APPLICATION FOR RECTIFICATION U/S 154, A.O. HA ADMITTED THE APPLICA TION FOR RECTIFICATION AS PER THE PROVISIONS OF LAW, HOWEVER, DID NOT ACCE PTED THE CONTENTION OF THE ASSESSEE COMPANY AND CONFIRMED THE CHARGING OF INTEREST U/S 2348. IT IS SUBMITTED THAT THE ISSUE IN THE PRESEN T APPEAL IS ONLY LIMITED TO CHARGEABILITY OF INTEREST U/S 234B IN RE SPECT OF INCREASE IN BOOK PROFIT U/S 115JB ON ACCOUNT OF RETROSPECTIVE A MENDMENT IN LAW AND CONSEQUENTIAL INCREASE IN TAX LIABILITY. THE APPELLANT RESPECTFULLY SUBMITS THAT THE COMPANY WAS NOT LIABLE TO PAY INTEREST U/S. 234B AND 2354C OF THE I.T. ACT. THE INTEREST U/S. 234B OF THE I.T. ACT CAME TO BE CHARGED SOLELY ON T HE GROUND THAT IN THE ASSESSMENT MADE U/S. 143(3). THE AO HAS MADE A DDITION FOR AN AMOUNT OF RS. 3,93,78,660/- BEING PROVISION FOR DEF ERRED TAX LIABILITIES WHILE WORKING OUT THE BOOK PROFIT FOR THE PURPOSE O F SECTION 115J. THE BOOK PROFIT OF THE ASSESSEE FOR THE PURPOSE OF SECTION 115JB WORKED OUT TO RS. 17,46,29,820/- WHICH WAS ARRIVED AT AFTER ADDING I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 4 BACK AN AMOUNT OF RS. 3,93,78,660/- BEING THE PROVI SION FOR DEFERRED TAX LIABILITY. THE ADDITION WAS MADE BY THE AO FOR AMOUNT OF RS. 3 ,93,78,660/- BEING PROVISION FOR DEFERRED TAX LIABILITIES. THIS ADDITION CAME TO BE MADE ONLY BECAUSE OF THE AMENDMENT INTRODUCED TO TH E INCOME TAX ACT BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFF ECT FROM 1 ST APRIL, 2001. NEEDLESS TO MENTION HERE THAT INTEREST U/S. 234B OF THE I.T. ACT IS CHARGEABLE IN A CASE WHERE THERE IS DEFAULT OF S HORT PAYMENT OF ADVANCE-TAX. IN THE CASE OF THE APPELLANT ASSESSEE , SO FAR AS THE ASSESSMENT YEAR UNDER APPEAL IS CONCERNED, AT THE P OINT OF TIME FOR PAYMENT OF ADVANCE-TAX FOR A.Y. 2005-06, AT THE TIM E OF FINALIZING THE BOOKS OF ACCOUNTS FOR F.Y. 2004-05 AND ALSO AT THE TIME OF FILING THE RETURN OF INCOME FOR A.Y. 2005-06 U/S. 139(1), PROV ISION FOR DEFERRED TAX LIABILITY WAS NOT REQUIRED TO BE ADDED BACK TO THE BOOK PROFIT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S. 115J B OF THE I.T. ACT. THEREFORE, THERE WAS NO DEFAULT OF SHORT PAYMENT OF ADVANCE-TAX. THE PROVISION FOR DEFERRED TAX LIABILITY CAME TO BE ADD ED BACK TO THE BOOK PROFIT ONLY BECAUSE OF THE AMENDMENT INTRODUCED IN THE INCOME TAX ACT BY FINANCE ACT, 2008 WHEREBY CLAUSE (H) BELOW E XPLANATION-1 TO THE SECTION 115B WAS INSERTED. THE APPELLANT ASSES SEE COULD NOT FORESEE OR VISUALIZE IN THE FINANCIAL YEAR 2004-05 (I.E. THE RELEVANT PERIOD FOR PAYMENT OF ADVANCE-TAX) AND IN F.Y. 2006 -07 (I.E. AT THE TIME OF FILING THE RETURN OF INCOME U/S. 139(1) THA T THE LEGISLATURE WOULD BEING IN AN AMENDMENT IN THE INCOME TAX ACT I N 2008 TO THE EFFECT THAT PROVISION FOR THE DEFERRED TAX LIABILIT Y IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE BOOK PROFIT. ADVANC E TAX IS REQUIRED TO BE PAID IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT AS IT EXITED AT THE MATERIAL POINT OF TIME. ADVANCE T AX PAYMENT CANNOT BE RELATED TO ANY FUTURE AMENDMENT THAT MAY OR MAY NOT BE INTRODUCED ON A FUTURE DATE. 5. LD. CIT(A) HOWEVER DISMISSED THE APPEAL OF THE A SSESSEE BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THAT FACTS OF THE CASE, RECT IFICATION ORDER AND APPELLANTS SUBMISSION. THIS APPEAL IS AGAINST ASS ESSING OFFICERS REJECTION OF APPELLANTS RECTIFICATION APPLICATION. APPELLANT REQUESTED AO UNDER SECTION 154 TO RECTIFY MISTAKE IN CHARGING INTEREST UNDER SECTION 234B ON THE GROUND THAT SHORTFALL IN PAYMEN T OF TAXES WAS ON I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 5 ACCOUNT OF THE RETROSPECTIVE AMENDMENT IN THE INCOM E TAX ACT. HOWEVER ASSESSING OFFICER CHARGED INTEREST AS PER T HE PROVISIONS OF SECTION 234B AND 234C AND THERE IS NO MISTAKE IN CH ARGING SUCH INTEREST. NO DOUBT APPELLANT HAD GENUINE DIFFICULT Y IN ESTIMATING THE TAX LIABILITY CONSEQUENT UPON THE RETROSPECTIVE AME NDMENT BUT FOR SUCH SITUATIONS THERE IS ADMINISTRATIVE MECHANISM U NDER WHICH WAIVER OF INTEREST IS GIVEN BY CHIEF CIT. AS FAR AS CHARG ING OF INTEREST BY THE ASSESSING OFFICER IS CONCERNED, THERE IS NO MISTAKE APPARENT FROM RECORD AND ACCORDINGLY THE SAME CANNOT BE RECTIFIED UNDER SECTION 154. THE DECISION OF HONOURABLE SUPREME COURT IN T HE CASE OF VOLKART BROTHERS IS VERY CLEAR IN DEFINING THE SCOP E OF SECTION 154. ONLY PATENTLY APPARENT MISTAKE CAN BE RECTIFIED UND ER SECTION 154. WHENEVER DETAILED REASONING OR JUDICIAL DECISIONS A RE TO BE USED TO ARRIVE AT A DECISION, THE SAME IS CLEARLY OUTSIDE T HE SCOPE OF SECTION 154. ACCORDINGLY I DO NOT FIND ANY MISTAKE IN THE ORDER OF ASSESSING OFFICER WHILE CHARGING INTEREST WHICH REQUIRES RECT IFICATION UNDER SECTION 154. THE DECISIONS RELIED UPON THE APPELLA NT ARE NOT RELEVANT AS FAR AS RECTIFICATION UNDER SECTION 154 IS CONCER NED. 6. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US. AT THE TIME OF HEARING LD. CIT(A) AT THE OUTSET SUBMITTED THAT ISS UE INVOLVED IN THESE APPEALS IS NOW COVERED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE BY THE DECISION OF DELHI TRIBUNAL IN THE CASE OF DCIT VS. INDO RAMA TEXTILE LTD. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ONLY CONTROVERSY IN THIS APPEAL IS WHETHER WHERE AD VANCE TAX PAID BY ASSESSEE FELL SHORT ON ACCOUNT OF RETROSPECTIVE AME NDMENT MADE BY FINANCE ACT, 2008 WHICH PROVIDED THAT BOOK PROFIT BE INCREA SED BY AMOUNT OF DEFERRED TAX W.E.F. 01-04-2001, INTEREST U/S 234B C OULD BE CHARGED OR NOT. THIS ISSUE HAS NOW BEEN DECIDED BY THE DELHI TRIBUN AL IN THE CASE OF DCIT VS. INDO RAMA TEXTILE LTD VIDE ITS ORDER DATED 22 ND JUNE, 2012 IN TAX I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 6 APPEAL NOS. 678 & 679 (DELHI) OF 2012 REPORTED IN 25 TAXMAN.COM 161 HEAD NOTE OF WHICH READS AS UNDER:- SECTION 234B OF THE INCOME-TAX ACT, 1961-INTEREST, CHARGEABLE AS- ASSESSMENT YEARS 2005-06 AND 2006-07-WHETHER WHERE ADVANCE TAX PAID BY ASSESSEE FELL SHORT ON ACCOUNT OF RETROSPEC TIVE AMENDMENT MADE BY FINANCE ACT, 2008 INSERTING SECTION 115JB(2 ), EXPLANATION 1(H) WHICH PROVIDED THAT BOOK PROFIT BE INCREASED B Y AMOUNT OF DEFERRED TAX WITH EFFECTS FROM 01-04-2001, INTEREST UNDER SECTION 234B COULD NOT BE CHARGED-HELD, YES [IN FAVOUR OF ASSESS EE] IN VIEW OF THE ABOVE INTEREST CHARGED U/S 234B IN R ELATION TO THE DISALLOWANCE OF DEFERRED TAX LIABILITY IS HEREBY DE LETED. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K.TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 15/03/2013 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# I.T.A NOS 16 & 1949/ADH/2011 A.Y. 2004-05 &2005-0 6 PAGE NO.. CLARIS LIFE SCIENCE LTD. VS. ACIT(OSD) 7 STRENGTHENED PREPARATION & DELIVERY OF ORDERS IN TH E ITAT 1) DATE OF TAKING DICTATION 06-03-2013 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE N.A. 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 11-03-2013 4) DATE OF CORRECTION 12-03-2013 5) DATE OF FURTHER CORRECTION XXXX 6) DATE OF INITIAL SIGN BY MEMBERS 13-03-2013 7) ORDER UPLOADED ON 01-04-2013 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) ORDER SENT TO BENCH CLERK 15-03-2013