PAL CREDIT & CAPITAL LTD., MUMBAI V. C.I.T.-8, MUMBAI

ITA 2302/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9316 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3); 115JB; 263; 28; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . !'# , $ %& BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO. 2302/MUM/2012 ( ' ' ' ' / ASSESSMENT YEAR : 2007-08 M/S. PAL CREDIT & CAPITAL LTD., AMARSONS BHAVAN, 3 RD FLOOR, SHRI VILE PARLE, KVO SEVA SANGH, 68, MISQUITTA STREET, OPP. RAILWAY CROSSING, VILE PARLE (E), MUMBAI-400 057 / VS. THE DCIT, RANGE-8, AAYAKAR BHAVAN, MUMBAI-400 020 &( $ ./ )* ./PAN/GIR NO. AAACP 4600N ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY: SHRI JAYESH DADIA ,-(+ / . / RESPONDENT BY SHRI GIRIJA DAYAL / 01$ / DATE OF HEARING :19 .12.2012 23' / 01$ /DATE OF PRONOUNCEMENT :31.12.2012 %4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT-8, MUMBAI DT.5.3.2012 PASSED U/S. 263 OF THE AC T PERTAINING TO A.Y. 2007-08. ITA NO.2302/M/2012 2 2. THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF T HE ORDER ALLEGING THAT THE CIT HAS ERRED IN LAW AND ON THE FACTS OF T HE CASE IN INVOKING PROVISIONS OF SECTION 263 OF THE I.T. ACT. BY DOIN G SO, THE CIT ERRED IN DIRECTING THE AO TO TREAT WAIVER OF PRINCIPAL AMOU NT OF LOAN AS INCOME AND FURTHER ERRED IN DIRECTING THE AO TO RECAST THE AUDITED ACCOUNTS FOR THE PURPOSE OF CALCULATING MAT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSMENT U/S. 143(3) OF THE ACT WAS DONE BY THE AO VIDE ORDER DT. 30.11.2009. SUBSEQUENTLY INVOKING THE POWERS VESTED UPON HIM U/ S. 263 OF THE ACT. THE CIT ISSUED SHOW CAUSE NOTICE DT. 7.2.2011 STATI NG THAT THE ASSESSEE HAS RECEIVED ONE TIME WAIVER OF PRINCIPAL AMOUNT OF LOAN FROM VARIOUS BANKS AMOUNTING TO RS. 423.45 LAKHS WHICH WAS SUPPO SED TO BE TAXED U/S. 41(1) OF THE ACT IN VIEW OF THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. VS DCIT 308 ITR 417, WHICH HAS RENDERED THE ASSESSMENT ORDER NOT ONLY ERRONEOU S BUT ALSO PRE-JUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT FURTHER IS SUED A SHOW CAUSE NOTICE DT. 18.5.2011 REITERATING THAT DUE TO NON TA XABILITY OF THE PRINCIPAL AMOUNT OF LOAN WAIVED THE ASSESSMENT ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3.1 REPLYING TO THE FIRST NOTICE DT. 7.2.2011, THE ASSESSEE EXPLAINED THAT THE WAIVER OF PRINCIPAL AMOUNT OF TERM LOAN CANNOT BE BROUGHT TO TAX AS PER THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02. IT WAS FURTHER EXPLAINED THAT THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. (SU PRA) DO NOT APPLY ON THE FACTS OF THE CASE INASMUCH AS THE PRINCIPAL AMO UNT OF BANK LOANS IS NOT IN THE NATURE OF TRADING LIABILITY U/S. 41(1) OF TH E ACT. AN AMOUNT CAN BE BROUGHT TO TAX ONLY IF THE SAID AMOUNT WAS CLAIMED AS DEDUCTION IN EARLIER YEARS AND THERE IS A REMISSION OF TRADING LIABILITY . TO SUPPORT, THE ITA NO.2302/M/2012 3 ASSESSEE RELIED UPON THE DECISION OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. 261 ITR501. T HE ASSESSEE CLAIMED THAT THE CIT SHOULD NOT INTERFERE WITH THE ASSESSMENT ORDER ONLY BECAUSE ANOTHER VIEW IS POSSIBLE. FOR THIS PROPOSI TION, RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GREEN WORLD CORPN. 314 ITR 81. THE LD. CIT FURTHER ISSUE D NOTICE DT. 12.7.2011 ASKING THE ASSESSEE TO FURNISH ALL NECESS ARY DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM THAT THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) IS APPLICABLE. THE LD. CIT FURTHER IN THE SAME NOT ICE STATED THAT AS THE RECEIPTS ON ACCOUNT OF ONE TIME SETTLEMENT OF THE B ANK HAS NOT BEEN CONSIDERED BY THE ASSESSEE FOR COMPUTATION OF BOOK PROFIT U/S. 115JB, THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE. 3.2. THE ASSESSEE FILED A DETAILED REPLY DT. 2.2.20 12 COVERING THE CONTENTION OF THE CIT AS RAISED IN ALL THE THREE NO TICES TAKEN TOGETHER. IT WAS EXPLAINED THAT ALL THE NECESSARY AND RELEVANT D ETAILS HAVE BEEN FILED AT THE TIME OF ASSESSMENT. FURTHER, THE ACCOUNTS HAVE BEEN PREPARED IN ACCORDANCE WITH PART II AND III OF SCHEDULE-VI TO T HE COMPANIES ACT. THE AUDITED ACCOUNTS HAVE BEEN CERTIFIED BY THE AUD ITORS AND THE SAME ARE IN ACCORDANCE WITH SCHEDULE-VI OF THE COMPANIES ACT . THE ACCOUNTS HAVE ALSO BEEN APPROVED BY THE SHAREHOLDERS IN THE GENERAL BODY MEETING AND ALSO BEEN APPROVED BY THE REGISTRAR OF COMPANIES. UNDER THESE CIRCUMSTANCES, THE AUDITED ACCOUNTS CANNOT BE DISTURBED OR RECAST AS THE ACT HAS NOT GIVEN ANY POWER TO THE AO TO RECAST THE AUDITED ACCOUNTS. FOR THIS PROPOSITION, THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. 255 ITR 273. 4. AFTER CONSIDERING THE DETAILED SUBMISSIONS OF TH E ASSESSEE THE CIT CAME TO THE CONCLUSION THAT THERE IS NO DOUBT THAT THE ASSESSEE HAS ITA NO.2302/M/2012 4 RECEIVED WAIVER OF ONE TIME SETTLEMENT OF PRINCIPAL AMOUNT OF RS. 423.45 LAKHS FROM VARIOUS FINANCIAL INSTITUTIONS. THIS SH OWS THAT THE AMOUNT OF RS. 423.45 LAKHS HAS CRYSTALLIZED BY WAY OF CESSAT ION OF LIABILITY, WHICH IS COVERED BY THE DEFINITION OF PROFIT/BENEFITS WIT HIN THE MEANING OF SEC. 28(IV) R.W. SECTION 41(1) OF THE ACT. THE CIT FURTHER RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS T.V. SUNDARAM IYENGAR & SONS LTD. 222 ITR 344. THE CIT FURTHER R ELIED UPON THE DECISION OF THE SOLID CONTAINERS LTD. (SUPRA) DISTI NGUISHING IT FROM THE DECISION OF MAHINDRA & MAHINDRA (SUPRA). ACCORDING LY, THE LD. CIT HELD AS UNDER: HENCE, IF THE LOANS WERE TAKEN FOR THE PURPOSE OF CIRCULATING CAPITAL, UPON WAIVER THEREOF, THE LOANS WOULD BE LIABLE TO BE TREATED AS THE ASSESSEES INCOME. THEREFORE, THE AO IS DIRECTED TO ASCERTAIN THE PURPOSE AND UTILIZATION O F THE WAIVED LOANS AND TREAT THEM AS THE ASSESSEES INCOME IN TE RMS OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN SOLID CONTAINERS LTD. THE AO IS FURTHER DIRECTED TO ASCERTAIN WHETHER THE WAIVED LOANS WERE TAKEN BY THE ASSESSEE FOR ACQUISITION OF DEPRECIABLE CAPITAL ASSETS FOR THE PURPOSE OF ITS BUSINESS AND IF SO, THE AO IS DIRECTED TO WITHDRAW DEPRECIATION TO THE EXTENT OF THE PRINCIPAL AMOUNTS OF WAIVED LOANS IN TERMS OF S. 43(1) R.W. E XPLANATION 10 THEREOF WHICH WAS INSERTED IN THE I.T. ACT, 1961 BY FINANCE (NO.2) ACT, 1998 W.E.F. 1.4.1999, THEREBY RENDERING THE DE CISION OF MAHINDRA & MAHINDRA LTD. WHICH PERTAINS TO A.Y. 197 6077, AS INAPPLICABLE. ALTERNATIVELY, EVEN IF THE ASSESSEES CONTENTION TH AT IT UTILIZED THE LOANS FOR ACQUIRING FIXED ASSETS IS ACCEPTED, T HEN ALSO THE ASSESSEE CANNOT ESCAPE FROM THE PROVISIONS OF SEC. 28(IV) R.W.S. 29/41(1)/43(1) OF THE ACT FOR THE REASON THAT THE A SSESSEE HAS CLAIMED DEDUCTION IN EARLIER YEARS IN THE FORM OF D EPRECIATION ON FIXED ASSETS ACQUIRED OUT OF THE IMPUGNED LOANS. T HUS, SINCE THE IMPUGNED LOANS HAVE BEEN UTILIZED BY THE ASSESSEE F OR THE PURPOSE OF BUSINESS AND THE ASSESSEE HAS BEEN ALLOWED DEDUC TION IN THE FORM OF DEPRECIATION IN RESPECT OF ASSETS PURCHASED OUT OF THE BORROWED FUNDS, THE ASSESSEE CANNOT TAKE THE PLEA T HAT NO ITA NO.2302/M/2012 5 DEDUCTION WAS GIVEN TO IT IN RESPECT OF THE PRINCIP AL AMOUNTS IN EARLIER YEARS. ACCORDINGLY, THE AMOUNT OF RS. 423. 45 LAKHS IS LIABLE TO BE ADDED TO THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SEC. 28(IV) OF THE ACT AS WELL AS BY APPLYING THE P ROVISIONS OF SEC. 41(1) OF THE ACT. HOWEVER, IT IS EVIDENT THAT THE AO HAD NOT EXAMINED THE RECEIPT OF ONE TIME SETTLEMENT OF PRIN CIPAL AMOUNT OF LOAN IN THE LIGHT OF THE PROVISIONS OF SEC. 28(IV) AS WELL AS SECTION 41(1)/43(1) OF THE ACT, WHICH HAS RENDERED THE ASSE SSMENT ORDER ERRONEOUS AND HAS CAUSED PREJUDICE TO THE INTEREST OF REVENUE. THE AO IS ACCORDINGLY DIRECTED TO TREAT THE AMOUNT OF RS. 423.45 LAKHS RECEIVED AS ONE-TIME WAIVER OF LOAN IN TERMS OF THE DIRECTIONS GIVEN HEREINABOVE. FINALLY THE LD. CIT SET ASIDE THE ASSESSMENT ORDER DT. 30.11.2009 TO BE REFRAMED AS PER THE DIRECTIONS GIVEN. 5. AGGRIEVED BY THIS FINDING OF CIT, THE ASSESSEE I S BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT TH E CIT HAS GROSSLY ERRED IN INVOKING SECTION 263 ON THE FACTS OF THE CASE. FIRSTLY BECAUSE ON GIVEN FACTS TWO VIEWS ARE POSSIBLE THEREFORE IF THE AO HA S ACCEPTED ONE VIEW, THE CIT CANNOT DIRECT THE AO TO FOLLOW ANOTHER VIEW BY INVOKING POWERS VESTED ON HIM U/S. 263 OF THE ACT. THE LD. COUNSEL FURTHER ARGUED THAT EVEN ON MERIT, THE DECISION RELIED UPON BY THE CIT DO NOT APPLY ON FACTS OF THE CASE. THE LD. COUNSEL PLEADED THAT THE DIRE CTIONS GIVEN BY CIT MAY BE SUITABLY MODIFIED WHILE DECIDING THE ISSUE O N MERIT. THE LD. COUNSEL FURTHER SUBMITTED THAT APPLICATION OF SEC. 115JB IS UNWARRANTED ON THE TREATMENT OF THE WAIVER OF PRINCIPAL AMOUNT OF LOAN. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY PLACED RELIANCE ON THE ORDER OF CIT AND ARGUED THAT THE DI RECTIONS ISSUED BY CIT ARE IN LINE WITH THE DECISIONS RELIED UPON BY HIM T HEREFORE, THERE IS NO ERROR OR FLAW IN THE ORDER U/S. 263 OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS AND THE DECISIONS RELIED UPON BY BOTH THE SIDES. I T IS NOT IN DISPUTE THAT ITA NO.2302/M/2012 6 THE CIT HAS INVOKED THE POWERS U/S. 263 BECAUSE ACC ORDING TO HIS VIEW, THE ONETIME WAIVER OF PRINCIPAL AMOUNT OF LOAN FROM VARIOUS BANKS AMOUNTING TO RS. 423.45 LAKHS OUGHT TO HAVE BEEN TA XED U/S. 41(1) OF THE ACT. TO SUBSTANTIATE HIS VIEW THE CIT RELIED UPON THE DECISION OF SOLID CONTAINERS (SUPRA). ON A CAREFUL PERUSAL OF THE DE CISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS L TD. (SUPRA), WE FIND THAT IN THAT CASE THE ASSESSEE HAS TAKEN LOAN FOR THE PURPOSE OF BUSINESS IN THE FORM OF CIRCULATING CAPITAL AND ON WAIVER OF TH E SAID LOAN, IT HAS BEEN HELD THAT THE SAME WAS TAXABLE U/S. 41(1) OF THE AC T SINCE THE AMOUNT WAS TAKEN IN THE COURSE OF TRADING TRANSACTION. WE AL SO FIND THAT IN THE SAID DECISION, THE HONBLE BOMBAY HIGH COURT HAS CONSIDE RED THE DECISION OF MAHINDRA & MAHINDRA (SUPRA) AND HAS MADE AN OBSERVA TION THAT IN THE CASE OF MAHINDRA & MAHINDRA, THE LOAN WAS TAKEN FOR THE PURCHASE OF PLANT AND MACHINERY AND THEREFORE THE WAIVER COULD NOT CONSTITUTE BUSINESS. THE COURT OBSERVED THAT THE FACTS OF THE PRESENT CASE (SOLID CONTAINERS) ARE ENTIRELY DIFFERENT INASMUCH AS IT W AS A LOAN TAKEN FOR TRADING ACTIVITY AND ULTIMATELY UPON WAIVER THE AMO UNT WAS RETAINED IN BUSINESS BY THE ASSESSEE. ON THAT NOTE THE HONBLE JURISDICTIONAL HIGH COURT FINALLY CONCLUDED THAT THE PRINCIPLE STATED B Y THE HONBLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. 7.1. WE FIND THAT THE DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT RELIED UPON BY THE CIT IS MORE IN FAVOUR OF THE ASS ESSEE THAN TO THE REVENUE INASMUCH AS IN THE PRESENT CASE, IT IS THE CLAIM OF THE ASSESSEE THAT THE LOAN WAS TAKEN FOR THE PURCHASE OF CAPITAL ASSET AND THEREFORE ANY WAIVER OF PRINCIPAL AMOUNT WOULD NOT CONSTITUTE A TRADING RECEIPT. WE ALSO FIND SUPPORT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN ITA NO.2302/M/2012 7 THE CASE OF CIT VS XYLON HOLDINGS PVT. LTD. IN ITA NO. 3704 OF 2010 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE ARI SING IN THIS CASE STAND COVERED BY THE DECISION OF THIS COU RT IN THE MATTER OF MAHINDRA & MAHINDRA (SUPRA). THE DECISIO N OF THIS COURT IN THE MATTER OF SOLID CONTAINERS (SUPRA ) IS ON COMPLETELY DIFFERENT FACTS AND INAPPLICABLE TO THIS CASE. IN THE MATTER OF SOLID CONTAINERS (SUPRA), THE ASSESSE E THEREIN HAD TAKEN A LOAN FOR BUSINESS PURPOSE. IN VIEW OF THE CONSENT TERMS ARRIVED AT, THE AMOUNT OF LOAN TAKEN WAS WAIVED BY THE LENDER. THE CASE OF THE ASSESSEE THE REIN WAS THAT THE LOAN WAS A CAPITAL RECEIPT AND HAS NOT BEE N CLAIMED AS DEDUCTION FROM THE TAXABLE INCOME IN THE EARLIER YEARS AND WOULD NOT COME WITHIN THE PURVIEW OF SECTION 41 (1) OF THE ACT. HOWEVER, THIS COURT BY PLACING RELIANCE U PON THE DECISION OF THE APEX COURT IN THE MATTER OF CIT VS T.V. SUNDARAM IYENGAR AND SONS LTD. 222 ITR 344 HELD THA T THE LOAN WAS RECEIVED BY THE ASSESSEE FOR CARRYING ON I TS BUSINESS AND THEREFORE, NOT A LOAN TAKEN FOR THE PU RCHASE OF CAPITAL ASSETS. CONSEQUENTLY, THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD. (SUPRA) WAS DISTINGUISHED AS IN THE SAID CASE THE LOAN WAS TAKE N FOR THE PURCHASE OF CAPITAL ASSETS AND NOT FOR TRADING ACTI VITIES AS IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA). IN VIEW OF THE ABOVE, THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LTD (SUPRA) WILL HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE AND THE MATTER STANDS COVERED B Y THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD. (SUPRA). THE ALTERNATIVE SUBMISSION THAT THE AMOUNT OF LOAN WRITTEN OFF WOULD BE TAXABLE U/S. 28 (IV) OF THE ACT ALSO CAME UP FOR CONSIDERATION BEFORE THIS COUR T IN THE MATTER OF MAHINDRA & MAHINDRA LTD (SUPRA) AND IT WA S HELD THEREIN THAT SECTION 28(IV) OF THE ACT WOULD APPLY ONLY WHEN A BENEFIT OR PERQUISITE IS RECEIVED IN KIND AND HAS NO APPLICATION WHERE BENEFIT IS RECEIVED IN CASH OR MO NEY. IN VIEW OF THE ISSUE ARISING IN THIS APPEAL BEING COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD. (SUPRA), NO SUBSTANTIAL QU ESTION OF LAW ARISES AND BOTH THE QUESTIONS ARE DISMISSED. ITA NO.2302/M/2012 8 8. CONSIDERING THE ABOVE DECISIONS, IN OUR CONSIDER ATE VIEW THE DIRECTIONS OF THE CIT DESERVES TO BE MODIFIED AND A CCORDINGLY MODIFYING THE DIRECTIONS OF THE CIT, WE RESTORE THIS ISSUE BA CK TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY WHETHER THE ASSESSEE H AS BORROWED LOAN FOR THE PURCHASE OF CAPITAL ASSET AND THE ASSESSEE IS D IRECTED TO FURNISH ALL NECESSARY DETAILS/DOCUMENTS TO SUBSTANTIATE ITS CLA IM. 9. FURTHER COMING TO THE SECOND ISSUE RELATING TO T HE COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF MAT ON ACCOUNT OF TH E WAIVER OF PRINCIPAL AMOUNT OF LOAN, WE DO NOT FIND ANY MERIT IN THE DIR ECTIONS OF CIT INASMUCH AS BOOK PROFIT UNDER PROVISIONS OF SEC. 11 5JB HAS TO BE COMPUTED ON THE BASIS OF NET PROFIT DISCLOSED AS PE R PROFIT AND LOSS ACCOUNT PREPARED UNDER PROVISIONS OF PART-II & III OF SCHEDULE-VI OF COMPANIES ACT AND LAID BEFORE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH PROVISIONS OF SEC. 210 OF COMPAN IES ACT, 1956. ON IDENTICAL FACTS, THE TRIBUNAL IN THE CASE OF ITO VS GALAXY SAWS (P) LTD. 132 ITD 236 HAS HELD AS FOLLOWS: WE ALSO NOTE FROM THE PROVISIONS OF EXPLANATION 1 TO SECTION 115JB(2) THAT AMOUNT CARRIED TO ANY RESERVE BY WHATEVER NAME CALLED HAS TO BE ADDED TO THE NET PRO FIT IF THE AMOUNT HAD BEEN DEBITED TO THE PROFIT AND LOSS ACCO UNT. IN THIS CASE THE REVALUATION RESERVE HAD BEEN DIRECTLY TAKEN TO THE BALANCE SHEET AND NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THEREFORE THE AMOUNT COULD NOT BE ADDED UNDER CLAUSE (B) OF EXPLANATION 1 TO SECTION 115JB(2). IT IS ALSO PERTINENT TO NOTE THAT CLAUSE (IIA) WAS INSERTED TO THE EXPLANATION 1 WITH EFFECT FROM 1-4-2007 IN WHICH IT WAS PROVIDED THAT AMOUNT OF DEPRECIATION DEBITED TO THE PROFIT AND LOSS ACCOUNT EXCLUDING THE DEPRECIATION ON ACCO UNT OF REVALUATION OF ASSETS HAS TO BE REDUCED FROM THE NE T PROFIT. THUS THE LEGISLATURE THOUGH IT FIT TO EXCLUDE THE D EPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS FROM THE AMOUNT TO BE ITA NO.2302/M/2012 9 REDUCED FROM THE NET PROFIT BUT THERE WERE NO SIMIL AR PROVISION INSERTED FOR ADDITION OF REVALUATION RESE RVE TO THE NET PROFIT EVEN IF THE SAME WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. THIS SHOWS THAT THE LEGISLATURE HAD CONSCIOUSLY NOT MADE ANY PROVISION FOR ADDITION ON ACCOUNT OF REVALUATION RESERVE TAKEN TO THE BALANCE SHEET. IN VIEW OF THE FOREGOING DISCUSSION AND FOR THE REASONS GIVEN EARLIER WE ARE OF THE CONSIDERED OPIN ION THAT NO ADDITION COULD BE MADE TO THE NET PROFIT ON ACCO UNT OF REVALUATION RESERVE DIRECTLY TAKEN TO THE BALANCE S HEET WHILE COMPUTING THE BOOK PROFIT. WE ACCORDINGLY SEE NO IN FIRMITY IN THE ORDER OF CIT(A) DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER AND THE SAME IS UPHELD. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNA L, THE DIRECTIONS ISSUED BY THE CIT ON THIS COUNT IS QUASHED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5 06 50 / 7 8/ 9:; 4 &<0 / )0 =' ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2012 %4 / 3' $ 7 >%6 31.12.2012 3 / ? SD/- SD/- (H.L. KARWA) (N.K. BILLAIYA) /PRESIDENT $ %& / ACCOUNTANT MEMBER MUMBAI; >% DATED 31.12.2012 . . ./ RJ , SR. PS ITA NO.2302/M/2012 10 %4 / ,0 @ '0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. A ( ) / THE CIT(A)- 4. A / CIT 5. B? ,0 , , / DR, ITAT, MUMBAI 6. ?C D / GUARD FILE. %4 / BY ORDER, - 0 ,0 //TRUE COPY// 9 / = ) DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI