Sri. Maruthi Power Gen India P. Ltd., V. ACIT,

ITA 208/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1517 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHAI
• Assessee Lawyers: R E BALASUBRAMANYAM
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.208(BNG)/2014 (ASSESSMENT YEAR : 2008-09) M/S MARUTHI POWER GEN.INDIA PVT.LTD. 22/24, RACE COURSE ROAD, GANDHINAGAR, BANGALORE-560 009 PAN NO.AAFCS0312R APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12(3) BANGALORE RESPONDENT ASSESSEE BY : SHRI R.E.BALASUBRAMANYAM, CA REVENUE BY : DR. P.K.SRIHAI, ADDL.CIT DATE OF HEARING : 16-11-201 5 DATE OF PRONOUNCEMENT : 18-11-2015 O R D E R PER SHRI INTURI RAMA RAO, AM : THIS APPEAL BY THE ASSESSEE COMPANY IS DIRECTED AGA INST THE ORDER OF THE CIT(A), BANGALORE DATED 28-10-2013 FOR THE A SSESSMENT YEAR : 2008-09. 2. THE ASSESSEE COMPANY HAS RAISED THE FOLLOWING GR OUNDS IN ITS APPEAL; 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMP UTATION OF BOOK PROFITS U/S 115JB MADE BY THE AO AND IN DOING SO; 2 ITA NO.208(B)/2014 A)THE LD.CIT(A) FAILED TO APPRECIATE THAT AS PER TH E SCHEME ENVISAGED U/S 115JB, THE EXCESS PROVISIONS FOR DEPR ECIATION CREATED IN EARLIER YEARS AND WRITTEN BACK DURING TH E YEAR UNDER ASSESSMENTS OUGHT TO HAVE BEEN REDUCED FROM T HE NET PROFITS SHOWN IN THE P&L ACCOUNT. B) THE LD.CIT(A) FAILED TO APPRECIATE THAT FOR THE YEARS IN WHICH THE SAID PROVISIONS WERE CREATED, THE ASSESSE E HAD NO LIABILITY TO INCOME-TAX UNDER THE MINIMUM ALTERNATE TAX REGIME AND CONSEQUENTLY, THE QUESTION OF ADDING BAC K THE AMOUNT OF PROVISIONS IN THOSE YEARS IS IMMATERIAL F OR THE ASSESSMENT YEAR UNDER DISPUTE. C) THE LD.CIT(A) FAILED TO APPRECIATE THAT IN ORDER TO INVOKE THE PROVISO TO CLAUSE(I) OF EXPLANATION TO SUB-SECT ION 2 OF SEC.115JB, IT IS NECESSARY THAT THE PROVISIONS OF S AID 115JB SHOULD HAVE BEEN APPLICABLE TO THE ASSESSEE DURING THE PRECEDING PREVIOUS YEAR DURING WHICH THE PROVISIONS WERE CREATED. THE ASSESSEE PRAYS FOR LEAVE TO ADD, MODIFY, DELETE OR INTRODUCE ADDITIONAL GROUNDS OF APPEAL AT ANY TIME BEFORE THE APPEAL IS DISPOSED OFF. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE-COMPANY IS INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 DISCLOSING NIL INCOME ON 27-09-2008. 3 ITA NO.208(B)/2014 AGAINST THE SAID RETURN, THE ASSESSMENT WAS COMPLET ED U/S 143(3) VIDE ORDER DATED 30-12-2010, AS NIL INCOME UNDER THE NORMAL PR OVISIONS OF THE INCOME U/S 115JB WAS COMPUTED AT RS.5,81,78,946/- AFTER ADDING BACK TO THE BOOK PROFIT OF RS.2,24,34,829/-, BEING EXCESS PROVISION FOR DEP RECIATION WITHDRAWN CREDITED TO THE PROFIT & LOSS ACCOUNT. 4. BEING AGGRIEVED BY THIS ASSESSMENT, THE ASSESSE E FILED APPEAL BEFORE THE CIT(A), WHO VIDE IMPUGNED ORDER HAD DISMISSED T HE GROUND OF APPEAL, BY OBSERVING AS UNDER AT PARA-4; 4. GROUND NO.2 IS AGAINST THE ADDITION OF EXCESS PROVISION FOR DEPRECIATION OF RS.2,24,34,829/-. NO SUBMISSIONS HAVE BEEN MADE IN THIS REGARD. HOWEVER , IN T HE DECISION IN THE CASE OF MYSORE BREWERIES LTD (KA R.) REPORTED IN 29 ITR 289 IT IS HELD AS FOLLOWS; IN VIEW OF THE INSERTION OF CLAUSE (I) TO EXPLANA TION 1 TO SEC.115JB, WITH RETROSPECTIVE EFFECT, AMOUNT SET ASIDE AS PROVISION FOR DIMINUTION IN VALUE OF ASSETS IS T O BE ADDED BACK FOR COMPUTATION OF BOOK PROFITS UNDER SE CTION 115JB (IN FAVOUR OF REVENUE). IN VIEW OF THE INSERTION OF CLAUSE (I) TO EXPLANAT ION 1 TO SEC.115JB, WITH RETROSPECTIVE EFFECT, THE AMOUNT SET 4 ITA NO.208(B)/2014 ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF A SSETS IS TO BE ADDED BACK FOR THE COMPUTATION OF BOOK PROFITS U NDER SEC.115JB. 5. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 6. THE LEARNED AR ARGUED THAT THE EXCESS PROVISION FOR DEPRECIATION SHOULD BE REDUCED FROM THE PROFIT AS DISCLOSED BY T HE PROFIT & LOSS ACCOUNT FOR THE PURPOSE OF DETERMINING THE TAXABLE INCOME UNDER THE PROVISIONS OF SEC.115JB OF THE IT ACT, 1961. HE FU RTHER SUBMITTED THAT THE ASSEESSE COMPANY WAS NOT LIABLE TO TAX UNDER TH E PROVISIONS OF SEC.115JB OF THE ACT, 1961 FOR THE YEARS IN WHICH T HE PROVISION WAS CREATED. THEREFORE, HE PRAYED THAT THE ADDITION MA NY BE DELETED. 6.1 ON THE OTHER HAND, LEARNED SENIOR DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ISSUE IN APPEAL IS TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS CONTAINED IN CLAUSE (I) F SEC.115JB OF T HE IT ACT, 1961 WHICH READS AS UNDER; 5 ITA NO.208(B)/2014 ... IF ANY AMOUNT REFERRED TO IN CLAUSE (A) (I) I S DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AM OUNT REFERRED TO IN CLAUSE(J) IS NOT CREDITED TO THE PRO FIT AND LOSS ACCOUNT, AND AS REDUCED BY, (I) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVIS ION (EXCLUDING A RESERVE CREATED BEFORE THE 1 ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF DEBIT TO THE PROFIT AND LO SS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PRO FIT AND LOSS ACCOUNT; PROVIDED . THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVISIONS MADE IN A PREVIOUS Y EAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AF TER THE 1 ST DAY OF APRIL, 1997 SHALL NOT BE REDUCED FROM THE B OOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RES ERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDR AWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SEC OND PROVISO TO SEC.115JB, AS THE CASE MAY BE.. 8. FROM THE ABOVE, IT IS CLEAR FROM THE PROVISIONS THAT THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION WHICH IS CR EDITED TO THE PROFIT & LOSS ACCOUNT, CAN BE REDUCED ONLY IN THE EVENT WHER E SUCH BOOK PROFIT OF SUCH YEAR HAVE BEEN INCREASED BY THIS PROVISION CRE ATED. FROM THE 6 ITA NO.208(B)/2014 MATERIAL AVAILABLE ON RECORD, IT IS NOT CLEAR WHETH ER PROVISION WAS ADDED BACK TO THE BOOK PROFIT FOR THE PURPOSE OF COMPUTIN G TAXABLE INCOME, UNDER THE PROVISIONS OF SEC.115JB OF THE IT ACT, 19 61, IN THE YEAR OF CREATION OF PROVISION. THEREFORE, WE ARE OF THE CON SIDERED OPINION THAT INTEREST OF JUSTICE WOULD BE MET, IF THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DE-NOVO ASSESSMENT, AFTER AFFORDING A REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE COMPANY. WE ORDER ACCO RDINGLY. 9. IN THE RESULT, THE APPEAL OF FILED BY THE ASSESS EE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH NOVEMBER, 2015. SD/ - (ASHA VIJAYARAGHAVAN SD/ - (INTURI RAMARAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE D A T E D : 18-11-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR,ITAT, BANGALORE