BAKHTAWAR CONSTRUCTION CO. P. LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 1814/MUM/2010

• Counselvise Citation: 181419914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAVIN VARMA
• Section: 143(3); 115JB; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.1814/ MUM/2010 ASSESSMENT YEAR: 2006-07 BAKHTAWAR CONSTRUCTION CO.P.LTD. .. APPELLANT MEHER HOUSE, 1 ST FLOOR, 15, CAWASJI PATEL STREET, FORT, MUMBAI-01. PA NO.AAACB 4942 P VS INCOME TAX OFFICER 2(1)(1) .. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: AMOGH M GHAISAS, FOR THE APPELLANT PRAVIN VARMA , FOR THE RESPONDENT DATE OF HEARING : 27.9.2011 DATE OF PRONOUNCEMENT : 25 -10-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 2 ND FEBRUARY, 2010,, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: I.T.A NO.1814/ MUM/2010 ASSESSMENT YEAR: 2006-07 2 (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) ERRED IN HOLDING THAT THE BENEFIT OF INVESTMENT UNDER SECTIO N 54EC IN RESPECT OF LONG TERM CAPITAL GAINS CREDITED TO PROFIT AN LOSS ACCOUNT CANNOT BE TAKEN INTO CONSIDERATION IN COMPUTATION OF BOOK PRO FITS CHARGEABLE TO TAX UNDER SECTION 115JB. 2. THE SHORT ISSUE WE ARE THUS REQUIRED TO ADJUDICA TE IS WHETHER OR NOT LONG TERM CAPITAL GAINS CREDITED TO THE PROFIT AND LOSS ACCOUNT, THOUGH NOT TAKEN INTO ACCOUNT FOR COMPUTATION OF NORMAL TAXABLE INCOME UN DER THE PROVISIONS OF THE INCOME TAX ACT AS A RESULT OF BENEFIT OF SECTION 54 EC, WILL BE INCLUDED IN BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE ASSESSEES CLA IM IS THAT IT CANNOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF BOOK PROFITS AS WELL, B UT BOTH THE AUTHORITIES BELOW HAVE REJECTED THE CLAIM. NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT(A) AS WELL, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 4. LEARNED COUNSEL FAIRLY ACCEPTS THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY HONBLE KERALA HIGH COURT IN THE CASE OF N J JOSE & CO.PVT. V. ACIT (321 ITR 132) AND THAT THERE IS NO CONTRARY JUDGMENT BY ANY OTHER HONBLE HIGH COURT. LEARNED COUNSEL, HOWEVER, VERY PAINSTAKINGLY ARGUED THE MATTER ON MERITS AND MADE EFFORTS TO DEMONSTRATE FALLACIES IN THE REASONING A DOPTED IN THE SAID JUDICIAL PRECEDENTS. LEARNED DEPARTMENTAL REPRESENTATIVE, O N THE OTHER HAND, SUBMITTED THAT ONCE THE MATTER IS COVERED BY A DECISION OF HONBLE COURTS ABOVE, THESE ARGUMENTS MERIT NO CONSIDERATION BY US. 5. WE FIND THAT HONBLE KERALA HIGH COURT, IN THE C ASE OF N.J JOSE (SUPRA) HAVE, INTER ALIA, OBSERVED AS FOLLOWS: WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESS EE, BECAUSE ASSESSMENT UNDER CHAPTER XII-B ON BOOK PROFIT IS A SELF-CONTAIN ED CODE. THE SCHEME THEREUNDER IS TO ADOPT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE I.T.A NO.1814/ MUM/2010 ASSESSMENT YEAR: 2006-07 3 COMPANIES ACT, 1956 AND TO TREAT THE NET PROFIT SHO WN THEREIN AS BOOK PROFIT. THE PERMISSIBLE ADJUSTMENTS IN THE FORM OF ADDITIONS AND DEDUCTIONS ARE PROVIDED UNDER THE EXPLANATION TO SECTION 115J(1A) OF THE ACT. NO MORE DEDUCTIONS, REBATES OR ALLOWANCES OTHER THAN WHAT IS STATED IN THE SAID EXPLANATION ARE AVAILABLE FOR THE COMPUTATION OF BOO K PROFIT. IN FACT, IT IS VERY CLEAR FROM THE NON OBSTANTE CLAUSE IN SECTION 115J( 1) THAT THE ASSESSMENT UNDER SECTION 115J OVERRIDES THE OTHER PROVISIONS O F THE ACT. IN FACT, THE ASSESSING OFFICER GETS JURISDICTION TO MAKE ASSESSM ENT UNDER SECTION 115J OF THE ACT ONLY WHEN THE TOTAL INCOME COMPUTED UNDER THE PROVISIONS OF THE ACT IS BELOW 30 PER CENT. OF THE BOOK PROFIT OF THE ASSESSEE AS CONTEMPLATED UNDER THE SAID SECTION. WHILE DEDUCTIONS, REBATES AND ALLOWAN CES ARE AVAILABLE IN THE COMPUTATION OF INCOME FOR NORMAL ASSESSMENT ADDITIO NS, DEDUCTIONS AND ADJUSTMENTS EXCEPT TO THE EXTENT COVERED BY THE EX PLANATION TO SECTION 115J(1A) ARE NOT AVAILABLE IN THE COMPUTATION OF BOO K PROFIT. IN OTHER WORDS, ONCE THE ASSESSING OFFICER FINDS THAT TOTAL INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT IS LESS THAN 30 PER CENT. OF THE BOOK PROFIT, HE HAS TO GIVE UP NORMAL ASSESSMENT AND THE ASSESSING OFFICER HAS T O OPT FOR THE ASSESSMENT UNDER SECTION 115J WHICH DOES NOT PROVIDE FOR ANY DEDUCTION IN TERMS OF SECTION 54E OF THE ACT. THE ASSESSEE HAS NO CASE THAT THE LONG-TERM CAPITAL GAINS ARE NOT PROFIT NOT INCLUDIBLE IN THE PROFIT AND LOSS ACCOUNT PREPARED IN TERMS OF SCHEDULE VI TO THE COMPANIES ACT. SINCE THERE IS NO PROVISION IN CHAPTER XII-B FOR DEDUCTION OF CAPITAL GAINS IN T HE COMPUTATION OF BOOK PROFIT, THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION CLA IMED. THE BOMBAY HIGH COURT IN THE DECISION IN CIT V. VEEKAYLAL INVESTMENT CO. P. LTD. [2001] 249 ITR 597 ALSO TOOK THE VIEW THAT CAPITAL GAINS IS PART OF PROFIT WHICH CANNOT BE EXCLUDED IN THE COMPUTATION OF BOOK PROFIT. EVEN THOUGH LEARN ED SENIOR COUNSEL FOR THE ASSESSEE CONTENDED THAT THE CASE DECIDED BY THE BOM BAY HIGH COURT DID NOT INVOLVE THE CLAIM OF EXEMPTION ON CAPITAL GAINS UND ER SECTION 54E OF THE ACT, WE DO NOT THINK THIS DISTINCTION MAKES ANY DIFFEREN CE, BECAUSE SO LONG AS LONG- TERM CAPITAL GAINS IS PART OF PROFIT INCLUDED IN TH E PROFIT AND LOSS ACCOUNT PREPARED UNDER SCHEDULE VI TO THE COMPANIES ACT, IT CANNOT BE EXCLUDED UNLESS SO PROVIDED UNDER THE EXPLANATION TO SECTION 115J(1 A) OF THE ACT. IN THE ABSENCE OF ANY PROVISION FOR EXCLUSION OF CAPITAL G AINS IN THE COMPUTATION OF BOOK PROFIT UNDER THE ABOVE PROVISION, THE ASSESSEE I S NOT ENTITLED TO THE EXCLUSION CLAIMED. IN OTHER WORDS, SECTION 54E HAS NO APPLICATION IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115J. 6. AS THERE IS NO OTHER CONTRARY JUDICIAL PRECEDENT , ON THE ISSUE, BY HONBLE COURTS ABOVE, AND RESPECTFULLY FOLLOWING THE VIEW SO TAKEN BY THEIR LORDSHIPS, WE APPROVE THE STAND TAKEN BY THE AUTHORITIES BELOW AN D DECLINE TO INTERFERE IN THE MATTER. I.T.A NO.1814/ MUM/2010 ASSESSMENT YEAR: 2006-07 4 7. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2011 SD/ (D.MANMOHAN) VICE PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 25 TH OCTOBER, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),,4 MUMBAI 4. COMMISSIONER OF INCOME TAX, II , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI