Appeal Details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 1004 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-10-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2004-2005
Appeal Filed On
18-10-2013
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1887/PN/2013 '% % / ASSESSMENT YEAR : 2004-05 ACIT CIRCLE-10, PUNE . / APPELLANT V/S SPICER INDIA LTD., 29, MILESTONE, PUNE-NASHIK ROAD, KURULI, TALUKA KHED, PUNE 410 501 PAN NO.AAECS1869C . / RESPONDENT / APPELLANT BY : SHRI R.N. SAHAY / RESPONDENT BY : SHRI KARTHIK NATARAJAN HEERAJ JAIN & B / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 23-07-2013 OF THE CIT(A)-V, PUNE RELATING TO ASSES SMENT YEAR 2004-05. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80 HHC OF THE I.T. ACT. FOR CALCULATING THE BOOK PROFIT U/S 115JB OF TH E ACT, WHEN IN FACT AFTER CONSIDERING BROUGHT FORWARD LOSSES, THE TOTAL INC OME BECOMES NIL. / DATE OF HEARING :27.08.2015 / DATE OF PRONOUNCEMENT:26.10.2015 2 ITA NO.1887/PN/2013 3. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURS E OF RE- ASSESSMENT PROCEEDINGS, THE AO DENIED DEDUCTION U/S 80H HC WHILE CALCULATING BOOK PROFIT OF THE COMPANY U/S 115JB OF THE ACT ON THE GROUND THAT AFTER CONSIDERING BROUGHT FORWARD LOS SES, DEDUCTION U/S 80HHC WAS NIL IN THE NORMAL COMPUTATION. TH E CIT(A) HELD THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF AJANTA P HARMA LTD., 327 ITR 305 (SC). THE CIT(A) THUS DIRECTED THE AO TO ALLOW DEDUCTION U/S 80HHC WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CHALLENG ED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE DECISION OF TH E LD. CIT(A) IS NOT ACCEPTABLE, AS IN ACCORDANCE WITH THE PROVISIONS O F SECTION 80AB OF THE IT ACT FOR THE PURPOSE OF COMPUTING DEDUCTIO N UNDER CHAPTER VI OF THE ACT, THE INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT, AFTER ALLOWING SET OFF OF PREVIOUS YEARS LOSSES SHALL BE CONSIDERED. THIS FACT HAS BEEN CONFIRMED BY THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS SHRIKE CONSTRUCTION EQUIPMEN T LTD REPORTED IN 291 ITR 380. HE FURTHER SUBMITTED THAT THE CASE IS COVERED IN VIEW OF PARA 8(C) OF INSTRUCTION NO. 3/2011 DATED 3.2.2011 I.E. THE DISALLOWANCE OF DEDUCTION U/S 80HHC HAS BE EN MADE ON ACCOUNT OF REVENUE AUDIT OBJECTION RAISED. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 3 ITA NO.1887/PN/2013 7. AFTER HEARING BOTH THE SIDES, WE FIND THE HONBLE SUPRE ME COURT IN THE CASE OF AJANTA PHARMA LTD. VS. CIT REPORTED IN 327 ITR 305 HAS HELD THAT 100% OF THE EXPORT PROFITS EARNED BY THE ASSESSEE AS COMPUTED U/S.80HHC(3) IS ELIGIBLE FOR REDUCTION UNDER CLAUS E (IV) OF THE EXPLANATION TO SECTION 115JB. THE RELEVANT OBSER VATION OF THE HONBLE SUPREME COURT READ AS UNDER (PAGE 309) : 8. BY THE FINANCE ACT, 2000, SECTION 115JB WAS INSE RTED W.E.F. 1.4.2001 PROVIDING FOR LEVY OF MAT ON CERTAIN COMPA NIES. SECTION 115JB, THOUGH STRUCTURED DIFFERENTLY, STOOD INSERTED T O PROVIDE FOR PAYMENT OF ADVANCE TAX BY MAT COMPANIES. SECTION 115 JB IS THE SUCCESSOR SECTION TO SECTION 115JA. IN ESSENCE, IT IS THE SAME EXCEPT THAT SECTION 115JA PROVIDED FOR MAT ON COMPANIES, SO FAR AS IT DOES NOT DEEM THE BOOK PROFIT AS TOTAL INCOME. UNDER SECT ION 115JB, HOWEVER, CLAUSE (VIII) OF SECTION 115JA IS RE-NUMBERE D AS CLAUSE (IV). SECTION 115JB CONTINUES TO REMAIN A SELF-CONTAI NED CODE. 9. ON THE OTHER HAND, SECTION 80HHC(1) INTER ALIA STATES THAT WHERE AN ASSESSEE, WHO IS THE INDIAN RESIDENT, IS ENGAGED IN THE BUSINESS OF EXPORTS OUT OF INDIA OF ANY GOODS EARNS CONV ERTIBLE FOREIGN EXCHANGE THEN IN COMPUTING THE TOTAL INCOME, A DEDU CTION OF THE PROFITS DERIVED FROM SUCH EXPORTS WOULD BE ADMISSIBLE. THUS, SEC TION 80HHC PROVIDES FOR TAX INCENTIVES. SECTION 80HHC(1) A T ONE POINT OF TIME LAID DOWN THAT AN AMOUNT EQUAL TO THE AMOUNT O F DEDUCTION CLAIMED SHOULD BE DEBITED TO THE P&L ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH DEDUCTION IS TO BE ALLOWED AND CREDI TED TO THE RESERVE ACCOUNT TO BE UTILIZED FOR THE BUSINESS PURPOSE. SECTIO N 80HHC(1) CONCERNS ELIGIBILITY WHEREAS SECTION 80HHC( 3) CONCERNS COMPUTATION OF THE QUANTUM OF DEDUCTION/TAX RELIEF. AT ONE POINT OF TIME PRIOR TO THE FINANCE ACT, 2000, EXPORTERS WERE ALLOWED 100% DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORT O F GOODS. HOWEVER, THAT HAS NOW BEEN REDUCED IN A PHASE-WISE MANNER UNDER SECTION 80HHC(1B). IT MAY BE NOTED THAT ALL ASSESSABLE ENTITIES ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. SIMILARLY, ONLY ELIGIBLE GOODS ARE ENTITLED TO SUCH SPECIAL DEDUCTION UNDER SECTION 80HH C(1). A BARE READING OF SECTION 80AB SHOWS THAT COMPUTATION OF DED UCTION IS GEARED TO THE AMOUNT OF INCOME, BUT SECTION 80HHC(3 ), WHICH REFERS TO QUANTIFICATION OF DEDUCTION IS GEARED TO THE EXPORTS TURNOVER AND NOT TO THE INCOME. ON THE OTHER HAND, SECTION 115JB REFERS TO LEVY OF MAT ON THE DEEMED INCOME. THE ABOVE DISCUSSION IS ONLY TO SHOW THAT SECTIONS 80HHC AND 115JB OPERATE IN DIFFERENT SPHERES. THUS, TW O ESSENTIAL CONDITIONS FOR INVOKING SECTION 80HHC(1) ARE THAT ASSE SSEE MUST BE IN THE BUSINESS OF EXPORT AND SECONDLY THAT SALE PROCEEDS O F SUCH EXPORTS SHOULD BE RECEIVABLE IN INDIA IN CONVERTIBLE FOREIGN EXCHANGE. HENCE, SECTION 80HHC(1) REFERS TO 'ELIGIBILITY' WHER EAS SECTION 80HHC(3) REFERS TO COMPUTATION OF TAX INCENTIVE. COM ING TO SECTION 80HHC(1B) IT IS CLEAR THAT AFTER FINANCE ACT, 2000 W .E.F. ASSESSMENT YEAR 2001-02 EXPORTERS WOULD NOT GET 100% DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORTS BUT THAT THEY WOULD GET DEDUCTION OF 80% IN THE ASSESSMENT YEAR 2001-02, 70% IN THE ASSESSMENT YEAR 2002-03 4 ITA NO.1887/PN/2013 AND SO ON. THUS, SECTION 80HHC(1B) DEALS NOT WITH 'ELI GIBILITY' BUT WITH THE 'EXTENT OF DEDUCTION'. AS EARLIER STATED, SE CTION 115JB IS A SELF- CONTAINED CODE. IT TAXES DEEMED INCOME. IT BEGINS WIT H A NON-OBSTANTE CLAUSE. SECTION 115JB REFERS TO COMPUTATION OF 'BOOK PROFITS' WHICH HAVE TO BE COMPUTED BY MAKING UPWARD AND DOWNWARD A DJUSTMENTS. IN THE DOWNWARD ADJUSTMENT, VIDE CLAUSE (IV) IT SEEKS T O EXCLUDE 'ELIGIBLE' PROFITS DERIVED FROM EXPORTS. ON THE OTHER HAND, UNDER SECTION 80HHC(1B) IT IS THE EXTENT OF DEDUCTIO N WHICH MATTERS. THE WORD 'THEREOF' IN EACH OF THE ITEMS UNDER SECTI ON 80HHC(1B) IS IMPORTANT. THUS, IF AN ASSESSEE EARNS RS.100 CRORES THEN FO R THE ASSESSMENT YEAR 2001-02, THE EXTENT OF DEDUCTION IS 80% THEREOF AND SO ON WHICH MEANS THAT THE PRINCIPLE OF PROPORTIONALI TY IS BROUGHT IN TO SCALE DOWN THE TAX INCENTIVE IN A PHASED MANNER. HOWE VER, FOR THE PURPOSES OF COMPUTATION OF BOOK PROFITS WHICH COMPUTA TION IS DIFFERENT FROM NORMAL COMPUTATION UNDER THE 1961 AC T/COMPUTATION UNDER CHAPTER VIA. WE NEED TO KEEP IN MIND THE UPWA RD AND DOWNWARD ADJUSTMENTS AND IF SO READ IT BECOMES CLEAR TH AT CLAUSE (IV) COVERS FULL EXPORT PROFITS OF 100% AS 'ELIGIBLE PROFIT S' AND THAT THE SAME CANNOT BE REDUCED TO 80% BY RELYING ON SECTION 80HHC(1B). THUS, FOR COMPUTING 'BOOK PROFITS' THE DOWNWARD ADJUST MENT, IN THE ABOVE EXAMPLE, WOULD BE RS.100 CRORES AND NOT RS.90 CR ORES. THE IDEA BEING TO EXCLUDE 'EXPORT PROFITS' FROM COMPUTATION O F BOOK PROFITS UNDER SECTION 115JB WHICH IMPOSES MAT ON DEEMED INCOM E. THE ABOVE REASONING ALSO GETS SUPPORT FROM THE MEMORANDUM O F EXPLANATION TO THE FINANCE BILL, 2000. 10. ONE OF THE CONTENTIONS RAISED ON BEHALF OF THE DEPARTMENT WAS THAT IF CLAUSE (IV) OF EXPLANATION TO SECTION 115JB IS READ IN ENTIRETY INCLUDING THE LAST LINE THEREOF (WHICH READS AS 'SUBJEC T TO THE CONDITIONS SPECIFIED IN THAT SECTION'), IT BECOMES CLE AR THAT THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HH C, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (3 ) OR SUB-SECTION (3A), AS THE CASE MAY BE, IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION. ACCORDING TO THE DEPARTMENT, THE ASSESSEE HER EIN IS TRYING TO READ THE VARIOUS PROVISIONS OF SECTION 80HHC IN ISOLATI ON WHEREAS AS PER CLAUSE (IV) OF EXPLANATION TO SECTION 115JB, IT IS CLEAR THAT BOOK PROFIT SHALL BE REDUCED BY THE AMOUNT OF PROFITS ELIG IBLE FOR DEDUCTION UNDER SECTION 80HHC AS COMPUTED UNDER CLAUSE(A) OR CL AUSE(B) OR CLAUSE(C) OF SUB- SECTION (3) OR SUB-SECTION (3A), AS THE CASE MAY BE, OF THAT SECTION AND SUBJECT TO THE CONDITIONS SPECIFIED I N THAT SECTION, THEREBY MEANING THAT THE DEDUCTION ALLOWABLE WOULD BE ONLY TO THE EXTENT OF DEDUCTION COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80HHC. THUS, ACCORDING TO THE DEPARTMENT, BOTH 'ELIGIBILITY' AS WELL AS 'DEDUCTIBILITY' OF THE PROFIT HAVE GOT TO BE CONSIDERED TOGETHER FOR WORKING OUT THE DEDUCTION AS MENTIONED IN CLAUSE (IV) OF EXPLANATION TO SECTION 115JB. WE FIND NO MERIT IN T HIS ARGUMENT. IF THE DICHOTOMY BETWEEN 'ELIGIBILITY' OF PROFIT AND 'DEDU CTIBILITY' OF PROFIT IS NOT KEPT IN MIND THEN SECTION 115JB WILL CEASE TO B E A SELF-CONTAINED CODE. IN SECTION 115JB, AS IN SECTION 115JA, IT HAS B EEN CLEARLY STATED THAT THE RELIEF WILL BE COMPUTED UNDER SECTION 80HH C(3)/(3A), SUBJECT TO THE CONDITIONS UNDER SUB-CLAUSES (4) AND (4A) OF THA T SECTION. THE CONDITIONS ARE ONLY THAT THE RELIEF SHOULD BE CERTIFI ED BY THE CHARTERED ACCOUNTANT. SUCH CONDITION IS NOT A QUALIFYING CONDI TION BUT IT IS A COMPLIANCE CONDITION. THEREFORE, ONE CANNOT RELY UP ON THE LAST SENTENCE IN CLAUSE (IV) OF EXPLANATION TOSECTION 115J B (SUBJECT TO THE CONDITIONS SPECIFIED IN SUB-CLAUSES (4) AND (4A) OF THAT SECTION) TO 5 ITA NO.1887/PN/2013 OBLITERATE THE DIFFERENCE BETWEEN 'ELIGIBILITY' AND 'DEDUCTIBILITY' OF PROFITS AS CONTENDED ON BEHALF OF THE DEPARTMENT. 11. FOR THE ABOVE REASONS, WE SET ASIDE THE IMPUGNED JUDGMENT OF THE HIGH COURT AND RESTORE THE JUDGMENT OF THE TRIB UNAL. ACCORDINGLY, THE CIVIL APPEAL OF THE ASSESSEE IS ALLOWED WITH NO ORD ER AS TO COSTS. 7.1 SINCE THE LD.CIT(A) WHILE ALLOWING DEDUCTION U/S.80HHC OF THE ACT FOR CALCULATING THE BOOK PROFIT U/S.115JB HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT CITED (SUPRA), THEREF ORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE SA ME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 34,08,79,454/- ON ACCOUNT OF BROUGHT FORWARD LOSSES MA DE TO THE BOOK PROFIT OF THE ASSESSEE. 9. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, BROUGHT FORWARD LOSSES AMOUNTING TO RS. 39,41,27,710/- BEING LOWER COMPARED TO UNABSORBED DEPRECIATION WAS ALLOWED BY THE AO AS WAS CLAIMED BY THE ASSESSEE. HOWEVER, SUBSEQUENTLY, THE AO NOTICED THAT AS PER PROFIT & LOSS ACCOUNT, ACCUMULATED BOOK LOSS WAS RS. 80,67,39,458/- AS O N 31.3.2003, AND AFTER EXCLUDING THE PROVISION OF DEFERRED TAX OF RS. 17,11,81,000/-, LOSS WAS WORKED OUT AT RS. 63,55,58,458/-. AS PER BOOKS OF ACCOUNT, UNABSORBED DEPRECIATION WAS RS. 58,23,10,205/-. THUS THE AO WORKED OUT BROUGHT FORWARD BUSINESS LOSS A T RS. 5,23,48,2531- (63,55,58,458 - 58,23,10,205). THE AO THUS INCREASED THE BOOK PROFIT OF THE ASSESSEE BY THE EXCESS CLAIM OF RS. 34,08,79,454 ( 39,41,27,710 - 5,32,48,253). 6 ITA NO.1887/PN/2013 10. BEFORE CIT(A) IT WAS SUBMITTED THAT THE BOOK LOSS OF T HE ASSESSEE COMPANY WAS ACTUALLY RS. 97,79,20,458/- AND AFT ER CONSIDERING THE CREDIT OF DEFERRED TAX LIABILITY OF RS. 17,11,81,0 00/-, THE BOOK LOSS WAS ARRIVED AT RS. 80,67,39,458/-. THE AO HO WEVER ADOPTED THE BOOK PROFIT AT RS. 80,67,39,458/- AND THEN R EDUCED THE DEFERRED TAX LIABILITY OF RS. 17,11,81,000/-, WHICH AMOUNTS TO DOUBLE ADDITION. 11. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 16. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, THE CLAIM OF THE APPE LLANT IS THAT, BOOK LOSS OF THE APPELLANT COMPANY WAS RS. 97,79,20,458/- AN D THE FIGURE OF RS.80,67,39,458/- WAS ARRIVED AT AFTER CONSIDERING TH E CREDIT OF DEFERRED TAX LIABILITY OF RS.17,11,81,000/-. THE AP PELLANT SUBMITTED THAT BOOK LOSS WAS REDUCED BY NOTIONAL DEFERRED TAX CR EDIT ENTRY OF RS.17,11,81,000/- FOR THE PROFIT & LOSS A/C ENDING ON 31.03.2002 (A.Y. 2002-03). ACCORDINGLY, THE BOOK LOSS WAS RS.3,48,12,388 /-. THE APPELLANT FURTHER SUBMITTED THAT THE LEARNED ASSESSING O FFICER REDUCED THE BOOK LOSS AGAIN FROM THE FIGURE OF RS.80,67,39,458 /- AND ARRIVED AT THE FIGURE OF RS. 63,55,58,458/- WHICH AMOUNTS TO DOU BLE ADDITION. I FIND THAT THE SUBMISSIONS OF THE APPELLANT IS CORRECT. A S PER PROVISIONS OF SEE. 115JB(2), EXPLANATION (1), CLAUSE (VIII) INT RODUCED BY FINANCE ACT 2008 W.E.F. 0L.04.2001, BOOK PROFIT IS REQUIRED TO BE REDUCED BY THE AMOUNT OF DEFERRED TAX CREDITED TO PROFIT & LOSS A/C. SINCE, IN THIS CASE THERE WAS BOOK LOSS, THE SAME WAS REQUIRED TO BE ADDED T O THE BOOK LOSS. HOWEVER, THE ASSESSING OFFICER HAS FIRST ADOPTED THE REDUCED LOSS OF RS.80,67,39,458/- AS AGAINST RS.97,79,20,458/- CLAIM ED BY THE APPELLANT AND THEREAFTER FURTHER REDUCED THE SAME BY RS.17,11,81,000/- WHICH AMOUNTS TO DOUBLE ADDITION IN A CASE WHERE NO ADDITION IS REQUIRED. THEREFORE, THE ACTION OF TH E ASSESSING OFFICER IN ADDING TO RS.34,08,79,454/- IN THE BOOK PROFIT CANNO T BE HELD TO BE JUSTIFIED. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTE D TO DELETE THE ADDITION OF RS.34,08,79,454/- MADE TO THE BOOK PROFI T. THUS, THE GROUND IS ALLOWED. 12. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 13. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE ORDER OF THE AO. 7 ITA NO.1887/PN/2013 14. THE LD. COUNSEL FOR THE ASSESSEE WHILE SUPPORTING THE ORDER OF THE LD.CIT(A) DREW THE ATTENTION OF THE BENCH TO THE T ABLE AT PARA 14 OF THE ORDER OF THE CIT(A) WHICH IS AS UNDER : YEAR WISE CALCULATION OF DEPRECIATION AND BUSINESS LOSS AS PER BOOKS OF ACCOUNT SR. NO. PREVIOUS YEAR ASSESSMENT YEAR DEPRECIATION LOSS BUSINESS LOSS TOTAL LOSS/PROFIT BEFORE TAX ACCUMULATED TOTAL/LOSS 1 1993 - 94 1994 - 95 -- 153,999 153,999 153,999 2 1994 - 95 1995 - 96 1,465,120 7,641,426 9,106,546 9,260,545 3 1995 - 96 1996 - 97 8,293,209 48,844,986 57,138,195 66,398,740 4 1996 - 97 1997 - 98 40,205,434 215,623,654 255,829,088 322,227,828 5 1997 - 98 1998 - 99 65,744,849 263,464,339 329,209,188 651,437,016 6 1998 - 99 1999 - 00 79,791,849 248,702,587 328,493,624 979,930,640 7 1999 - 00 2000 - 01 85,355,997 56,986,284 142,342,281 1,122,272,921 8 2000 - 01 2001 - 02 99,996,181 139,593,777 139,597,596 1,082,675,325 9 2001 - 02 2002 - 03 99,379,368 64,566,980 34,812,388 1,117,487,713 10 2002 - 03 2003 - 04 103,561,553 243,128,808 139,567,255 977,920,458 TOTAL 583,792,6748 394,127,710 977,920,458 RS.39,41,27,710/- WAS CLAIMED BY THE ASSESSEE AGAINST THE BOOK PROFIT FOR A.Y. 2004-05. 15. REFERRING TO THE ABOVE CHART HE SUBMITTED THAT T HE ENTIRE AMOUNT OF BROUGHT FORWARD BOOK LOSS RS.39,41,27,710/- AS CLAIMED BY THE ASSESSEE AND ALLOWED IN THE ORIGINAL ASSESSMENT FOR THE A,.Y. 2004-05 SHOULD HAVE BEEN ACCEPTED AND ALLOWED IN ARRIVING AT MAT LIABILITY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JB A ND EXPLANATION 1 CLAUSE (VII) TO SUB SECTION 2 THEREOF. 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. AS PER THE PROVISIONS OF SE CTION 115JB(2) EXPLANATION 1 CLAUSES (VIII) INTRODUCED BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 01-04-2001 BOOK PRO FIT IS REQUIRED TO BE REDUCED BY THE AMOUNT OF DEFERRED TAX, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT. THERE FORE, WE FULLY AGREE WITH THE FINDING GIVEN BY THE LD.CIT(A) THAT SINCE IN THIS 8 ITA NO.1887/PN/2013 CASE THERE WAS BOOK LOSS THE SAME WAS REQUIRED TO BE ADDED TO THE BOOK LOSS. SINCE IN THE INSTANT CASE THE AO HAS FIRST ADO PTED THE REDUCED LOSS OF RS.80,67,39,458/- AS AGAINST RS.97,79,20,458/ - CLAIMED BY THE ASSESSEE AND THEREAFTER FURTHER REDUCED THE SAME BY RS.17,11,81,000/-, THE SAME AMOUNTS TO DOUBLE ADDITION IN A CASE WHERE NO ADDITION IS REQUIRED. WE THEREFORE UPHOLD THE O BSERVATION OF THE LD.CIT(A) THAT THE ACTION OF THE AO IN ADDING RS.34,08,79,454/- TO THE BOOK PROFIT CANNOT BE HELD AS JUS TIFIED. THE LD. DEPARTMENTAL REPRESENTATIVE WAS ALSO UNABLE TO P OINT OUT ANY ERROR IN THE FINDINGS GIVEN BY THE LD.CIT(A). ACCORDINGL Y, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUND RAISED BY T HE REVENUE IS DISMISSED. 17. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UNDER : 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO D ELETE THE DISALLOWANCE MADE ON ACCOUNT OF PROVISION FOR EXPENSES ON ACCOUNT OF POWER AND FREIGHT AMOUNTING TO RS. 43,24,393/-. 18. FACTS OF THE CASE, IN BRIEF ARE THAT DURING THE COUR SE OF RE- ASSESSMENT PROCEEDINGS, THE AO DISALLOWED THE PROVISION FO R REVENUE EXPENSES INCURRED ON ELECTRICITY CHARGES AND FREIGHT BY OBSERVING THAT THE EXPENSES WERE OMITTED TO BE DISALLOWE D IN THE ORIGINAL ASSESSMENT ORDER. IT WAS FURTHER OBSERVED BY TH E AO THAT SINCE THE PROVISION FOR INCREASE IN PRICE OF RAW MATERIAL PUR CHASED TO THE EXTENT OF RS. 76,42,125/ - WAS DISALLOWED BY THE AO IN THE REGULAR ASSESSMENT BY REFERRING TO THE JUDGEMENT IN THE CASE OF TAPARIA TOOLS ( 260 ITR 102), THE PROVISION FOR ELECTRICITY AN D FREIGHT CHARGES SHOULD ALSO HAVE BEEN DISALLOWED. THE AO ACCORDIN GLY 9 ITA NO.1887/PN/2013 DISALLOWED THE CLAIM OF PROVISION FOR EXPENSES ON ACCOUNT OF POWER AND FREIGHT AMOUNTING TO RS. 43,24,393/- . 19. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ENTIRE AMOUNT OF EXPENSES HAS BEEN PAID IN THE IMMEDIATELY SUCCEEDING YEA R I.E. AY. 2005-06. IT WAS FURTHER SUBMITTED THAT THE PROVISION FOR EXPENSES ON ELECTRICITY POWER CHARGES AND FREIGHT EXPENSES WAS AN ASCERTAINED LIABILITY INCURRED IN THE ORDINARY COURSE OF BUSIN ESS AND ACCRUED IN ACCORDANCE WITH MERCANTILE METHOD OF ACCOUNT ING FOLLOWED BY THE ASSESSEE. 20. THE CIT(A) OBSERVED THAT THE ADDITION ON ACCOUNT OF PROVISION FOR INCREASE IN EXPENSES MADE IN THE ORIGINAL ASSESSMENT W AS DELETED BY THE CIT(A). THE CIT(A) FURTHER OBSERVED THAT SI NCE THE ENTIRE EXPENSES OF RS. 43,24,393/- WAS PAID IN THE NEXT FIN ANCIAL YEAR, THERE CANNOT BE A CASE OF EXCESSIVE PROVISIONING. T HE CIT(A) THUS DIRECTED THE AO TO DELETE THE ADDITION MADE OF RS.43,24,393/-. 21. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 22. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE STATEMENT OF FACTS DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : IT IS SEEN THAT THE DEPARTMENT HAS ACCEPTED THE DECI SION OF CIT(A) IN RESPECT OF DELETION OF ADDITION MADE ON ACCOUNT OF P ROVISION FOR INCREASE IN EXPENSES/PURCHASE PRICE AND NO FURTHER APP EAL HAS BEEN FILED BY THIS OFFICE. IN VIEW OF THE SAID POSITION, TH E DECISION OF THE CIT(A) IS ACCEPTABLE. HOWEVER, SINCE THAT THE CASE IS C OVERED IN VIEW OF PARA 8(C) OF INSTRUCTION NO. 3/2011 DATED 3.2.2011 I .E. THE ASSESSMENT IN THIS CASE HAS BEEN MADE ON ACCOUNT OF REVENUE AUD IT OBJECTION RAISED, FURTHER APPEAL TO THE ITAT IS RECOMMENDED. 23. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO THE ORDE R OF THE 10 ITA NO.1887/PN/2013 TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 VIDE ITA NO.1297/PN/2012 ORDER DATED 26-08-2013 HE SUBMITTED T HAT ALTHOUGH THE REVENUE HAS RAISED VARIOUS ISSUES AGAINST T HE ORDER OF THE CIT(A), HOWEVER, THE REVENUE HAS NOT CHALLENGED THE O RDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.76,42,125/- MADE O N ACCOUNT OF PROVISION FOR INCREASE IN EXPENSES. THEREFORE, T HE REVENUE NOW CANNOT TAKE A GROUND IN THE REASSESSMENT PROCEEDINGS. 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AT PARA 19 OF THE ORDER HAS OBSERVED AS UNDER : 19. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, IT IS SEEN THAT THE ISSUE OF ADDITION OF RS.76,42,125/- HAS BEEN DECIDED IN FAVOUR OF APPELLAN T IN THE APPEAL FILED AGAINST THE ORIGINAL ASSESSMENT ORDER PASSED U/S. 143 (3) OF INCOME-TAX ACT. THE RELEVANT PORTION OF THE ORDER IS AS UNDER: '7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. IT CAN BE SEEN THAT PROVISION HAS BE EN CREATED IN VIEW OF CLAIMS MADE BY VARIOUS SUPPLIERS OF RAW MATERIAL FOR INCREASE IN PRICE. IT IS ALSO SEEN THAT AGAINST THE PROVISION OF RS.7 6,42,125/-, SUPPLEMENTARY INVOICES WERE RAISED BY THE SUPPLIERS AMOU NTING TO RS.76,67,705/-. THIS SHOWS THAT PROVISION WAS MADE ON REA LISTIC BASIS BASED UPON DEMAND FOR INCREASE IN RAW MATERIAL SUPPLIE RS. EVEN THE ASSESSING OFFICER HAS NOT RAISED ANY POINT ON NECESSITY AND WORKING OF PROVISION. HIS ONLY OBJECTION IS THAT THIS PROVISION IS N OT MATCHED BY CORRESPONDING INCREASE IN PROVISION FOR SALE PRICES DUR ING THE YEAR. THE ASSESSING OFFICER THEREAFTER APPLIED THE RATIO OF T HE HON 'BLE JURISDICTION HIGH COURT'S ORDER IN THE CASE OF TAPARIA TOOLS LTD. VS. JCIT REPORTED IN 260 ITR 102. THOUGH THE ASSESSING OFFICER C ONCEDES THAT THE ISSUE BEFORE THE HON 'BLE HIGH COURT IN THE DECISI ON CITED ABOVE WAS DIFFERENT, NEVERTHELESS CONCEPT OF MATCHING PRINCI PLE WAS VERY MUCH APPLICABLE IN THIS CASE. 8. THUS, IT CAN BE SEEN THAT ONLY GRIEVANCE OF THE A SSESSING OFFICER IS THAT WHILE PROVISION OF ANTICIPATED INCREASE IN RAW M ATERIAL PRICES WAS MADE AND DEBITED TO THE P&L A/C, NO CORRESPONDING CR EDIT WAS SHOWN ON ACCOUNT OF ANTICIPATED INCREASE IN SALES PRICES. THI S FINDING OF THE ASSESSING OFFICER COULD HAVE BEEN ACCEPTED PROVIDED THE RE WAS INCREASE IN SALE PRICES BUT THE SAME WAS NOT REFLECTED I N THE CREDIT SIDE OF P&L A/C. THE APPELLANT HAS CATEGORICALLY STATED T HAT EVEN THOUGH 11 ITA NO.1887/PN/2013 THERE WAS DEMAND FOR INCREASE IN RAW MATERIAL PRICES B Y THE SUPPLIERS, SALES OF AXLES AND COMPONENTS WERE MADE AT THE FIXED AG REED PRICES WITH THE CUSTOMERS MEANING THEREBY THAT INCREASE IN IN PUT COSTS WAS ABSORBED BY THE APPELLANT ITSELF THEREFORE, THERE WAS NO QUESTION OF CORRESPONDING CREDIT TO MATCH WITH THE PROVISIONS DEBI TED TO P&L A/C. IN VIEW OF THE ABOVE POSITION, THE APPELLANT DESERVES TO SUCCEED. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.76,42,125/- MADE ON ACCOUNT OF PROVISION FOR INCRE ASE IN PURCHASE PRICE AND THE GROUND IS ALLOWED. ' 20. IN VIEW OF THE ABOVE POSITION, THERE CANNOT BE A NY CASE FOR ADDITION OF THE ABOVE TWO AMOUNTS. FURTHER, THE ENTIRE EXPENSE S HAVE BEEN PAID IN THE NEXT FINANCIAL YEAR. THEREFORE, IT CANNOT BE EVEN SAID THAT PROVISION WAS EXCESSIVE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.43,24,393/-. 25. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE FINDINGS GIVEN BY THE LD.CIT(A) ON THIS ISSUE. SINCE THE ASS ESSEE IN THE INSTANT CASE HAS PAID THE ENTIRE EXPENSES IN THE NE XT FINANCIAL YEAR AND SINCE THE APPEAL FILED AGAINST THE ORIGINAL ASSESSM ENT YEAR WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) AND T HE REVENUE ALTHOUGH FILED AN APPEAL BEFORE THE TRIBUNAL DID NOT CHALLENGE THIS ISSUE, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE SAID ADDITION. THE GROUN D RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 26. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS UNDER : 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 95,29,652/- , BEING THE DIFFERENCE OF INTEREST CREDITED IN PROFIT & LOSS ACCOUNT AND INTEREST AMOUNT MENTIONED IN TDS CERTIFICATES? 27. FACTS OF THE CASE, IN BRIEF ARE THAT DURING THE COURS E OF REASSESSMENT PROCEEDINGS, THE AO MADE ADDITION OF RS. 95,29,652/- ON ACCOUNT OF DIFFERENCE OF INTEREST CREDITED IN P&L ACCOUNT AND INTEREST AMOUNT MENTIONED IN TDS CERTIFICATES. 12 ITA NO.1887/PN/2013 28. BEFORE CIT(A) THE ASSESSEE SUBMITTED THE RECONCILIATION STATEMENT OF TDS AND EXPLAINED THAT AN AMOUNT OF RS. 98,1 9,693/- WAS OFFERED TO TAX IN AY. 2003-04 ITSELF ON ACCRUAL BASIS A ND THE TDS CERTIFICATE RELIED ON BY THE AO SHOWS THE AMOUNT OF IN TEREST FOR BOTH THE AYS I.E. 2003-04 AND 2004-05. 29. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 23. AFTER CAREFULLY CONSIDERING THE REPLY OF THE AP PELLANT IT IS SEEN THAT THE APPELLANT HAS ALREADY OFFERED RS.98,19,693/- IN EARLIER YEARS ON ACCRUAL BASIS. THIS BEING SO, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN IGNORING THE RECONCILIATION FILED BY THE APPELLA NT AND PROCEEDING WITH ADDITION OF RS.95,29,652/-. THEREFORE, THE ASSESSI NG OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.95,29,652/- AS THE SAME INCOME CANNOT BE TAXED TWICE. NEEDLESS TO SAY, CORRESPONDING CREDIT FOR TDS WILL ALSO BE DISALLOWED BY THE ASSESSING OFFICER WHILE GI VING EFFECT TO THIS ORDER. SUBJECT TO THE ABOVE REMARKS, THE GROUND TAKEN BY THE APPELLANT IS ALLOWED. 30. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 31. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE CIT(A). THE ASSESSEE IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING AND HAS CREDITED THE INTEREST INCOME ON AC CRUAL BASIS OF RS.98,16,692/- AND OFFERED THE SAME TO TAX IN THE A.Y. 2 003-04. THEREFORE, SINCE THE BANK HAS NOT DEDUCTED TDS AND HAS CALCULATED THE TOTAL INTEREST IN A.Y. 2004-05 AND DEDUCTED TDS IN A. Y. 2004- 05 ONLY, THEREFORE, THE CIT(A) WAS FULLY JUSTIFIED IN REDUCING SUCH ACCRUED INTEREST OF A.Y. 2003-04 WHICH HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND OFFERED TO TAX IN A.Y. 2003-04 AND WHICH HAS BEEN ACCEPTED BY THE AO. IN VIEW OF THE ABO VE, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 13 ITA NO.1887/PN/2013 32. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26-10-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 26 TH OCTOBER, 2015. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. & ( ) , / THE CIT(A)-V, PUNE 4. & / THE CIT-V, PUNE 5. 6. ) ,,-, -, / DR, ITAT, A PUNE; 1 / GUARD FILE. / BY ORDER , ) , //TRUE C ) , //TRUE COPY// 34 , - / SR. PRIVATE SECRETARY -, / ITAT, PUNE
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