The DCIT, Circle-3(1)(1), Ahmedabad V. M/s. Narmada Bio-Chem Pvt. Ltd., Ahmedabad

ITA 2467/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4129 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARTH PATEL
• Keywords: Rectification of order; Earning of tax free income
• Section: 143(3); 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIR - 3(1)(1), AHMEDABAD (APPELLANT) VS M/S. NARMADA BIO - CHEM PVT. LTD. 907, 9 TH FLOOR, AKIK COMPLEX, OPP. RAJPATH CLUB, AHMEDABAD PAN: AABCN4107F (RESPONDENT) REVENUE BY : S H RI PRASOON KA BRA , SR. D . R. ASSESSEE BY: S H RI PARTH PATEL , A.R. DATE OF HEARING : 20 - 06 - 2 018 DATE OF PRONOUNCEMENT : 08 - 08 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) - 9 , AHM EDABAD DATED 26 - 07 - 2016 , IN PROCEEDINGS UNDER SECTION 154 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,89,81, 032/ - MADE ON ACCOUNT OF PROVISIONS OF I. T. ACT U/S. 115JB OF THE ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE HAS TO BE ADDED PROVISION MADE FOR CURRENT TAX AS PER EXPLANATION 1 TO SUB - SECTION (2) OF SECTION 115JB OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFIC ER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. I T A NO . 2467 / A HD/ 20 16 A SSESSMENT YEAR 2012 - 13 I.T.A NO. 2467 /AHD/20 16 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. NARMADA BIO - C HEM PVT. LTD. 2 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING LOSS OF RS. 5 , 65 , 70 ,335/ - AND B O OK PROFIT AT RS. 9 , 68 , 07 , 397/ - WAS FILED ON 28 TH SEP, 2012. SUBSEQUENTLY , THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 6 TH AUGUST, 2013. THE AS SESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FERTIL IZER. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 27 TH FEB, 2015 BY ASSESSING BOOK PROFIT AT RS. 9 , 73 , 47 , 261/ - AND DETERMINING THE LOSS AT RS. 5 , 59 , 73 , 070/ - . THEREAFTER , THE ASSESSING OFFICER HAS PASSED ORDER U/S. 154 O F THE ACT ON 11 TH JAN, 2016 BY ADDING INCOME TAX PROVISION TO T HE AMOUNT OF RS. 1 , 89 , 81 , 032/ - TO THE BOOK PROFIT AND DETERMINED THE REVISED BOOK PROFIT AT RS. 11 , 63 , 28 , 293/ - . 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) HAS D ELETED THE ADDITION OF RS. 1 , 89 , 81 , 032/ - MADE T O THE BOOK PROFIT U/S. 115JB OF THE ACT. THE RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND THE OBSERVATIONS MADE BY THE A. O. IN THE ORDER. IT IS OBSERVED FROM THE RECTIFICATION ORDER U/S.154 OF THE ACT DTD.11/01/2016 THAT ASSESSMENT ORDER U/S.143(3) OF THE ACT WAS PASSED ON 27/02/2015 DETERMINING LOSS OF RS.5,59,73,069/ - AND BOOK PROFIT AT RS.9,73,47,261/ - . THE A.O. OBSERVED THAT AS PER EXPLANATION 1 TO SECTION 115JB OF THE ACT, BOOK PROFIT IS REQUIRED TO BE INCREASED BY THE AMOUNT OF TAX DEBITED IN PROFIT & LOSS A/C. ON VERIFYING THIS FACT THE A.O. OBSERVED THAT THE APPELLANT HAD DEBITED RS.1,94,00,000/ - AS PROVISION FOR CURR ENT YEAR TAX AND HAD ADDED ONLY RS,4,18,968/ - WHILE WORKING OUT MAT PROVISION. A.O. PASSED RECTIFICATION ORDER U/S.154 OF THE ACT AND RECALCULATED THE BOOK PROFIT FOR THE PURPOSE OF MAT. DURING THE RECTIFICATION PROCEEDINGS APPELLANT HAD EXPLAINED TO THE A .O. THAT IT HAD MADE PROVISION OF INCOME - TAX AT RS.1,94 CRORES. HOWEVER, IT HAS CLAIMED MAT CREDIT OF RS.1,93,69,003/ - AGAINST THAT PROVISION AND ACCORDINGLY NET PROVISION OF RS.30,997/ - HAS BEEN CONSIDERED WHILE CALCULATING BOOK PROFIT U/S.115JB. IT FURTH ER STATED THAT THIS IS BASED ON THE GUIDANCE NOTE ON ACCOUNTING ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA FOR CREDIT AVAILABLE IN RESPECT OF MAT AS WELL AS PROVISIONS OF IT. ACT. DURING THE APPELLATE PROCEEDINGS APPELLANT HAS RESTATED ITS CONTE NTION MADE BEFORE THE A.O. CONSIDERING EXPLANATION - 1 TO SECTION 115JB WHEREIN IT HAS BEEN STATED AS FOLLOWS: - 'EXPLANATION 1. FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREV IOUS YEAR PREPARED UNDER SUB - SECTION (2), AS INCREASED BY (A).... (B)... (C)... IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AMOUNT REFERRED TO IN CLAUSE (J) IS NOT CREDITED TO THE PROFIT AND LOSS ACC OUNT, AND AS REDUCED BY, I.T.A NO. 2467 /AHD/20 16 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. NARMADA BIO - C HEM PVT. LTD. 3 (I) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT A ND LOSS ACCOUNT:' . IT IS APPARENT FROM THE ABOVE MENTIONED EXPLANATION THAT AMOUNT WHICH IS WITHDRAWN FROM ANY PROVISION MADE AND CREDITED TO PROFIT & LOSS A/C. IS REQUIRED TO BE REDUCED WHILE CALCULATING BOOK PROFIT U/S.115JB OF THE ACT. FURTHER FIR ST PROVISO TO EXPLANATION 1 STATES AS FOLLOWS: - '....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 YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1997 SHALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPL ANATION BELOW THE SECOND PROVISO TO SECTION 115JA, AS THE CASE MAY BE; OR ...' AS PER THE ABOVE STATED PROVISO BOOK PROFIT MUST ALSO BE INCREASED BY THE PROVISION OUT OF WHICH THE SAME HAS BEEN WITHDRAWN AND CREDITED TO PROFIT & LOSS A/C. CONSIDERING THE P ROVISIONS OF THE ACT, I AM OF THE CONSIDERED OPINION THAT APPELLANT HAS RIGHTLY REDUCED THE MAT CREDI T OF RS.1,93,699,003/ - AS PER SECTION 115JB(2) EXPLANATION 1 ITEM NO.1 FROM PROVISIO NS OF L.T. ACT OF RS.1,94,00,000 / - WHILE CALCULATING BOOK PROFIT. FURT HER IT HAS ALSO TAKEN INTO CONSIDERATION NET AMOUNT OF RS.30,997/ - WHILE CALCULATING BOOK PROFIT. THEREFORE, A.O. WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.1,89,81,032/ - ON ACCOUNT OF PROVISIONS OF L.T. ACT WHILE CALCULATING BOOK PROFIT U/S.115JB OF THE A CT. THIS GROUND OF APPEAL IS ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS FURNISHED PAPER BOOK CONTAINING DETAILS AND SUBMISSION FURNISHED BEFORE T H E ASSESSING OFFICER AND CIT(A) DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE COMPANY HAS FILED ITS RETUR N OF INCOME SHOWING BOOK PROFIT AT RS. 9 , 68 , 07 , 397/ - AND THE ASSESSING OFFICER HAS ASSESSED THE BOOK PROFIT AT RS.9,73,47,261 UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY THE ASSESSING OFFICER HAS PASSED ORDER U/S 154 OF THE ACT STAT ING THAT THE ASSESSEE COMPANY HAS DEBITED RS. 1 , 94 ,00000 CRORES AS PROVISION FOR CURRENT TAX WHEREAS WHILE WORKING INCOME UNDER MAT PROVISION HAD ADDED ONLY RS. 4 , 18 , 968/ - AS INCOME TAX PROVISION, TH EREFORE , HE HAS MADE ADDITION OF RS. 1 , 89 , 81 , 032/ - AS PROVISION FOR INCOME TAX TO THE BOOK PROFIT. . I.T.A NO. 2467 /AHD/20 16 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. NARMADA BIO - C HEM PVT. LTD. 4 6.1 AFTER PERUSAL OF THE DETAIL ON RECORD AND THE FACTS OF THE CASE , WE OBSERVE THAT IF PROVISION OF INCOME TAX OF RS.1,94,00000/ IS ADDED FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT, THEN THE AMOUNT CREDITED TO PROFIT AND LOSS ACCO UNT BEING MAT CREDIT ENTITLEMENT RS.1,93,69,003/ IS TO BE REDUCED WHILE CALCULATING BOOK PROFIT AS IS MENTIONED IN ITEM NO.(I) OF EXPLANATION 1 TO SEC.115JB(2 ) OF THE ACT. THE CALCULATION FOR THE SAME AS FURNISHED BY THE ASSESSEE IS REPRODUCED AS UNDER: - SR. NO. PARTICULARS OF AMOUNT ADDED AMOUNT AMOUNT (RS.) 1 PROVISION OF INCOME - TAX 1,94,00,000 LESS: MAT CREDIT ENTITLEMENT (1,93,69,003) 30,997 2 EXCESS PROVISION OF INCOME - TAX OF EARLIER YEAR (115) 3 DI VIDEND DISTRIBUTION TAX OF EARLIER YEAR 3,406 4 INTEREST ON INCOME TAX (NOTE NO. 23 OF THE BALANCE SHEET) 3,84,680 TOTAL 4,18,98 IT WAS ALSO NOTICED THAT ALTERNATIVELY IF THE AMOUNT OF PROFIT BEFORE THE TAX IS TAKEN FOR CALCULATI NG BOOK PROFIT U/S. 115JB OF THE ACT AND NO ADJUSTMENT ARE MADE WITH RES PECT TO INCOME TAX THEN ALSO THE CALCULATION OF BOOK PROFIT WOULD AS UNDER: - PARTICULARS AMOUNT (RS.) AMOUNT (RS.) PROFIT BEFORE TAX 10,95,48,446 ADD: INTEREST ON IN COME TAX (NOTE NO. 23 OF THE BALANCE SHEET) 3,84,680 ADD: INTEREST ON TDS 13,057 I.T.A NO. 2467 /AHD/20 16 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. NARMADA BIO - C HEM PVT. LTD. 5 LESS: EXEMPT INCOME BEING SHARE OF PROFIT FROM PARTNERSHIP FIRM (CLAUSE NO. (II) OF EXPLANATION 1) (1,31,38,796) BOOK PROFIT AS PER PROVISIONS OF SEC: 115JB 9,68,07,387 IT IS CLEARLY DEMONSTRATED FROM THE ABOVE FACTS THAT T HE ASSESSEE HAS DEBITED INCOME TAX PROVISION , OF RS. 1.94 ,00000 CRORES AGAINST WHICH IT HAS CLAIMED MAT CREDIT OF RS. 1,93,69,003/ - T HEREFORE, THE DIFFERENCE OF RS. 30,997/ - WAS ADDED TO THE BOOK PROFIT. IN THE LIGHT OF THE ABOVE AND A FTER CONSIDERING THE DETAILED FINDINGS OF LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE I S DISMISSED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 08 - 08 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 08 /08 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,