ITO, New Delhi V. M/s. Shree Shyam Pulp & Board Mills Ltd., New Delhi

ITA 1744/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91104 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-05-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Section: 115JB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY: JUDICIAL MEMBER ITA NO. 1744/DEL/2012 A.Y. 2003-04 INCOME-TAX OFFICER VS. M/S SHREE SHYAM PULP & BOA RD MILLS LTD., WARD 8(3), NEW DELHI. A-257, ROAD NO. 6, MAHIPALPU R EXTN., NEW DELHI-110037. PAN: AAACS 4740 C ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI B.R.R. KUMAR SR. DR RESPONDENT BY : NONE DATE OF HEARING : 21-05-2015 DATE OF ORDER : 29-05-2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, FILED BY THE REVENUE, IS DIRECTED AGAI NST CIT(A)S ORDER DATED 23-1-2012 PERTAINING TO AY 2003-04. SOLE EFFECTIVE GROUND RAISED IS AS UNDER: THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CA SE IN HOLDING THAT THE ASSESSEE COMPANY WAS A SICK INDUST RIAL COMPANY DURING THE YEAR UNDER CONSIDERATION AND THE PROVISIONS OF SECTION 115JB WERE NOT APPLICABLE TO THE COMPANY. 2 ITA 1744/DEL/2012 ITO VS. SHREE SHYAM PULP & BOARD MILLS LTD. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF PAPER OF DIFFEREN T QUALITIES. THE ASSESSEE FILED RETURN DECLARING NIL INCOME. THE AO HAS OBSERVED TH AT THE COMPANY DECLARED A NET PROFIT OF RS. 2,75,62,358/- IN ITS P&L A/C BUT THE SAME HAD NOT BEEN SUBJECTED TO TAX U/S 115JB SINCE THE COMPANY BEING A BIFR CASE W AS ENTITLED TO DEDUCTION AS PER CLAUSE (2)(VII) OF THE SAID SECTION. THE AO VID E ASSESSMENT ORDER DATED 20-12- 2005 PASSED U/S 143(3), DETERMINED THE TOTAL INCOME OF THE ASSESSEE AS UNDER: TAXABLE INCOME FOR THE YEAR AS PER COMPUTATION 2,4 2,21,876/- ADD: BELATED PAYMENT OF PF ON A/C OF EMPLOYERS AND EMPLOYEES CONTRIBUTION 4,93,984/- TOTAL INCOME 2,47,15,860/- ADD: INTEREST WAIVED BY PICUP AND SBI 6,87,31,61 1/- TOTAL INCOME 9,34,47,471/- LESS: B/F LOSSES FROM AY 98-99 TO 2001-02 9,34,47 ,471/- (SUBJECT TO THE INCOME AVAILABLE) NIL 2.1. THEREAFTER, THE CASE WAS REOPENED U/S 148 ON T HE GROUND THAT ASSESSEE HAD BOOK PROFIT AMOUNTING TO RS. 2,42,21,876/- AND TAX SHOULD HAVE BEEN PAID UNDER SPECIAL PROVISIONS OF THE ACT. 2.2. THE ASSESSEE ADVANCED TWO ARGUMENTS BEFORE THE AO (I) THE PROVISIONS OF MAT WERE NOT APPLICABLE TO IT FOR THE YEAR AS COMPANY WAS A SICK INDUSTRIAL UNDERTAKING DURING THIS PERIO D RELEVANT TO AY 2003- 04; 3 ITA 1744/DEL/2012 ITO VS. SHREE SHYAM PULP & BOARD MILLS LTD. (II) THE ASSESSEE WAS ENTITL4ED TO DEDUCTION AS PER CLAU SE (2)(VII) OF SECTION 115JB. 2.3. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTIO N, INTER ALIA, REFERRING TO THE ORDER OF BIFR PASSED IN THE CASE OF ASSESSEE VIDE O RDER NO. 274/2000 DATED 8.6.2005, WHEREIN IT HAD BEEN MENTIONED THAT THE ST ATUTORY AUDITOR AT PARA 19 OF THE ANNEXURE TO THE AUDIT REPORT IN THIS YEAR HAD CLARI FIED THAT THE COMPANY WAS NO LONGER A SICK INDUSTRIAL COMPANY WITHIN THE MEANING OF CLAUSE (O) OF SUB SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES ( SPECIAL PROVISIONS) ACT 1985. HE ALSO REFERRED TO CLAUSE (2)(VII) OF SECTION 115J B AND POINTED OUT THAT AS PER THAT CLAUSE ALSO THE COMPANY WOULD NO LONGER BE A SICK U NIT DURING THE YEAR IN WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES.. HE OBSERVED THAT THE NET WORTH OF THE COMP ANY AS RS. 7,92,21,750/- AGAINST ACCUMULATED LOSSES OF RS. 62,37,278/- AND, THEREFOR E, ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 115JB(2)(VII). 2.4. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL, INTE R ALIA, OBSERVING THAT THE ASSESSEE WAS DECLARED A SICK INDUSTRIAL UNIT BY THE BIFR ON 7-12-2000 AND VIDE ORDER PASSED ON 8-6-2005, BIFR STATED THAT THE COMP ANYS NET WORTH HAD TURNED POSITIVE. THEREFORE, THE COMPANY STOOD DISCHARGED F ROM THE PURVIEW OF SICK INDUSTRIAL COMPANY WITH IMMEDIATE EFFECT FROM 8-6-2 005 AND, THEREFORE, BETWEEN 7-12-20000 TO 8-6-2005, THE COMPANY WAS A SICK INDU STRIAL UNDERTAKING AND WAS 4 ITA 1744/DEL/2012 ITO VS. SHREE SHYAM PULP & BOARD MILLS LTD. SUBJECTED TO THE ORDER PASSED BY THE BIFR. SHE, ACC ORDINGLY, HELD THAT THE PROVISIONS OF MAT WERE NOT APPLICABLE TO IT. AGGRIE VED, THE REVENUE IS IN APPEAL BEFORE US. 3. NONE PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE AT THE HEARING. WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE, QUA THE ASSESSEE , ON MERITS AND IN THAT PROCESS WE HAVE HEARD LD. DR AND PERUSED THE ENTIRE MATERIAL A VAILABLE ON RECORD. 4. THE FACTS ARE NOT DISPUTED. DURING THE ASSESSMEN T YEAR UNDER CONSIDERATION VIZ. AY 2003-04 THE COMPANY WAS A SICK INDUSTRIAL C OMPANY WITHIN THE MEANING OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) A CT 1985 BY THE ORDER OF BIFR DATED 7-12-2000. WE ARE NOT IN AGREEMENT WITH THE O BSERVATION OF LD. CIT(A) THAT THE PROVISIONS OF MAT WERE NOT APPLICABLE TO ASSESS EE COMPANY BECAUSE AS PER SECTION 115JB SUB-SECTION (2), EXPLANATION 1 CLAUSE (VII), THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COM MENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE SAID COMPANY HAD BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT 1985, ENDING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH CO MPANY BECOMES EQUAL OR EXCEEDS THE ACCUMULATED LOSS, HAS TO BE REDUCED WHI LE COMPUTING THE BOOK PROFITS. THIS PROVISION ITSELF MAKES IT VERY CLEAR THAT THOU GH THE PROVISIONS OF MAT ARE APPLICABLE BUT THE ASSESSEE WOULD BE ENTITLED FOR R EDUCING THE PROFITS DURING THE 5 ITA 1744/DEL/2012 ITO VS. SHREE SHYAM PULP & BOARD MILLS LTD. PERIOD WHEN IT REMAINS A SICK INDUSTRIAL COMPANY WI THIN THE MEANING OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT 1985. IT IS PERTINENT TO NOTE THAT AO HAS REFERRED TO THE ORDER DATED 8-6-2005 FOR ARRIVI NG AT HIS FINDING. HE HAS NOT MENTIONED ANY DATE PRIOR TO 8-6-2005 FOR COMING TO HIS FINDING THAT THE NET WORTH OF THE COMPANY WAS RS. 7,92,71,750/- AGAINST ACCUM ULATED LOSSES OF RS. 62,37,278/-. THEREFORE, WHILE ALLOWING THE GROUND R AISED BY THE DEPARTMENT, WE HOLD THAT THE ASSESSEE WILL BE ENTITLED FOR DEDUCTI ON AS PER SECTION 115JB(2) EXPLANATION 1 TO CLAUSE (VII). 5. IN THE RESULT, DEPARTMENTS APPEAL IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 29-05-2015. SD/- SD/- (A.T. VARKEY) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29-05-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR