ACIT CEN. CIR. 13, MUMBAI V. M/s. A.B. CORPORATION LTD., MUMBAI

ITA 2711/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2083 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 17-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAVE SAXENA
• Assessee Lawyers: D J THAKKAR SHRI RAJESH SHAH
• Section: 115JB; 2

Judgement Text

ITA NO. 2711/MUM/2008 ASSESSMENT YEAR 2001- 2002 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR AND SHRI V.D. RAO ITA NO. 2711/MUM/2008 ASSESSMENT YEAR 2001-2002 ACIT CEN.CIR.13 .APPELLANT 11 TH FLR., OLD CGO BLDG., ANNEXE, M.K. RD., MUMBAI 400 020. VS. A.B. CORPORATION LTD. 301/302, MYOMA, 16, NEW INDIA CHS.LTD., 13 TH NORTH SOUTH RD., OPP.ST.JOSEPHS HIGH SCHOOL, JUHU, MUMBAI 400 049. PAN :AAACA5553D . RESPONDENT APPELLANT BY : SHRI KESHAVE SAXENA RESPONDENT BY : SHRI D.J. THAKKAR, SHRI RAJESH SHAH O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 19.10.2007, FOR THE ASSESSM ENT YEAR 2001-2002, ON THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE A ND IN LAW, THE LD CIT(A) ERRED IN HOLDING THAT PROVISI ONS ITA NO. 2711/MUM/2008 ASSESSMENT YEAR 2001- 2002 PAGE 2 OF 4 OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE S CASE WITHOUT GIVING A FINDING THAT IN ASSESSMENT YEAR 2001-02 OR EARLIER, THE COMPANY HAS BECOME SICK INDUSTRIAL COMPANY UNDER SECTION 17(1) OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985. 2. TO DECIDE THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE NOTED. IN THE COURSE OF IMPUGNED ASSESSMENT PROCEEDING, THE A SSESSING OFFICER COMPLETED THE NET WORTH OF THE COMPANY AT RS.98.68 CRORES, AND NOTED THAT SINCE THE NET WORTH SO COMPUTED IS MORE THAN LOSSES CARRIED FORWARD, THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT A RE APPLICABLE. ACCORDINGLY, BOOK PROFIT OF RS.11,85,07,218/- WERE TAKEN INTO ACCOUNT FOR COMPUTING MAT LIABILITY U/S.115JB. AGGRIEVED, AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) AND, ENTER ALIA, CONTENDED THAT NET WORTH HAS BEEN WRONGLY COMPUTED IS AS MUCH AS ISSUED CAPITAL AS AL SO PAID UP CAPITAL ARE TAKEN INTO ACCOUNT. THE CIT(A) REVERSED THE ACTI ON OF THE ASSESSING OFFICER AND OBSERVED AS FOLLOWS:- 4. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND FIND SUFFICIENT MERITS IN THE CONTENTION OF THE APPELLANT. THE MATTER WAS REQUIRED TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 WHEREFROM THE DEFINITION OF THE TERM NET WORTH HAS BEEN BORROWED FOR THE PURPOSES OF SECTION 115JA/JB. THE SAID ACT DEFINES NET WORTH AS THE SUM TOTAL OF THE PAID UP CAPITAL AND FREE RESERVES . THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE FIGURES AS APPEARING IN THE BALANCE SHEET, IN THE FORM OF ISSUED SHARE CAPITAL AS ALSO SUBSCRIBED SHARE CAPITAL, WHICH IS APPARENTLY INCORRECT. AS A RESULT, THE NET WORTH VIS--VIS ACCUMULATED LOSS HA S BEEN CONVERTED INTO A POSITIVE FIGURE. THE ASSESSMENT ORDER IS ALSO SILENT ON THE WORKING GIVE N BY THE APPELLANT WHICH APPEARS TO HAVE BEEN DULY RECEIVED IN HIS OFFIE MUCH BEFORE THE DATE OF ASSESSMENT BUT NOT CONSIDERED AT ALL, WITHOUT CITIN G ANY REASON. THE ORDER PASSED IS NOT ONLY BASED INCORRECT APPRECIATION OF THE FACTS, THE PROVISIONS OF LAW BUT HAS ALSO BEEN PASSED IN HASTY AND ITA NO. 2711/MUM/2008 ASSESSMENT YEAR 2001- 2002 PAGE 3 OF 4 INJUDICIOUS MANNER. SINCE THE NET WORTH IS LESS T HAN THE ACCUMULATED LOSSES, IT IS HELD THAT THE PROVISI ONS OF SECTION 115JB ARE NOT APPLICABLE TO THE APPELLAN T. THE APPEAL ON THIS COUNT IS, THEREFORE, ALLOWED. 3. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE CONCL USIONS ARRIVED AT BY THE CIT(A). AS PER THE PROVISIONS OF SECTION 115JB(2) , THE AMOUNT OF PROFIT OF A SICK INDUSTRIAL COMPANY, BEGINNING FROM THE YEAR IN WHICH IT IS DECLARED SICK AND TILL THE YEAR IN WHICH ENTIRE NET WORTH BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED PROFITS, ARE REQUIRED TO BE REDUCED FRO M THE BOOK PROFITS. THE ASSESSING OFFICER HAS DECLINED TO SO REDUCE THE PRO FITS ON THE GROUND THAT THE NET WORTH OF THE ASSESSEE COMPANY IN THE CURRENT YE AR EXCEEDS ACCUMULATED PROFITS. HOWEVER THIS FINDING IS PATENTLY INCORRE CT FOR THE REASON THAT IN COMPUTATION OF NET WORTH THE ASSESSING OFFICER HAS TAKEN INTO ACCOUNT ISSUED SHARE CAPITAL, WHICH IS A NOTIONAL FIGURE IN BALANCE SHEET, IN ADDITION TO SUBSCRIBED AND PAID UP CAPITAL. THE FIGURE OF ISSUED SHARE CAPITAL ONLY DENOTES THE VALUE OF SHARE CAPITAL OFFERED FOR SUBS CRIPTION WHICH NEED NOT BE FULLY PAID UP. IN THE PRESENT CASE, THE ASSESSI NG OFFICER HAS ADDED ISSUED SHARE CAPITAL AS ALSO SUBSCRIBED SHARE CAPITAL I N COMPUTATION OF NET WORTH. THE CIT(A) WAS THUS QUITE JUSTIFIED IN COMING TO TH E CONCLUSION THAT THE COMPUTATION OF NET WORTH WAS INCORRECT. ONCE WE EX CLUDE THE ISSUED SHARE CAPITAL FROM COMPUTATION OF NET WORTH, THE NET WOR TH OF THE COMPANY IS ADMITTEDLY LOWER THAN THE ACCUMULATED PROFITS. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER INDEED ERRED IN REDUCING THE PROFITS EARNED FROM THE BOOK PROFITS, WHICH EFFECTIVELY LEADS TO NON TAXABI LITY U/S.115JB, AND THE CIT(A) WAS JUSTIFIED IN REVERSING THE SAID ACTION O F THE ASSESSING OFFICER. WE UPHOLD THE RELIEF GIVEN BY THE CIT(A) AND DECLINE T O INTERFERE IN THE MATTER. ITA NO. 2711/MUM/2008 ASSESSMENT YEAR 2001- 2002 PAGE 4 OF 4 5. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON 14 TH DAY OF MAY, 2010. SD/- SD/- ( V.D. RAO) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 14 TH DAY OF MAY, 2010. JANHAVI COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT , MUMBAI 4. THE COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - H BENCH, MUMBA I 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI