The DCIT, Circle-1(1)(1), Vadodara V. Gulbrandsen Chemicals Pvt. Ltd., Vadodara

ITA 3318/AHD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2864 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 09-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Unabsorbed depreciation; Revenue expenditure
• Section: 143(3); 115JB; 154; 11

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMAJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO. 3318/AHD/2016 / ASSESSMENT YEAR: 2005-06 DCIT, CIR.1(1)(1) VADODARA. VS GULBRANDSEN CHEMICALS P.LTD. ON COASTAL HIGHWAY POST OFFICE MUJPUR TAL. PADRA DIST. VADODARA 391 440 PAN : AABCG 0812 A / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI MUDIT NAGPAL, SR.DR ASSESSEE BY : SHRI HEMANT SUTHAR, AR / DATE OF HEARING : 29/10/2018 /DATE OF PRONOUNCEMENT : 01/11/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 1, VADODARA DATED 19.9.2016 PASSED FOR THE ASSTT.YEAR 2005-06. 2. SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT (A) HAS ERRED IN DELETING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28.10.2006 DECLARING NIL INCOME. THE ASS ESSMENT ORDER WAS ITA NO.3318/AHD/2016 - 2 - FRAMED UNDER SECTION 143(3) OF THE ACT ON 30.12.200 8 WHEREBY INCOME OF THE ASSESSEE WAS DETERMINED AT NIL AFTER GIVING SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO RS.3,45,68,541/-. THE BO OK PROFIT UNDER SECTION 115JB WAS COMPUTED AT RS.83,34,074/- AS AGAINST RS. 78,91,226/- DECLARED BY THE ASSESSEE. THE LD.AO HAS MADE AN ADJUSTMENT OF RS.4,42,848/- ON ACCOUNT OF UNASCERTAINED LIABILITIES IN THE BOOK PR OFIT DECLARED BY THE ASSESSEE. THE AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON THREE ADDITIONS VIZ. (I) ON ACCOUNT O F TRANSFER PRICING OF RS.3,68,79,804/-; (B) DISALLOWANCE OF CLAIM OF R&D EXPENSES OF RS.78,19,668/- AND (C) DISALLOWANCE OF CLAIM OF DEF ERRED REVENUE EXPENDITURE OF RS.14,91,315/-. THE AO HAS IMPOSED A PENALTY OF RS.27,50,000/- UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE FILED AN APPLICATION UNDER SECTION 154 OF THE ACT WHEREIN IT HAS CONTENDED THAT ITS INCOME WAS DETERMINED UNDER SECTION 115JB. TAX HAS BEEN COLLECTED ON THIS AMOUNT. NO ADDITION WAS MADE UNDER SECTION 11 5JB IN THE BOOK PROFIT EXCEPT ADDITION OF UNASCERTAINED LIABILITY A MOUNTING TO RS.4,42,848/- . THIS AMOUNT HAS NOT BEEN CONSIDERED FOR VISITING THE ASSESSEE WITH PENALTY. IT WAS CONTENDED THAT CONTROVERSY HAS BEE N SILENCED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF NALWA SONS INVESTMENT P.LTD., 194 TAXMANN 387 (DELHI). THIS JUDGMENT HAS BEEN CO NFIRMED BY THE HONBLE SUPREME COURT AND THE BOARD HAS ACCEPTED TH E LAW LAID DOWN IN THIS JUDGMENT IN CIRCULAR NO.25/2015 DATED 31.12.20 15. HENCE, PENALTY UPON THE ASSESSEE ON THE ADDITIONS MADE TO ITS REGU LAR INCOME SHOULD NOT BE IMPOSED BECAUSE ULTIMATELY TAXES HAVE NOT BEEN M ADE ON THE BASIS OF ADDITIONS MADE UNDER THE REGULAR PROVISIONS. THE LD .AO REJECTED RECTIFICATION APPLICATION OF THE ASSESSEE. HOWEVER , ON APPEAL, THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND DE LETED PENALTY. ITA NO.3318/AHD/2016 - 3 - 5. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE PLACE D ON RECORD CIRCULAR ISSUED BY THE BOARD WHICH READS ASUNDER: CIRCULAR NO.25/2015 [F.NO.279/MISC./140/2015/ITJ], DATED 31-12-2015 SECTION 115JB OF THE ACT IS A SPECIAL PROVISION FOR LEVY OF MINIMUM ALTERNATE TAX ON COMPANIES, INSERTED BY FINANCE ACT , 2000 WITH EFFECT FROM 1-4-2001. 2. UNDER CLAUSE (III) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT, PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INA CCURATE PARTICULARS OF INCOME IS DETERMINED BASED ON THE 'A MOUNT OF FAX SOUGHT TO BE EVADED' WHICH HAS BEEN DEFINED INTER-A LIA, AS THE DIFFERENCE BETWEEN THE TAX DUE ON THE INCOME ASSESS ED AND THE TAX WHICH WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INC OME BEEN REDUCED BY THE AMOUNT OF CONCEALED INCOME OR INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAD BEEN FILED. 3. IN THIS CONTEXT, HON'BLE DELHI HIGH COURT IN ITS JUDGMENT DATED 26-8-2010 IN ITA NO.1420 OF 2009 [2010] 194 TAXMAN 387 (DELHI) IN THE CASE OF NALWA SONS INVESTMENT LTD. (AVAILABL E IN NJRS AS 2010-LL-0826-2), HELD THAT WHEN THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROCEDURE IS LESS THAN THE TA X PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT, THEN PENALTY UNDER SECTION 271(L)(C) OF THE ACT COULD NOT BE IMP OSED WITH REFERENCE TO ADDITIONS /DISALLOWANCES MADE UNDER NO RMAL PROVISIONS. THE JUDGMENT HAS ATTAINED FINALITY. 4. SUBSEQUENTLY, THE PROVISIONS OF EXPLANATION 4 TO SUB-SECTION (1) OF SECTION 271 OF THE ACT HAVE BEEN SUBSTITUTED BY FIN ANCE ACT, 2015, WHICH PROVIDE FOR THE METHOD OF CALCULATING THE AMO UNT OF TAX SOUGHT TO BE EVADED FOR SITUATIONS EVEN WHERE THE I NCOME DETERMINED UNDER THE GENERAL PROVISIONS IS LESS THA N THE INCOME DECLARED FOR THE PURPOSE OF MAT U/S 115JB OF THE AC T. THE SUBSTITUTED EXPLANATION 4 IS APPLICABLE PROSPECTIVE LY W.E.F. 1-4- 2016. 5. ACCORDINGLY, IN VIEW OF THE DELHI HIGH COURT JUD GMENT AND SUBSTITUTION OF EXPLANATION 4 OF SECTION 271 OF THE ACT WITH PROSPECTIVE EFFECT, IT IS NOW A SETTLED POSITION TH AT PRIOR TO 1-4-2016, ITA NO.3318/AHD/2016 - 4 - WHERE THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS U/S 115JB OF THE ACT, THEN PENA LTY UNDER SECTION 271(L)(C) OF THE ACT, IS NOT ATTRACTED WITH REFEREN CE TO ADDITIONS /DISALLOWANCES MADE UNDER NORMAL PROVISIONS. IT IS FURTHER CLARIFIED THAT IN CASES PRIOR TO 1-4-2016, IF ANY ADJUSTMENT IS MADE IN THE INCOME COMPUTED FOR THE PURPOSE OF MAT, THEN THE LE VY OF PENALTY U/S 271(L)(C) OF THE ACT, WILL DEPEND ON THE NATURE OF ADJUSTMENT. 6. THE ABOVE SETTLED POSITION IS TO BE FOLLOWED IN RESPECT OF SECTION 115JC OF THE ACT ALSO. 7. ACCORDINGLY, THE BOARD HEREBY DIRECTS THAT NO AP PEALS MAY HENCEFORTH BE FILED ON THIS GROUND AND APPEALS ALRE ADY FILED, IF ANY, ON THIS ISSUE BEFORE VARIOUS COURTS/TRIBUNALS PRESS ED UPON. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 6. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE AO. 7. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT CIRCULAR EXTRACTED (SUPRA) IS APPL ICABLE ON THE FACTS OF THE PRESENT CASE. THE LD.CIT(A) DELETED THE IMPUGNED P ENALTY BY FOLLOWING JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F NALWA SONS INVESTMENT LTD. (SUPRA). IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 1 ST NOVEMBER, 2018. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 1/11/2018