ITO 9(1)-3, MUMBAI V. DEEPAK WOOLENS LTD, MUMBAI

ITA 3279/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7678 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DURGESH SUMROTT
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: TDS; Set aside
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.3279/MUM/2009 - A.Y 2006-07 INCOME TAX OFFICER -9(1)-3 MUMBAI M/S DEEPAK WOOLLENS PVT. LTD., 415, DHEERAJ HERITAGE, MILAN SUBWAY JUNCTION, S.V.ROAD, SANTACRUZ [W] MUMBAI 400 054 PAN NO. AABCDO818K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI DURGESH SUMROTT. ASSESSEE BY : SHRI VIJAY KOTHARI. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST CIT (A)S ORDER DATED 2/3/2009. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW CIT[A] ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUC E THE PROFIT OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION FROM THE AMOUNT OF PROFIT IN TERMS OF EXPLANATION ( VII) TO SECTION 115JB OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW CIT[A] ERRED APPRECIATING THE FACT THAT AS PER CLAUSE G O N PAGE-9 OF BIFR ORDER THE DIRECTORATE OF INCOME TAX (R) HAD TO CONSIDER THE EXEMPTION FROM THE PROVISIO NS OF SECTION 41(1), 45, 72(3), 43(B) AND 115JA/115JB. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT[A] ON THE GROUNDS BE SET ASIDE AND THAT OF THE ITO/A/DC BE RE STORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF SHODDY WOOLEN YARN, BLANKETS AND FABRICS ETC., FILED ITS R ETURN OF INCOME DECLARING NIL INCOME AND CLAIMED REFUND OF TDS. I N THE NOTES TO THE 2 COMPUTATION OF TOTAL INCOME ASSESSEE STATED THAT IT IS DECLARED AS A SICK COMPANY AS PER THE ORDER OF THE APPELLATE AUTH ORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION VIDE ORDER DATED 26-12 -2005 AND, THEREFORE, SEC.115JB IS NOT APPLICABLE. AO OBSERVED THAT NO COPY OF THE ORDER IS FURNISHED ALONG WITH THE RETURN AND, THERE FORE, ASSESSEES CONTENTION IS NOT ACCEPTABLE AND THE PROVISIONS OF SEC.115JB ARE APPLICABLE. HE FURTHER OBSERVED THAT THE ASSESSEE H AS SUO MOTU FOR A.Y 2005-06 COMPUTED INCOME U/S.115JB AND, THEREFORE, F OR THE RELEVANT ASSESSMENT YEAR HE COMPUTED THE INCOME U/S.115JB OF THE ACT AND ACCORDINGLY BROUGHT IT TO TAX. 4. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] . THE CIT[A] CONSIDERED THE ASSESSEES CONTENTIONS THAT IT HAD BECOME A SICK INDUSTRY AND IN PURSUANT THERETO FILED AN APPL ICATION TO BIFR IN FORM A ON 21-8-2000 U/S.15(1) OF SICA AND BIFR VIDE ITS ORDER DATED 14-1-2003 REJECTED THE REFERENCE MADE AND HELD THAT THE ASSESSEE COULD NOT BE DECLARED TO BE SICK INDUSTRIAL COMPANY AS PER SEC.3(1)(O) FOR THE REASON THAT THE ASSESSEE HAD FAILED TO ESTA BLISH ITS ELIGIBILITY UNDER THE ACT THAT IT IS NOT A SMALL INDUSTRIAL CO MPANY. IT WAS ALSO SUBMITTED THAT THE ASSESSEE FILED AN APPEAL BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTIO N (AAIFR) U/S.25 OF SICA AND HON'BLE AAIFR VIDE ITS ORDER DATED 26-12-2 005 ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DIRECTED THE OPERAT ING AGENCY FOR SUBMITTING A SCHEME AS PER PROVISIONS OF SEC.17(3) OF SICA. ACCORDINGLY, A SCHEME FOR REHABILITATION WAS PRESEN TED BEFORE BIFR 3 WHICH WAS SANCTIONED VIDE ORDER DATED 4-5-2007. AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT[A] ALLOWED TH E APPEAL HOLDING THAT THE PROVISIONS OF EXPLANATION (VII) TO SEC.115 JB DO NOT CONTAIN ANY STIPULATION RELATING TO NON-APPLICABILITY OF THE SA ID SECTION FOR STAGES SUBSEQUENT TO THE DECLARATION OF THE COMPANY BEING A SICK INDUSTRIAL COMPANY U/S.17(1) OF THE SICA. HE, THEREFORE, DIREC TED THE AO TO REDUCE THE PROFIT OF THE ASSESSEE COMPANY FOR THE Y EAR UNDER CONSIDERATION FROM THE AMOUNT OF BOOK PROFIT IN TER MS OF EXPLANATION (VII) TO SEC.115JB OF THE ACT. AGGRIEVED BY THE REL IEF GIVEN BY THE CIT[A] , THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR WHILE RELYING UPON THE ORDER OF THE A O SUBMITTED THAT THE ASSESSEE HAD APPROACHED THE AO U/S.154 OF THE ACT AGAINST THE ORDER U/S.143[3] TO EXCLUDE THE ASSESSEE FROM T HE PURVIEW OF SEC.115JB AND THE AO HAS HELD THAT AS PER PARA-2 OF THE DECLARATION AS SICK INDUSTRY AND BASED ON THE SCHEME OF REHABILITA TION FILED IN BANK OF INDIA A DRAFT REHABILITATION SCHEME WAS CIRCULATED AS REQUIRED U/S.19 OF SICA AND AS PER PARA-5 OF THE SAID ORDER THE REHABI LITATION SCHEME IS SANCTIONED BY PREFIXING THE WORD TO CONSIDER IN R ESPECT OF RELIEF SOUGHT FROM THE DIRECTORATE OF INCOME TAX (RECOVERY ), NEW DELHI AND AS THE OFFICE HAS NOT RECEIVED ANY COMMUNICATION FR OM THE OFFICE OF DIRECTORATE OF INCOME TAX (R), THE ASSESSEE CANNOT BE GRANTED EXEMPTION U/S.115JB OF THE ACT. THUS, ACCORDING TO THE LD. DR, THE REHABILITATION SCHEME HAS NOT BEEN APPROVED BY THE REVENUE 4 AUTHORITIES AND, THEREFORE, AO HAS RIGHTLY DISALLOW ED THE CLAIM OF DEDUCTION UNDER CLAUSE (VII) OF SEC.115JB OF THE AC T. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUPPORTED THE ORDER OF THE AO AND DREW OUR ATTENTION TO THE P ROVISIONS OF SEC.115JB(VII) TO STRESS ON THE POINT THAT IT IS SU FFICIENT COMPLIANCE IF THE COMPANY IS DECLARED AS A SICK INDUSTRIAL COMPAN Y UNDER SUB-SEC.(1) OF SEC.17 OF SICA AND NO FURTHER CONDITIONS ARE TO BE SATISFIED FOR REDUCING THE BOOK PROFIT UNDER CLAUSE (VII) OF SEC. 115JB OF THE ACT. HE ALSO DREW OUR ATTENTION TO SECTIONS 17 & 18 OF SICA TO DEMONSTRATE THAT THE APPROVAL OF THE DIRECTORATE OF INCOME TAX (R) IS NOT A CONDITION PRECEDENT FOR APPLICATION OF SUB-CLAUSE ( VII) OF SEC.115JB OF THE ACT. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE IS DECLARED AS A SICK INDUSTRY BY BIFR U/S.17(1) OF SICA. THE ISSUE BEFORE US IS WHETHER THE APPROVAL OF DIRECTORATE OF INCOME TAX (R) IS NE CESSARY BEFORE APPLYING THE PROVISIONS OF CLAUSE (VII) OF SEC.115J B OF THE ACT. 8. FOR PROPER APPRECIATION, CLAUSE (VII) OF SUB-SEC .(2) OF SEC.115JB IS REPRODUCED HEREUNDER- SEC.115JB(2)( VII ) - THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPAN Y FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAI D COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SEC.17 THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) AND ENDING WITH THE ASSESSMENT YEAR DURING WH ICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEE DS THE ACCUMULATED LOSSES. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, NET WORTH SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( GA ) OF SUB-SECTION (1) OF 5 SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986); OR IN THE SAID CLAUSE IT IS PROVIDED THAT THE PROFIT O F A COMPANY WHICH IS DECLARED AS A SICK INDUSTRIAL COMPANY U/S.17(1) OF THE SICA, WOULD HAVE TO BE REDUCED FROM THE BOOK PROFIT FOR COMPUTA TION OF ITS INCOME U/S.115JB OF THE ACT. THERE IS NO CONDITION PRESCRI BED THAT THE DIRECTORATE OF INCOME TAX (R) ALSO HAS TO APPROVE T HE SCHEME OF REHABILITATION AND HAS TO GIVE AN ORDER EXEMPTING T HE ASSESSEE FROM THE APPLICABILITY OF SEC.115JB OF THE ACT. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF T HE CIT[A] AND THE REVENUES GROUNDS OF APPEAL ARE DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF FEBRUARY, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:12 TH FEBRUARY, 2010. P/-* COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. 6 SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON 9-2-10 P 2 DRAFT PLACED BEFORE AUTHOR 10-2-10 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER