Sangu Chakra Hotels Pvt Ltd., Trichy V. DCIT Circle 1, Trichy

ITA 2759/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5030 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 16-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R V SREENIVASAN IRS
• Keywords: Depreciation; Deemed to accrue or arise in india
• Section: 143(3); 234B; 115JB; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.2759/CHNY/2017 ! / ASSESSMENT YEAR : 2001-02. M/S. SANGU CHAKRA HOTELS PVT. LTD, COLLECTORS OFFICE ROAD, TIRUCHIRAPALLI 620 001. [PAN AAACS 8819A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, TIRUCHIRAPALLI. ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. PHILIP GEORGE, ADVOCATE &' '# $ % /RESPONDENT BY : SHRI. AR.V. SREENIVASAN, IRS, JCIT. ( ) $ * /DATE OF HEARING : 29-07-2019 +,! $ * /DATE OF PRONOUNCEMENT : 20-08-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 , TIRUCHIRAPALLI (CIT(A) FOR SHORT) DATED 29.08.2017 FOR THE ASSES SMENT YEAR (AY) 2001-02. ITA NO.2759/2017 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) IS OPPOSED TO LAW AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. DEDUCTION U/S. 80HHD: 2.1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S. 8OHHD IS ERRONEOUS AND OPPOSED TO LAW. 2.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SECTION 8OHHD IS SELF-CONTAIN ED CODE BY ITSELF AND ACCORDINGLY SPECIFIES THE METHOD OF C OMPUTATION OF DEDUCTION UNDER THE SAID SECTION WITHOUT SPECIFY ING THAT THE DEDUCTION HAS TO BE ALLOWED ONLY AFTER SETTING OFF OF UNOBSERVED LOSSES OR DEPRECIATION OF EARLIER YEARS. 2.3. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSS LY ERRED IN OBSERVING THAT THE PROVISIONS OF SECTION 8 0A(2) AND 80B(5) APPLIED TO ALL SECTIONS APPEARING UNDER CHAP TER VI-A OF THE ACT INCLUDING SECTION 80HHD. 2.4. ALTERNATIVE GROUND: 2.4.1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN REJECTING THE ALTERNATIVE PLEA RAISED BY THE APPELL ANT THAT SINCE, EVEN AS PER THE ASSESSING OFFICER HIMSELF, T HE GROSS TOTAL INCOME WAS WORKED OUT AT E10,45,271/- THE DED UCTION U/S. 8OHHD OUGHT TO HAVE BEEN ALLOWED TO THAT EXTEN T, AS AGAINST THE CLAIM OF RS.16,41,1271- MADE IN THE RET URN OF INCOME. 3. COMPUTATION OF INCOME U/S. II5JB: 3.1. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSS LY ERRED IN UPHOLDING THE ADDITION OF LONG TERM CAPITA L GAINS OF RS.1O,45,27 - FOR THE PURPOSE OF ARRIVING AT BOOK P ROFIT OF THE COMPANY U/S. 115 B OF THE INCOME TAX ACT. 3.2. THE COMMISSIONER OF INCOME TAX (APPEALS) HAVIN G ACCEPTED THAT THE ACCOUNTS OF THE APPELLANT WERE PR EPARED IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI OF THE ITA NO.2759/2017 :- 3 -: COMPANYS ACT AND DULY CERTIFIED BY STATUTORY AUDIT ORS OUGHT TO HAVE DELETED THE PROFIT ON SALE OF LAND AND EXPO RT PROFIT TO ARRIVE AT THE BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT, 1961. 3.3. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSS LY ERRED IN NOT ACCEPTING THE CLAIM OF THE APPELLANT T HAT THE PROFIT ON SALE OF LAND AND EXPORT PROFIT HAS TO BE REDUCED WHILE COMPUTING THE BOOK PROFIT U/S. 115JB AFTER OB SERVING THAT THE ASSESSING OFFICER HAS NO POWER TO TINKER W ITH THE FIGURES OF THE NET PROFIT SHOWN IN THE PROFIT AND L OSS ACCOUNT EXCEPT AS PROVIDED IN THE EXPLANATION US.115JB. 3.4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE THEREFORE IN THE CIRCUMSTANCES OF THE CASE DIR ECTED THE ASSESSING OFFICER TO COMPUTE THE BOOK, PROFIT AFTER REDUCING THE PROFIT ON SALE OF LAND AND EXPORT PROFIT. 3.5. ENHANCEMENT OF ASSESSMENT: 3.5.1. THE COMMISSIONER OF INCOME TAX (APPEALS), GR OSSLY ERRED IN ENHANCING THE BOOK PROFIT TO RS.85,84,6031 - AGAINST RS.83,05,482/- DETERMINED BY THE ASSESSING OFFICER. 3.5.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUG HT TO HAVE IN FACT REDUCED THE BOOK PROFIT FOR THE PURPOS E OF COMPUTATION OF INCOME U/S. II5JB FROM RS.83,05,482/ - COMPUTED BY THE ASSESSING OFFICER TO RS.52,08,803/- AS CLAIMED BY THE APPELLANT. 4. LEVY OF INTEREST U/S. 234B & 234C: 4.1. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSS LY ERRED IN UPHOLDING THE LEVY OF INTEREST U/SS. 234B AND 234C. 4.2. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSS LY ERRED IN HOLDING THAT INTEREST U/SS. 234B & 234C AR E LEVIABLE ON DEFAULT IN PAYMENT OF ADVANCE TAX O DEFERMENT OF ADVANCE TAX WHILE COMPUTING THE INCOME U/S. 115JB. 4.3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THAT SECTION I15JB IS A DEEMI NG PROVISION UNDER WHICH INTEREST U/SS. 234B & 234C AR E NOT CHARGEABLE. ITA NO.2759/2017 :- 4 -: 4.4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE THEREFORE DELETED THE LEVY OF INTEREST U/SS. 2 34B & 234C IN THE COMPUTATION OF INCOME U/S. 115JB. 5. THE APPELLANT CONTESTS ALL THE FINDINGS OF FACT AND LAW MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) AG AINST THE APPELLANT. 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING . 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. SANGU CHAKRA HOTELS PVT. LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF HOTEL INDU STRY. THE RETURN OF INCOME FOR THE AY 2001-02 WAS FILED ON 30.10.2001 A ND SUBSEQUENTLY THE SAME WAS REVISED ON 17.10.2002 DECLARING NIL IN COME CLAIMING DEDUCTION UNDER THE PROVISIONS OF SECTION 80HHD OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WHILE COMPUTING BO OK PROFITS FOR THE PURPOSE OF DEEMED INCOME U/S.115JB OF THE ACT. AGA INST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I, TIRUC HIRAPALLI, (HEREINAFTER CALLED AO) VIDE ORDER DATED 30.11.20 06 PASSED U/S. 143(3) R/W S. 147 OF THE ACT AT TOTAL INCOME OF RS. 10,45,274/- AFTER SETTING OFF OF BROUGHT FORWARD LOSS OF E70,46,042/ - AND COMPUTED BOOKS PROFITS OF E10,45,271/-, PLACING RELIANCE ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SUTLEJ COTTON MILLS LTD. ITA NO.2759/2017 :- 5 -: VS. ASST. CIT (1993) 199 ITR (AT) 164 (CAL) (SB) AND THIS STAND WAS SUPERSEDED BY THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT. VS. VEEKAYLAL INVESTMENT COMPANY (P) LTD 249 ITR 597 AND NOT ALLOWED EXEMPTION OF INCOME U/S.80HHD OF THE A CT FROM THE BOOK PROFIT. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD CONFIRMED THE ACTION OF THE ASSESSING OFFICER STATING THAT GROSS TOTAL INCOM E WAS REDUCED BY THE AMOUNT OF BROUGHT FORWARD LOSS PLACING RELIANCE O N THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD VS. ASSESSING OFFICER (INCOME TAX ) AND ANOTHER 299 ITR 444 AND THE PLAIN PROVISIONS OF SECTIONS 80A(1) AND 80A(2) OF THE ACT . AS REGARDS TO THE COMPUTATION OF BOOK PROFIT U/S.115JB OF THE ACT, TH E LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ADOPT SUM OF E85, 84,602/- AS BOOK PROFIT FOR THE PURPOSE OF COMPUTING TAX LIABILITY U /S. 115JB OF THE ACT, WHILE DOING SO THE LD. CIT(A) HELD THAT AMOUNT ON E XPORT PROFIT CREDITED TO PROFIT AND LOSS E20,51,408/- AND CAPIT AL GAIN ARISING ON SALE OF LAND OF E13,24,392/- SHOULD BE ADDED TO THE BOOK PROFITS WHICH WERE CLAIMED AS DEDUCTION FROM THE BOOK PROFITS. THE LD. CIT(A) PLACED RELIANCE ON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF APPOLLO TYRES VS. CIT, (2002) 255 ITR 273, HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VEEEKAYLAL INVEST MENT COMPANY PVT. ITA NO.2759/2017 :- 6 -: LTD (2001) 249 ITR 597 (BOM) AND HONBLE KARNATAKA HIGH COURT IN THE CASE OF B AND B INFRATECH LTD (2017) 396 ITR 42 0 FOR CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER. 5. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. GROUNDS OF APPEAL NOS.1, 5 & 6 ARE GENERAL IN NATURE THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 7. GROUND NO.2 CHALLENGES COMPUTATION OF THE AMOUNT OF EXEMPTION U/S.80HHD OF THE ACT AFTER SET OFF OF BRO UGHT FORWARD BUSINESS LOSS. THE APPROACH OF THE LOWER AUTHORITIE S IS SUPPORTED BY PLAIN PROVISIONS OF INCOME TAX ACT AND HON'BLE SUP REME COURT DECISION IN THE CASE OF SYNCO INDUSTRIES LTD (SUPRA ). THE ORDER OF THE LD. CIT(A) IS WELL REASONED, SPEAKING ORDER AND IN CONSONANCE WITH THE SETTLED PROPOSITION OF LAW. THUS, WE DO NOT FIN D ANY MERITS IN THE GROUND NO.2 RAISED BY THE ASSESSEE. THE GROUND OF A PPEAL NO.2 STANDS DISMISSED. 8. GROUND NO.3 CHALLENGES THE ACTION OF THE LOWER AUT HORITIES BY ADDING BACK THE PROFITS EARNED ON EXPORTS AND L ONG TERM CAPITAL GAINS MADE ON SALE OF LAND. IN THE LIGHT OF TH E ABOVE FINDING CONFIRMING THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER FOR COMPUTING THE AMOUNT OF EXEMPTION U/S.80HHD OF THE ACT, THERE WAS ITA NO.2759/2017 :- 7 -: NO AMOUNT AVAILABLE FOR EXEMPTION U/S.80HHD OF THE ACT. ACCORDINGLY, NO AMOUNT CAN BE CLAIMED AS DEDUCTION WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT. SIMILARLY, AS RE GARDS TO THE ADDITION OF LONG TERM CAPITAL GAINS MADE ON SALE OF LAND T O BOOK PROFIT, ACTION OF THE LOWER AUTHORITIES ARE SUPPORTED BY THE DECIS IONS OF HON'BLE SUPREME COURT IN THE CASE OF APPOLLO TYRES (SUPRA), HONBLE BOMBAY HIGH COURT IN THE CASE OF VEEEKAYLAL INVESTMENT CO MPANY PVT. LTD. (SUPRA) AND HONBLE KARNATAKA HIGH COURT IN THE CA SE OF B AND B INFRATECH LTD (SUPRA). ACCORDINGLY, WE DO NOT FIND ANY MERITS IN THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE. HENC E, GROUND OF APPEAL NO.3 STANDS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED ON 20TH DAY OF AUGUST, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED: 20TH AUGUST, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF