Deputy Commissioner of Income-tax, V. Spicer India Ltd., Pune

ITA 2298/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0409 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 26-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: R D ONKAR
• Section: 115JB; 10B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 2298/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE ....... / APPELLANT ' /VS. SPICER INDIA LTD., 29, MILESTONE, PUNE-NASHIK ROAD, KURULI, TAL.-KHED, PUNE 410501 PAN : AAECS1869C / RESPONDENT ASSESSEE BY : SHRI R.D. ONKAR REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 17-11-2016 / DATE OF PRONOUNCEMENT : 30-11-2016 * / ORDER PER VIKAS AWASTHY, JM : THE PRESENT APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 22-0 9-2014 FOR THE ASSESSMENT YEAR 2006-07. 2 ITA NO. 2298/PN/2014, A.Y. 2006-07 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PROPELLER SHAFTS, LIGHT AXLES AND COMPONENTS THEREOF. THE A SSESSEE HAS SET UP THREE EXPORTS ORIENTED UNITS WHICH ARE ELIGIBLE FOR DEDUCTION U/S. 10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2006-07 ON 29-11-2006 DECLARING TOTAL INCOME AS NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY FIRS T NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 15-10-2007. THE A SSESSEE COMPUTED BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115J B OF THE ACT AT ` 17,24,12,618/-. THE ASSESSEE CLAIMED DEDUCTION OF ` 16,22,03,398/- U/S. 10B OF THE ACT. IN ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ACCEPTED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 10B OF THE ACT. THEREAFTER, THE ASSE SSING OFFICER INVOKED THE PROVISIONS OF SECTION 154 ON THE GROUND THA T EXCESS DEDUCTION OF ` 2,84,95,451/- HAS BEEN ALLOWED TO THE ASSESSEE U/S. 10B OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 13,37,07,947/- U/S. 10B UNDER NORMAL PROVISIONS. HOWEVER, WHILE COMPUTING BOOK PROFIT U/S. 115JB THE ASSESS EE HAS CLAIMED DEDUCTION OF ` 16,22,03,398/-. THE ASSESSING OFFICER MADE ADDITION OF DIFFERENCE I.E. ` 2,84,95,451/- VIDE ORDER DATED 05-03-2013 PASSED U/S. 154 OF THE ACT. AGAINST THE ORDER PASSED U/S. 154 OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF APOLLO TYRES LTD. VS. COMMISSIONER OF INCOME TAX REPORTE D AS 255 ITR 273 AND THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF 3 ITA NO. 2298/PN/2014, A.Y. 2006-07 DCIT VS. ROXY INVESTMENTS (P) LTD. REPORTED AS 24 SOT 2 27 DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED EXCESSIVE CLAIM OF DEDUCTION U/S. 10B. AGAINST THE FINDINGS OF COMMISSION ER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT SUB MITTED THAT THE ASSESSEE IN COMPUTATION OF INCOME UNDER NORMA L PROVISIONS HAD CLAIMED DEDUCTION OF ` 13,37,07,947/- U/S. 10B OF THE ACT. HOWEVER, WHILE COMPUTING BOOK PROFIT UNDER MAT PROVISIONS , THE ASSESSEE CLAIMED DEDUCTION OF ` 16,22,03,398/-. THUS, THE ASSESSEE HAS CLAIMED EXCESSIVE DEDUCTION OF ` 2,84,95,451/. WHILE PASSING THE ASSESSMENT ORDER DATED 30-12-2009 THE ASSESSING OFFICER INADVERTENTLY OVERLOOKED THIS EXCESSIVE CLAIM MADE BY THE ASSESSEE. TH E ASSESSING OFFICER RECTIFIED HIS MISTAKE WHICH APPARENT FROM RECORD BY PASSING THE ORDER U/S. 154 OF THE ACT. THE LD. AR PRAYED FOR SETTING ASIDE THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORING THE FIN DINGS OF THE ORDER PASSED BY ASSESSING OFFICER U/S. 154 OF THE ACT. 4. ON THE OTHER HAND SHRI R.D. ONKAR APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) SUBMITTED THAT THE COMPUTATION OF BOOK PROFIT UNDER MAT PROVISIONS ARE CONTAINED IN CHAPTER XII-B OF THE ACT. IT IS A SELF CONTAINED CODE AND COMPUTATION HAS TO BE DONE IN ACCOR DANCE WITH THE FORMULA GIVEN U/S. 115JB OF THE ACT. THE ACT PROVIDES A S TRAIGHT JACKET METHOD FOR COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT. THE ASSES SEE HAS COMPUTED BOOK PROFIT ACCORDING TO THE METHOD GIVEN UNDER THE PROVISIONS OF SECTION 115JB. THE AMOUNT OF DEDUCTION U/S. 10B 4 ITA NO. 2298/PN/2014, A.Y. 2006-07 COMPUTED UNDER THE NORMAL PROVISIONS MAY OR MAY NOT BE SAME IF MAT PROVISIONS ARE APPLIED. EXPLANATION TO SECTION 115JB(2) DEFIN ES BOOK PROFIT TO MEAN THE NET PROFIT AS SHOWN IN THE PROFIT AND LO SS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND INCREASED OR DECREAS ED BY THE EXPENSES OR PROFIT/INCOME STATED UNDER THE CLAUSE THERE OF. THE DIFFERENCE IN AMOUNT OF CLAIM OF DEDUCTION U/S. 10B UNDER NOR MAL PROVISIONS AND MAT PROVISIONS IS ON ACCOUNT OF SET OFF OF N OTIONALLY BROUGHT FORWARD UNABSORBED BUSINESS LOSS. THE GROUND RAISED BY THE REVENUE IN APPEAL WRONGLY REFERS TO EXPENDITURE RELATABLE TO DEDUCTION U/S. 10B AND THUS, IMPLIEDLY DRAWS A FLAWED INFERENCE THAT SUCH A GAP IS DUE TO NON CONSIDERATION OF EXPENSES TO BE ADDED/SUB TRACTED FROM BOOK PROFITS AS STIPULATED IN CLAUSE 1(F) OF EXPLANATION TO SEC TION 115JB OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION OF PROFITS DERIVED FROM EXPORTS U/S. 10B BY APPLYING THE PROVISIONS OF SUB-SECT ION (4) I.E. IN PROPORTION OF EXPORT TO TOTAL TURNOVER OF UNDERTAKING A ND SUB-SECTION (6) OF SECTION 10B OF THE ACT. THE LD. AR FURTHER REFERRED T O COMPUTATION OF DEDUCTION U/S. 10B AT PAGES 25 TO 37 OF THE PAPER BO OK. FURTHER, TO SUPPORT HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE D ECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF APOLLO TYRES LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) AND THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. ROXY INVESTMENTS (P) LTD. (SUPRA). 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ALLEGED EXCESS DEDUCTION CLAIMED BY THE 5 ITA NO. 2298/PN/2014, A.Y. 2006-07 ASSESSEE U/S. 10B OF THE ACT. THE DIFFERENCE IN CLAIM OF DED UCTION U/S. 10B IS ON ACCOUNT OF COMPUTATION OF DEDUCTION UNDER NORM AL PROVISIONS AND UNDER MAT PROVISIONS. IT IS AN UNDISPUTED FACT THAT THE COMPUTATION MADE UNDER NORMAL PROVISIONS CANNOT BE SUBS TITUTED WHILE COMPUTING BOOK PROFITS UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSING OFFICER HAS NOT POINTED ANY DEFECT IN COMPUTATION OF BOOK PROFITS UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 154 TO DISALLOW THE DIFFERENCE IN THE DEDUCTION CLAIMED BY TH E ASSESSEE U/S. 10B ON THE GROUND THAT UNDER NORMAL PROVISIONS THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 13,37,07,947/- U/S. 10B, WHEREAS WHILE COMPUTING BOOK PROFITS UNDER MAT PROVISIONS THE CLAIM OF D EDUCTION HAS INCREASED TO ` 16,22,03,398/-. WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS ERRED IN COMING TO SUCH A CONCLUSION. THE ASSESSING OFFICER CANNOT SUBSTITUTE THE CLAIM MADE BY THE ASSESSEE UNDER NORMAL PROVISIONS WHILE COMPUTING BOOK PROFITS UNDER SPECIAL PROVISIONS OF SECTION 115JB OF THE ACT. 6. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF A POLLO TYRES LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS HELD THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME U/S. 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CER TIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROP ERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSE SSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BE HIND THE NET 6 ITA NO. 2298/PN/2014, A.Y. 2006-07 PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION. 7. FURTHER, THE DELHI BENCH OF THE TRIBUNAL IN THE CASE O F DCIT VS. ROXY INVESTMENTS (P) LTD. (SUPRA) WHILE DEALING WITH THE SIMILA R ISSUE HAS OBSERVED AS UNDER : '12. THUS, UNDER THE SCHEME OF PROVISIONS OF S. 115 JB MINIMUM ALTERNATE TAX(MAT) IS LEVIED WITH REFERENCE TO THE BOOK PROFIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDAN CE WITH THE PROVISIONS OF PARTS II AND III OF SCH. VI OF THE CO MPANIES ACT, AS OPPOSED TO 'PROFITS OR GAINS OF BUSINESS OR PROFESS ION' AS COMPUTED AS PER THE PROVISIONS OF THE ACT. THE BOOK PROFIT GETS SUBSTITUTED FOR THE TOTAL INCOME AS COMPUTED UNDER THE ACT. THE BOOK PR OFIT HAS, THEREFORE, TO BE WHOLLY QUARANTINED FROM THE SAID T OTAL INCOME. FOR THE DETERMINATION OF BOOK PROFITS THUS ANY MODE AND MAN NER OF COMPUTATION OF TOTAL INCOME UNDER THE ACT HAS NOT T O BE APPLIED UNLESS SPECIFICALLY PROVIDED. EXPLANATION TO S. 115JB PROV IDES THE MANNER OF COMPUTATION OF BOOK PROFIT. THE STARTING POINT IS T HE BOOK PROFIT AS DISCLOSED IN THE P&L A/C PREPARED IN ACCORDANCE WIT H PARTS II AND III OF SCH. VI TO THE COMPANIES ACT, 1956. SUCH PROFIT IS SUBJECT TO ADJUSTMENTS SPECIFIED IN THE EXPLANATION TO SAID SE CTION. IN TERMS OF EXPLN.(II) TO S. 115JB . THE AMOUNT OF INCOME TO WHICH PROVISIONS, INTER ALIA, OF S. 10A/10B APPLY IF SUCH AMOUNT IS CREDITE D TO P&L A/C, IS TO BE REDUCED FROM THE PROFIT AS PER P&L A/C. THE AMOUNT OF INCOME TO WHICH, INTER ALIA, S. 10A/10B APPLIES, IF SUCH AMOU NT IS CREDITED TO THE P&L A/C WOULD ONLY REFER TO SUCH AMOUNT AS APPEARIN G IN THE BOOKS OF ACCOUNT. 13. A CAREFUL PERUSAL OF CL.(IT) OF EXPLANATION TO S. 115JB(2) WILL REVEAL THAT THOUGH THE SAID CLAUSE SPEAKS ABOUT THE AMOUNT OF 'INCOME', IT ALSO SPEAKS OF 'IF, ANY SUCH AMOUNT IS CREDITED TO P&L A/C. THUS, WHILE READING THE SAID CLAUSE AS A WHOLE, IT WILL BECOME CLEAR THAT THE AMOUNT OF INCOME WHICH CAN BE REDUCED BY T HE AO FOR COMPUTING THE BOOK PROFIT UNDER THAT CLAUSE WILL BE THE AMOUNT WHICH IS CREDITED TO THE P&L A/C AND NOT THE AMOUNT OF IN COME WHICH IS 7 ITA NO. 2298/PN/2014, A.Y. 2006-07 CLAIMED BY THE ASSESSEE OR DETERMINED BY THE AO WHI LE ASSESSING THE INCOME UNDER THE REGULAR PROVISIONS OF IT ACT. 8. THUS, IN VIEW OF SETTLED LEGAL POSITION AND THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INC OME TAX (APPEALS) IN DELETING THE ADDITION. THE IMPUGNED ORDER IS UP HELD AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 30 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH NOVEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE