DCIT 9(3), MUMBAI V. RAHIL IMPEX P. LTD, MUMBAI

ITA 2955/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1563 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 08-04-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 07-05-2009
• Court: TRIBUNAL
• Assessee Lawyers: AJAY R SINGH
• Keywords: Deemed to accrue or arise in india; Question of law; Set aside
• Section: 234B; 115JB; 143(1); 207

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE SHRI N.V. VASUDEVAN (JM) & T.R. SOOD (AM) I.T.A.NO. 2955/MUM/09 (ASSESSMENT YEAR : 2007-08) DCIT 9(3) ROOM NO. 229, 2 ND FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI-400 020. VS. M/S. RAHIL IMPEX P. LTD. 601, DEV DARSHAN 50, RIDGE ROAD MUMBAI-400 006. APPELLANT RESPONDENT PAN/GIR NO. : AAACR2622L ASSESSEE BY : SHRI K. SHIVRAM & SHRI AJAY R. SINGH DEPARTMENT BY : SHRI AARSI PRASAD ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 19.2.2009 OF LEARNED CIT(A)-IX, MUMBAI RELATING TO A.Y. 2007-08. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LEARNED CIT(A) ERRED IN DELETING INTEREST U/S. 234B OF RS.10,57,878/- AND INTEREST U/S. 234C OF RS. 6,31,5 21/- ON THE BASIS OF BOMBAY HIGH COURT DECISION IN M/S. KWA LITY BISCUITS LTD. VS. CIT WHICH WAS NOT ACCEPTED BY THE DEPARTMENT. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE SLP FILED BY THE DEPARTMENT AGAINST THE DECISION IN THE CASE OF M/S. KWALITY BISCUITS LTD. WAS DISMISSED NOT ON MERIT OF THE CASE AND THE DISMISSAL OF AN SLP WOULD NOT AMOUNT TO DECLARATION OF LAW. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LEARNED CIT(A) FAILED TO CONSIDER THE CIRCULAR NO. 13/2001 DATED 9.11.2001 WHEREIN IT WAS ENUMERATED THAT ALL COMPANIES ARE LIABLE FOR PAYMENT OF ADVANCE TAX HAV ING M/S. RAHIL IMPEX P. LTD. 2 REGARD TO THE PROVISIONS CONTAINED IN SECTION 115JB OF THE I.T. ACT AND CONSEQUENTLY, THE PROVISIONS OF SECTIO N 234B & 234C ARE APPLICABLE AS WELL, WHICH IS SQUARELY APPL ICABLE IN THE CASE OF THE ASSESSEE. 4) THE ASSESSEE PRAYS THAT THE ORDER OF LEARNED CIT(A) ON THE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT DE RIVES INCOME IN THE FORM OF COMMISSION. IT ALSO MAKES INVESTMENT IN SHARES AND DERIVES INCOME IN THE FORM OF CAPITAL GAIN ON TRANSFER OF S HARES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2007-08 DECLARING T AXABLE INCOME AT RS. 8,41,970/-. IN ACCORDANCE WITH PROVISIONS OF SECTIO N 115JB OF THE ACT, BOOK PROFIT OF THE ASSESSEE WAS RS. 1,13,95,567/-. THE TOTAL INCOME OF THE ASSESSEE COMPUTED IN ACCORDANCE WITH NORMAL PRO VISIONS OF THE ACT WAS LESS THAN THE BOOK PROFIT; AND THEREFORE, TOTAL INCOME WAS DETERMINED IN ACCORDANCE WITH PROVISIONS OF SECTION 115JB BASED ON THE BOOK PROFIT. AN INTIMATION U/S. 143(1) OF THE ACT D ATED 10.10.2008 WAS ISSUED BY THE ASSESSING OFFICER, IN WHICH, THE ASSE SSING OFFICER LEVIED INTEREST U/S. 234B & 234C OF THE ACT. 4. AGAINST THE INTIMATION U/S. 143(1) OF THE ACT, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A) AND CONTENDED THAT DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08, THE ASSESSEE SOLD SH ARE INVESTMENT IN M/S. ASIAN STAR COMPANY LIMITED AND EARNED LONG TER M CAPITAL GAIN(LTCG) OF RS. 113,336,019. HOWEVER, THE LTCG WA S EXEMPT U/S. 10(38) AND HENCE, NO TAX WAS PAYABLE ON REGULAR INC OME. SO THE ASSESSEE DID NOT PAY ANY ADVANCE TAX. HOWEVER, SINCE THE TAX ON BOOK PROFIT AS DEFINED IN SEC.115JB WAS MORE THAN TAX ON REGULAR I NCOME, THE ASSESSEE HAD TO PAY TAX OF RS. 12,785,826 UNDER THE PROVISIO NS OF SECTION 115JB. IT WAS FURTHER CONTENDED THAT THE PROVISIONS OF SEC TION 115JB DETERMINES TAX ON BOOK PROFIT IN A MANNER DIFFERENT FROM STATU TORY PROFIT. WHILE STATUTORY PROFIT IS A NORMAL BASE, A LEGAL FICTION IS CREATED BY TREATING BOOK PROFIT AS AN ALTERNATIVE BASE IN ORDER ENABLE TAXATION OF PROSPEROUS COMPANIES. THE BOOK PROFIT TAX IS LEVIED ONLY IN TH E CIRCUMSTANCES, WHERE M/S. RAHIL IMPEX P. LTD. 3 THE STATUTORY PROFITS FALL BELOW 30% OF SUCH BOOK P ROFITS. BUT, BOOK PROFIT CAN BE DETERMINED ONLY AFTER THE END OF THE RELEVAN T PREVIOUS YEAR. IT WAS CONTENDED THAT SUCH PROFITS ARE ONLY TREATED AS DEEMED INCOME U/S. 115JB AND SECTION 234B DOES NOT FURTHER DEEM SUCH I NCOME AS LIABLE FOR ADVANCE TAX IN PROVISIONS DEALING WITH ADVANCE TAX AS UNDER SECTION 207 TO 210. SO, NO INTEREST IS PAYABLE U/S. 234B AND 23 4C FOR FAILURE TO PAY ADVANCE TAX. 5. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON' BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. KWALITY BISCUITS LTD., 24 3 ITR 519; WHEREIN IT WAS HELD THAT TAX U/S. 115J IS DETERMINED ONLY AFTE R END OF THE ASSESSMENT YEAR; AND THEREFORE, NO INTEREST U/S. 23 4B& 234C COULD BE LEVIED ON THE BASIS OF TAX PAYABLE ON BOOK PROFIT. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SNOWCEM INDIA LTD. VS. DCIT, (2009) TIOL 39 HIGH COURT-MUM- IT; WHEREIN IT WAS HELD THAT DISMISSAL OF SLP AGAINST THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. KWALITY BISCUITS LTD . REPORTED IN 284 ITR 434 (SC) WOULD BE BINDING ON ALL SUBORDINATE AUTHOR ITIES. IT WAS ALSO SUBMITTED THAT DECISION OF HON'BLE BOMBAY HIGH COUR T WAS IN THE CONTEXT OF PROVISIONS OF SECTION 115JA OF THE ACT, WHICH ARE IN PARI MATERIA SAME AS SECTION 115JB OF THE ACT. 6. THE LEARNED CIT(A) FOLLOWING THE DECISION OF HON 'BLE BOMBAY HIGH COURT IN THE CASE OF SNOWCEM INDIA LTD. (SUPRA) DIR ECTED THE ASSESSING OFFICER NOT TO CHARGE INTEREST U/S. 234B & 234C OF THE ACT. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVENUE HAS PREFER RED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. BEFORE US, LEARNED DR SUBMITTED THAT CBDT HAD IS SUED CIRCULAR NO. 13 OF 2001 DATED 9.11.2001; WHEREIN PROVISIONS OF SECTION 115JB HAVE BEEN EXPLAINED AND IN PARAGRAPH 4 OF THE SAID CIRCULAR, IT HAS BEEN SPECIFICALLY MENTIONED THAT ALL COMPANIES ARE LIABL E FOR PAYMENT OF ADVANCE TAX EVEN WHEN THEIR INCOME IS DETERMINED BA SED ON THE BOOKS M/S. RAHIL IMPEX P. LTD. 4 PROFIT U/S. 115JB OF THE ACT. LEARNED COUNSEL FOR T HE ASSESSEE RELIED ON THE ORDER OF LEARNED CIT(A) AND REITERATED THE CONT ENTION AS PUT FORTH BEFORE LEARNED CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR VIEW, CIRCULAR ISSUED BY CBDT WILL NOT BE DECISIVE OF THE MATTER. HON'BLE BOMBAY HIGH COURT IN THE CASE OF SNOWCEM INDIA LTD. (SUPRA) AFT ER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M /S. KWALITY BISCUITS LTD. (SUPRA) HAS HELD AS FOLLOWS :- IF THE SPECIAL LEAVE PETITIONS HAD ONLY BEEN DISMI SSED THEN PERHAPS IT WOULD HAVE BEEN POSSIBLE TO SAY THAT THE RE WAS NO MERGER OF THE JUDGMENT OF THE KARNATAKA HIGH COURT AND THAT THE SUPREME COURT HAD REFUSED TO GRANT SPECIAL LEAVE TO APPEAL AND CONSEQUENTLY IT WAS NOT AN ORDER OF AFFIRMATION. SE E KUNHAYAMMED VS. STATE OF KERALA, 2001 (129) ELT 11 (S.C.). HOWEVER, THE ORDER PASSED BY THE SUPREME COURT IS THE APPEALS ARE DISMISSED BEING CIVIL APPEAL NOS.1284 AND 1285 OF 2001. ONCE THE APPEALS ARE DISMISSED THEN IT CAN BE SAID THAT THE JUDGMENT OF THE KARNATAKA HIGH COURT HAS BEEN AFFIR MED BY THE SUPREME COURT. THAT WOULD NOT BE THE CASE IN THE EV ENT ONLY SPECIAL LEAVE PETITIONS HAD BEEN DISMISSED IN WHICH EVENT IT WOULD BE THE SAID THAT THE SUPREME COURT CHOSE NOT TO INTERFERE WITH THE JUDGMENT OF THE KARNATAKA HIGH COURT. IN S UCH AN EVENT THE DOCTRINE OF MERGER WOULD NOT APPLY. ONCE THE JU DGMENT OF THE KARNATAKA HIGH COURT IN QUALITY BISCUITS (SUPRA) HA S BEEN AFFIRMED BY THE SUPREME COURT BY DISMISSING THE APP EALS, IN OUR OPINION, THE LAW BINDING ON US WOULD BE THE JUDGMEN T IN KWALITY BISCUITS LTD. (SUPRA). CONSIDERING THE ABOVE, IN OUR OPINION, THE APPEAL W ILL HAVE TO BE ALLOWED. ACCORDINGLY, THE QUESTION AS FRAMED IS ANS WERED IN THE NEGATIVE AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. QUESTION OF LAW WHICH WAS CONSIDERED BY HON'BLE HIG H COURT IS AS FOLLOWS :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN HOLDING THAT INTERES T U/S. 234B AND 234C WAS LEVIABLE IN CASE OF COMPUTATION OF INCOME UNDER THE PROVISIONS OF SECTION 115JA OF THE ACT ? M/S. RAHIL IMPEX P. LTD. 5 9. THE ABOVE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SNOWCEM INDIA LTD. (SUPRA) WAS IN THE CONTEXT OF PR OVISIONS OF SECTION 115JA OF THE ACT, WHICH ARE IN PARI MATERIA SAME AS SECTION 115JB OF THE ACT. IN VIEW OF THE ABOVE DECISION OF HON'BLE BOMB AY HIGH COURT, WE ARE OF THE VIEW THAT LEARNED CIT(A) WAS RIGHT IN DIRECT ING THE ASSESSING OFFICER NOT TO LEVY INTEREST U/S. 234B & 234C OF TH E ACT. WE THEREFORE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THIS APPEAL BY THE REVENUE. ORDER HAS BEEN PRONOUNCED ON 4 TH DAY OF JUNE, 2010. SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 4 TH JUNE, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS