DCIT, Bangalore V. M/s Sansera Engg. Pvt. Ltd., Bangalore

ITA 303/BANG/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80758 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR
• Section: 115JB; 154

Judgement Text

ITA NO.303 OF 2014 SANSERA EMGG PVT TD BANGALORE PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE ABENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 303/BANG/2014 (ASSESSMENT YEAR: 2008-09) DY. COMMISSIONER OF INCOME TAX ( LTU ) BANGALORE VS. M/S. SANSERA ENGG. PVT. LIMITED NO.261/C BOMMASANDRA INDUSTRIAL AREA, HEBBAGODI, ANEKAL TALUK BANGALORE 560099 PAN: AAECS 2440 M (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI P. DHIVAHAR, JCIT (DR) ASSESSEE BY: SHRI BHARATH, L, CA DATE OF HEARING: 20/11/2014 DATE OF PRONOUNCEMENT: 21/11/2014 O R D E R PER RAJPAL YADAV, J.M. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED CIT (A) DATED 27.11.2013 PASSED FOR ASSESSM ENT YEAR 2008-09. THE LEARNED DR SOUGHT AN ADJOURNMENT, ON T HE GROUND THAT IN FORM NO.36, DATE OF THE ORDER HAS BEEN MENT IONED AS 29.03.2012 WHICH IS THE ORDER OF THE ASSESSING OFFI CER PASSED U/S 154 OF THE I.T. ACT. THE DATE OUGHT TO BE 27.11 .2013 I.E. DATE OF ORDER PASSED BY THE LEARNED CIT (A). AFTER GOING THROUGH THE CIT (A)S ORDER, WE DO NOT FIND ANY MERIT IN HIS AP PEAL, THEREFORE, WE ALLOW HIM TO CORRECT THE MISTAKE AT HIS LEVEL IN FORM NO.36. THE GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CI T (A) HAS ITA NO.303 OF 2014 SANSERA EMGG PVT TD BANGALORE PAGE 2 OF 5 ERRED IN EXCLUDING THE FOLLOWING AMOUNTS FROM THE B OOK PROFIT COMPUTED FOR THE PURPOSE OF SECTION 115JB OF THE I. T. ACT: I) FRINGE BENEFIT TAX - RS.23,68,318 II) PRIOR PERIOD EXPENDITURE - RS. 6,27,863 III) SECURITY TRANSACTION TAX - RS. 1,07,973 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE MANUFACTURE OF AUTOMOBILE CO MPONENT. IT HAS FILED ITS RETURN OF INCOME ON 30.09.2008 DEC LARING NIL INCOME. AN ASSESSMENT ORDER WAS PASSED ON 29.11.201 0. THE LEARNED ASSESSING OFFICER HAS OBSERVED THAT THE ASS ESSEE HAS COMPUTED THE BOOK PROFIT AT RS.5,37,92,195/- WHEREA S ON VERIFICATION OF RECORD, HE FURTHER NOTICED THAT THE ASSESSEE IN HIS P&L A/C HAS SHOWN NET PROFIT OF RS.5,68,96,349/- BU T HAS TAKEN RS.5,37,92,195/- IN ITS COMPUTATION. THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 154, INVITING THE EXPLANATION OF THE ASSESSEE, AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE RECTIF IED AND BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB SHOULD NOT BE TAKEN AT AN ENHANCED FIGURE. THE ASSESSING OFFICER HAS PASSED 1 54 ORDER ON 29.3.2012. HE INCLUDED THREE ITEMS EXTRACTED (SUPRA ) IN THE BOOK PROFIT. 3. ON APPEAL, THE LEARNED CIT (A) DELETED THE INCLU SION IN THE BOOK PROFIT. 4. THE LEARNED CIT (A) HAS EXCLUDED THE FRINGE BENE FIT TAX (FBT) INCLUDED BY THE ASSESSING OFFICER IN THE BOOK PROFIT. ACCORDING TO THE CIT (A), THE BOARD HAS ISSUED A CI RCULAR NO.8/2005 DATED 29.08.2005 WHEREIN IT WAS EXPLAINED THAT FOR ITA NO.303 OF 2014 SANSERA EMGG PVT TD BANGALORE PAGE 3 OF 5 THE PURPOSE OF COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF PROFESSION, THE FBT WOULD NOT BE CLAI MED AS DEDUCTION BECAUSE IT IS AN EXPENDITURE LAID OUT EXT ENDING WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROF ESSION OF THE EMPLOYER. SECTION 40 (A)(IC) SPECIFICALLY PROHIBIT THE CLAIM OF ITS DEDUCTION FOR THE PURPOSE OF COMPUTING THE INCOME U NDER THE REGULAR PROVISIONS. HOWEVER, FOR THE PURPOSE OF SEC TION 115JB, THIS PROHIBITION WOULD NOT APPLY. THE QUESTION AND REPLY READ AS UNDER: Q.103. WHETHER FBT WOULD BE ALLOWABLE DEDUCTION WHILE COMPUTING BOOK PROFIT U/S 115JB? FBT IS A LIABILITY QUA EMPLOYER. IT IS AN EXPENDITU RE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION OF THE EMPLOYER. HOWEVER, SUB-CLAUSE (IC) OF CLAUSE (A) OF SECTION 40 OF THE INCOME TAX ACT EXPRESSLY PROHIBIT S THE DEDUCTION OF THE AMOUNT OF FBT PAID, FOR THE PURPOS E OF COMPUTING THE INCOME UNDER THE PROFITS AND GAIN S OF PUSINESS OR PROFESSION. THIS PROHIBITION DOES N OT APPLY TO THE COMPUTATION OF THE BOOK PROFIT FOR T HE PURPOSE OF SECTION 115JB. ACCORDINGLY, THE FBT IS A N ALLOWABLE DEDUCTION IN THE COMPUTATION OF BOOK PRO FIT U/S 115JB OF THE INCOME TAX ACT. 5. ON DUE CONSIDERATION OF THE ABOVE, WE ARE OF THE VIEW THAT THE LEARNED CIT (A) HAS RIGHTLY EXCLUDED THE FBT FR OM THE COMPUTATION OF BOOK PROFIT. 6. THE NEXT ITEM IS PRIOR PERIOD EXPENDITURE. ACCOR DING TO THE LEARNED CIT (A), EXPLANATION-1 ATTACHED TO SECTION 115JB (2) DOES NOT PROVIDE FOR ADJUSTMENT OF THIS EXPENDITURE IN T HE BOOK PROFIT. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIVES, WE HAVE ITA NO.303 OF 2014 SANSERA EMGG PVT TD BANGALORE PAGE 4 OF 5 CONSIDERED THIS ISSUE. THE LEARNED CIT (A) HAS RELI ED UPON THE ORDER OF THE ITAT MUMBAI IN THE CASE OF SHIVSHASHI PUNARVASAN PRAKALPA LTD VS. ITO 135 ITD 51 WHICH IS BASED ON T HE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD, 254 ITR 273. FOR THE PURPOSE OF SECTION 115JB, THE BOOK PROFIT IS THE PROFIT DISCLOSED AS PER P&L A/C PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART-II AND PART-III OF SCHE DULE VI OF THE COMPANYS ACT, 1956, LAID BEFORE THE COMPANY IN ITS AGM. THE ADJUSTMENT TO THAT PROFIT CAN ONLY BE MADE QUA, THE ITEMS PROVIDED IN EXPLANATION-1 TO SECTION 115JB I.E. A T O F. ON PERUSAL OF CLAUSE A TO F , UNDER EXPLANATION-1, WE FIND THAT NO ADJUSTMENT ON ACCOUNT OF PRIOR PERIOD EXPENSES IS TO BE MADE. THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES HAS OBSER VED THAT EXCEPT THE ADJUSTMENT PROVIDED IN EXPLANATION-1 TO SECTION 115JB (2), THE ASSESSING OFFICER CANNOT TINKER WITH THE BOOK PROFIT COMPUTED BY THE ASSESSEE AND APPROVED IN THE AGM. THE LEARNED CIT (A) HAS HELD THAT THIS TYPE OF EXPENDIT URE CANNOT BE ADJUSTED. WE ARE OF THE VIEW THAT SUCH TYPE OF RECT IFICATION IS NEITHER PERMISSIBLE U/S 154; NOR U/S 115JB (EXP-1), THEREFORE, THE CIT (A) HAS RIGHTLY DELETED THIS ADDITION FROM THE BOOK PROFIT. SIMILAR IS THE POSITION WITH REGARD TO THIRD ASPECT , THE LEARNED CIT (A) HAS OBSERVED AS UNDER: 5. IN RESPECT OF SECURITY TRANSACTION TAX (STT), T HE APPELLANT POINTED OUT THAT IT IS NOT INCLUDED IN AN Y OF THE 9 ITEMS LISTED IN EXPLANATION 1 TO SECTION 115J B(2) AND, HENCE, COULD NOT BE USED TO ENHANCE THE BOOK PROFIT. THIS IS AN ARGUMENT BASED ON A CORRECT UNDERSTANDING OF THE PREVAILING LEGAL PROVISIONS AN D IT IS ADMITTED. THE ADDITION BY THE ASSESSING OFFICER TO THE BOOK PROFIT IN THIS REGARD IS DIRECTED TO BE DE LETED. ITA NO.303 OF 2014 SANSERA EMGG PVT TD BANGALORE PAGE 5 OF 5 7. ON DUE CONSIDERATION OF THE ORDER OF THE CIT (A) , WE FIND NO ERROR IN IT. THE ADJUSTMENT MADE BY THE ASSESSING O FFICER CANNOT BE MADE IN AN ORDER PASSED U/S 154. THEREFORE, WE D O NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE, IT IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2014. SD/- SD/- (JASON P. BOAZ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 21 ST NOVEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE