M/S. HEREDILLIA LTD, NAVI MUMBAI V. THE JCIT RG 3(3), MUMBAI

ITA 2238/MUM/2007

• Counselvise Citation: 223819914 RSA 2007
• Duration Of Justice: 4 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 23-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: GOLI SRINIWAS RAO
• Keywords: Depreciation; Retrospective amendment; Bad and doubtful debts; Unabsorbed depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, H BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER I.T.A NO.2237/ MUM/2007: ASSESSMENT YEAR: 2003-04 I.T.A NO.2238/ MUM/2007: ASSESSMENT YEAR: 2004-05 HEREDILLIA LIMITED .. APPELLANT PLOT NO.2/1, TTC INDL. AREA, THANE- BELAPUR ROAD, NAVI MUMBAI-705 PA NO.AAACH 7323 L VS JT. COMMISSIONER OF INCOME TAX, RANGE 3(3) .. RE SPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: NIRAJ SHETH, FOR THE APPELLANT GOLI SRINIWAS RAO , FOR THE RESPONDENT DATE OF HEARING : 23.8.2011 DATE OF PRONOUNCEMENT : 26 -08-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THESE APPEALS, THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S SEPARATE ORDERS DATED 15.12.2006 AND 13.12 .2006, IN THE MATTER OF 2 ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05, RESPECTIVELY. SINCE CO MMON GROUNDS ARE RAISED IN BOTH THE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN GROUND NO. 1 FOR BOTH THE ASSESSMENT YEARS, GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING ADD ITION IN RESPECT OF GAIN ON SETTLEMENT OF SALES TAX DEFERRAL LOAN. 3. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ADDED AN AMOUNT OF RS. 2,15,20,005 AND RS.4,77,00,067 FOR THE A.YS 200 3-04 AND 2004-05, RESPECTIVELY BEING DISCOUNT ON SALES TAX DEFERMENT BY TREATING T HE SAME IN THE NATURE OF REVENUE RECEIPT. THE ASSESSING OFFICER REQUIRED THE ASSESS EE TO FURNISH THE DETAILS OF THE SAME AND ALSO TO SHOW CAUSE AS TO WHY THE SAME SHOU LD NOT BE DISALLOWED. IN REPLY, IT WAS SUBMITTED THAT THE ASSESSEE COMPANY IS ENTITLED TO DEFERRED SALES TAX BENEFIT UNDER THE PACKAGE SCHEME OF INCENTIVES, 1993 OF THE GOVERNMENT OF MAHARASHTRA FOR ITS TWO PLANTS AT RASAL AND LOTE. HENCE, THE COMPA NY HAS PART SETTLED THE AMOUNT AND DIFFERENCE BETWEEN THE AMOUNT PAYABLE AND THE AMOUN T PAID ON DISCOUNTING THE LIABILITY, HAS BEEN CREDITED TO P&L ACCOUNT FOR THE YEARS AND SHOWN OTHER INCOME. THE AO DID NOT ACCEPT THE ABOVE EXPLANATION OF THE ASSESSEE AND TREATED THE SAME AS REVENUE RECEIPT AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A) BUT WITHOUT ANY SUCCESS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY SPECIAL BENCH OF THIS DEC ISION OF THIS TRIBUNAL IN THE CASE OF SULZER INDIA LTD VS JCIT (42 SOT 457). LEARNED DEPA RTMENTAL REPRESENTATIVE FAIRLY AGREE WITH THE CONTENTION OF THE ASSESSEE, B UT HE SUBMITS THAT A MISCELLANEOUS APPLICATION IS BEING FILED BY THE DEP ARTMENT AGAINST THE SAID 3 ORDER, AND, THEREFORE, WE SHOULD WAIT TILL THE MISC ELLANEOUS APPLICATION IS DISPOSED OF. HE ALSO VEHEMENTLY RELIES UPON THE OR DERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL ON RECORD. WE ARE NOT PERSUADED BY THE SUBMISSION OF LEARNED D EPARTMENTAL REPRESENTATIVE. AS THE THINGS STAND RIGHT NOW, THE SPECIAL BENCH DECIS ION CONSTITUTES A BINDING PRECEDENT TO US. JUST BECAUSE A MISCELLANEOUS PETIT ION IS FILED AGAINST THE SPECIAL BENCH DECISION, PRECEDENCE VALUE OF THE DECISION DO ES NOT GET DILUTED. WE ALSO SEE NO REASONS TO WAIT TILL THE SAID MISCELLANEOUS APPLICA TION IS DISPOSED OF BY THE SPECIAL BENCH. THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF SPECIAL BENCH IN THE CASE OF SULZER INDIA LTD(SUPRA) , WE UPHOLD THE GRI EVANCE OF THE ASSESSEE AND THE ASSESSEE SUCCEEDS ON THIS ISSUE. 6. GROUND NO.1 IS THUS ALLOWED. 7. IN GROUND NO.2 FOR BOTH THE ASSESSMENT YEARS, TH E GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING SET TING OFF THE BROUGHT FORWARD LOSS AND DEPRECIATION OF AMALGAMATING COMPA NY SSAPL, AGAINST PROFITS ELIGIBLE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 HHC OF THE INCOME TAX ACT, 1961. 8. FACTS IN BRIEF ARE THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80 HHC OF TH E ACT, THE ASSESSEE HAS NOT REDUCED THE AMOUNTS OF UNABSORBED DEPRECIATION FROM THE BUSINESS PROFITS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY WHILE CALCULATING PROFIT OF BUSINESS FOR THE PURPOSE OF C OMPUTATION OF DEDUCTION U/S.80 HHC, THE UNABSORBED DEPRECIATION SHOULD NOT BE REDUCED. IN REPLY, THE ASSESSEE CONTENDED THAT WHILE CALCULATING DEDUCTION U/S. 80 HHC, THE UNABSORBED BUSINESS LOSS AND DEPRECIATION ARE NOT R EQUIRED TO BE REDUCED. 4 THE AO DECLINED THE ASSESSEES CONTENTION AND WAS OF THE VIEW THAT FOR THE PURPOSE OF DEDUCTION U/S. 80HHC, THE BUSINESS PROFI TS IS DECREASED BEING THE AMOUNT OF UNABSORBED BUSINESS LOSS INCLUDING DEPREC IATION CARRIED FORWARD FROM SSAPL. AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER IN APPEAL BUT WITHOUT ANY SUCCESS. 9. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE IS NOW COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE APEX C OURT IN THE CASE OF IPCA LABORATORIES, 266 ITR 521 (SC). WE, THEREFORE, R ESPECTFULLY FOLLOWING THE SAME, HOLD THAT THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN DECREASING AMOUNT OF BROUGHT FORWARD UNABSORBED BUSINESS LOSSE S INCLUDING DEPRECIATION FROM THE BUSINESS PROFIT OF THE CURRENT YEAR FOR THE PUR POSE OF COMPUTATION OF DEDUCTION U/S. 80 HHC. 10. GROUND NO.2 IS THUS DISMISSED. 11. IN GROUND NOS.3 & 4, FOR THE ASSESSMENT YEAR 20 03-04, THE ASSESSEE IS AGGRIEVED CIT(A)S UPHOLDING THE ADDITION PF PROVIS ION OF BAD DEBTS OF RS.95,00,000 AND INSURANCE CLAIM WRITTEN OFF OF RS. 92,00,000 WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE A CT. 12. LEARNED COUNSEL FAIRLY ACCEPTS THAT IN VIEW OF RETROSPECTIVE AMENDMENT TO SECTION 115JB, THESE GRIEVANCES HAVE NO LEGALLY SUS TAINABLE MERITS, AND, SHOULD THEREFORE, BE TREATED AS NOT PRESSED. 13. GROUND NOS.3 & 4 FOR A.Y. 2003-04 ARE, ACCORDIN GLY, DISMISSED. 14. IN GROUND NO.3 FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS RAISED GRIEVANCE AGAINST LEVY OF INTEREST UNDER SECTION 23 4B, BUT LEARNED COUNSEL SUBMITS THAT ONLY CONSEQUENTIAL RELIEF IS PRAYED FOR BY THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT OPPOSE THIS PRAYER. 5 15. IN VIEW OF THE ABOVE POSITION, GROUND NO.3 FOR A.Y. 2004-05 IS ALLOWED IN THE LIMITED TERMS OF CONSEQUENTIAL RELIEF. 16. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011 SD/- (R.S.PADVEKAR) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 26 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XXXII MUMB AI 4. COMMISSIONER OF INCOME TAX, 3 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH H MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI