FERMENTA BIOTECH LTD, MUMBAI V. CIT-I, MUMBAI

ITA 3536/MUM/2015

• Counselvise Citation: 353619914 RSA 2015
• Duration Of Justice: 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTER
• Assessee Lawyers: P P BHANDARI
• Keywords: Depreciation
• Section: 32; 12; 10; 11; 139; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER ITA NO . 3536 / MUM./ 2015 ( ASSESSMENT YEAR : 20 07 08 ) M/S. FERMENTA BIOTECH LIMITED DIL COMPLEX, GODBUNDER ROAD S.V. ROAD, MAJIWADA, THANE (W) 400 610 PAN AAACF2503N .. APPELLANT V/S ASSTT. COMMISSIONER OF TAX OFFICER CIRCLE 1, THANE .... RESPONDENT ASSESSEE BY : SHRI P.P. BHANDARI REVENUE BY : SHRI JAVED AKHTER DATE OF HEARING 27 .0 7 .2015 DATE OF ORDER 30.06.2015 O R D E R PER R.C. SHARMA , JUDICIAL MEMBER TH E PRESENT APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 30 TH APRIL 2015 , PASSED BY THE COMMISSIONER ( APPEALS) I , MUMBAI, FOR THE ASSESSMENT YEAR 20 07 08 . THE GROUND RAISED BY THE ASSESS EE IS AS UNDER: 1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTED THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT BY ADDING THE EXPENSES DISALLOWED IN COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE ACT TO THE BOOK PROFITS. 2. THE FACTS, AS CULLED OUT FROM THE ASSESSMENT ORDER, ARE THAT THE ASSESSEE CLAIMED WEIGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE THE STANDARD BATTERIES LIMITED 2 INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) , AMOUNTING TO ` 1,56,18,208. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY T HE DEDUCTION. THE ASSESSEE FURNISHED ITS REPLY BUT THE ASSESSING OFFICER WAS NOT SATISFIED AND THE CLAIM OF DEDUCTION WAS DISALLOWED FOR THE SAID AMOUNT. THE ASSESSING OFFICER WHILE MAKING COMPUTATION OF MINIMUM ALTERNATE TAX UNDER SECTION 115JB OF THE ACT MADE AN UPWARD ADJUSTMENT TO THE BOOK PROFIT FOR ` 1,56,18,208, AND ACCORDINGLY DETERMINED THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE. THE ASSESSEE CONTESTED THIS MATTER BEFORE THE LEARNED CIT(A) IN WHICH THE ASSESSEE, INTER ALIA, CONTESTED THE ISSUE OF EN HANCEMENT OF BOOK PROFIT BY THE AMOUNT OF DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 35(2AB). 3. THE LEARNED CIT(A), WHILE GIVING PART RELIEF, HELD THAT SINCE THE EXPENDITURE IN R&D WORK WAS DEBITED IN THE PROFIT & LOSS ACCOUNT AND WAS CLAIMED UNDER SECTION 35(2AB) AND, THEREFORE, THE NET PROFIT OF THE ASSESSEE WAS REDUCED BY THAT AMOUNT AND ACCORDINGLY THE ASSESSING OFFICER WAS DIRECTED TO INCREASE THE BOOK PROFIT BY ACTUAL EXPENDITURE INCURRED ON R&D AND NOT THE VALUE OF WEIGHTED DEDUCTION AS WAS ADOPTED BY THE ASSESSING OFFICER FOR COMPUTATION OF BOOK PROFITS. IT WAS FURTHER HELD BY THE LEARNED CIT(A) THAT THE ASSESSEE WOULD BE ENTITLED TO THE RELIEF FOR THIS AMOUNT UNDER SECTION 115JB AS THE ASSESSING OFFICER HAS ALREADY ALLOWED THE EXPENDITU RE FOR R&D THE STANDARD BATTERIES LIMITED 3 WORK UNDER SECTION 35(1) IN THE ASSESSMENT YEAR 2008 09 AND ACCORDINGLY PART RELIEF WAS GIVEN BY THE LEARNED CIT(A). HOWEVER, THE ASSESSEE WAS NOT SATISFIED WITH THE ORDER OF THE LEARNED CIT(A) AND, HENCE, FILED APPEAL BEFORE THE TRIBUNAL. 4. BEFO RE ME, DURING THE COURSE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS ASKED AS TO WHETHER ANY APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE PART RELIEF GIVEN BY THE LEARNED CIT(A) TO WHICH LEARNED DEPARTMENTAL REPRESENTATIVE REPLIED THAT NO A PPEAL HAS BEEN FILED BY THE REVENUE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO ADDITION AT ALL CAN BE MADE UNDER SECTION 115JB OF THE ACT WITH RESPECT TO THE DISALLOWANCE OF DEDUCTION MADE BY THE ASSESSING OFFICER UNDER SECTION 35(2AB) OF THE ACT. ASSESSING OFFICER IS NOT EMPOWERED TO RE WRITE THE PROFIT & LOSS ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN APOLLO TYERS LTD. V/S CIT, [ 2002 ] 255 ITR 273 ( SC ) . IT WAS SUBMITTED THAT THE DISA LLOWANCE / ADDITION CANNOT BE ADDED TO THE BOOK PROFIT OF THE ASSESSEE UNDER SECTION 115JB. THE ASSESSING OFFICER HAS THE LIMITED POWER OF MAKING INCREASE OR REDUCTION AS PROVIDED FOR IN SECTION 115JB. THE STANDARD BATTERIES LIMITED 4 6. I HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. FOR THE SAKE OF READY REFERENCE, SECTION 115JB OF THE ACT IS REPRODUCED BELOW: SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME - TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, [2012], IS LESS THAN EIGHTEEN AND ONE - HALF PER CENT] OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME - TAX AT THE RATE OF EIGHTEEN AND ONE - HALF PER CENT . ( 2) EVERY ASSESSEE, ( A ) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE ( B ), SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956); OR ( B ) BEING A COMPANY, TO WHICH THE PROVISO TO SUB - SECTION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT F OR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY:] PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; THE STANDARD BATTERIES LIMITED 5 ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURPOSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT AND LAI D BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956) : PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THIS ACT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUNTING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPRECIATION WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION [ 1 ]. FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB - SECTION (2), AS INCREASED BY ( A ) THE AMOUNT OF INCOME - TAX PAID OR PAYABLE, AND THE PROVISION THEREFOR; OR ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED, OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC ; OR ( C ) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBSIDIARY COMPANIES; OR THE STANDARD BATTERIES LIMITED 6 ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOSED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIO NS CONTAINED IN CLAUSE ( 38 ) THEREOF) OR SECTION 11 OR SECTION 12 APPLY; OR] ( G ) THE AMOUNT OF DEPRECIATION, ( H ) THE AMOUNT OF DEFERRED TAX AND THE PROVISION THEREFOR, ( I ) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, ( J ) THE AMOUNT STANDING IN REVALUATION RESERVE RELATING TO REVALUE D ASSET ON THE RETIREMENT OR DISPOSAL OF SUCH ASSET, IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AMOUNT REFERRED TO IN CLAUSE (J) IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY, ( I ) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVISIONS MADE IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1997 SHALL NOT BE REDUC ED FROM THE BOOK PROFIT UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115JA , AS THE CASE MAY BE; OR] ( II ) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF)] OR SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT; OR ( IIA ) THE AMOUNT OF DEPRECIATION DEBITED TO THE PROFIT AND LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS); OR THE STANDARD BATTERIES LIMITED 7 ( IIB ) THE AMOUNT WITHDRAWN FROM REVALUATION RESERVE AND CREDITED TO THE PROFIT AND LOSS ACCOUNT, TO THE EXTENT IT DOES NOT EXCEED THE AMOUNT OF DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS REFERRED TO IN CLAUSE (IIA); OR] ( III ) THE AMOUNT OF LOSS BROUGHT FORWARD OR UN ABSORBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. EXPLANATION . FOR THE PURPOSES OF THIS CLAUSE, ( A ) THE LOSS SHALL NOT INCLUDE DEPRECIATION; ( B ) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABS ORBED DEPRECIATION IS NIL; OR] ( IV ) TO ( VI ) 12 [***] ( VII ) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE P REVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB - SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS ) ACT, 1985 (1 OF 1986) AND ENDING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS 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 SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986); OR ( VIII ) THE AMOUNT OF DEFERRED TAX, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT.] EXPLANATION 2. FOR THE PU RPOSES OF CLAUSE (A) OF EXPLANATION 1, THE AMOUNT OF INCOME - TAX SHALL INCLUDE ( I ) ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 115 - O OR ON DISTRIBUTED INCOME UNDE R SECTION 115R ; ( II ) ANY INTEREST CHARGED UNDER THIS ACT; THE STANDARD BATTERIES LIMITED 8 ( III ) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME; ( IV ) EDUCATION CESS ON INCOME - TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME; AND ( V ) SECONDARY AND HIGHER EDUCATION CESS ON INCOME - TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME. EXPLANATION 3. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT FOR T HE PURPOSES OF THIS SECTION, THE ASSESSEE, BEING A COMPANY TO WHICH THE PROVISO TO SUB - SECTION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, HAS, FOR AN ASSESSMENT YEAR COMMENCING ON OR BEFORE THE 1ST DAY OF APRIL, 2012, AN OPTIO N TO PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR EITHER IN ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI 17 TO THE COMPANIES ACT, 1956 OR IN ACCORD ANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY. (3) NOTHING CONTAINED IN SUB - SECTION (1) SHALL AFFECT THE DETERMINATION OF THE AMOUNTS IN RELATION TO THE RELEVANT PREVIOUS YEAR TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR OR YEARS UNDER THE PR OVISIONS OF SUB - SECTION (2) OF SECTION 32 OR SUB - SECTION (3) OF SECTION 3 2A OR CLAUSE ( II ) OF SUB - SECTION (1) OF SECTION 72 OR SECTION 73 OR SECTION 74 OR SUB - SECTION (3) OF SECTION 74A . (4) EVERY COMPANY TO WHICH T HIS SECTION APPLIES, SHALL FURNISH A REPORT IN THE PRESCRIBED FORM 18 FROM AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION (2) OF SECTION 288 , CERTIFYING THAT THE BOOK PROFIT HAS BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION ALONG WITH THE RETURN OF INCOME FILED UNDER SUB - SECTION (1) OF SECTION 139 OR ALONG WITH THE RETURN OF INCOME FURNISHED IN RESPONSE TO A NOTICE UNDER CLAUSE ( I ) OF SUB - SECTION (1) OF SECTION 142 . (5) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN THIS SECTION.] THE STANDARD BATTERIES LIMITED 9 (5A) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY INCOME ACCRUING OR ARISING TO A COMPANY FROM LIFE INSURANCE BUSINESS REFERRED TO IN SECTION 115B .] (6) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO THE INCOME ACCRUED OR ARI SING ON OR AFTER THE 1ST DAY OF APRIL, 2005 FROM ANY BUSINESS CARRIED ON, OR SERVICES RENDERED, BY AN ENTREPRENEUR OR A DEVELOPER, IN A UNIT OR SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE:] PROVIDED THAT THE PROVISIONS OF THIS SUB - SECTION SHALL CEASE TO HAV E EFFECT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2012.] 7. PERUSAL OF THE AFORESAID PROVISION WOULD CLEARLY INDICATE THAT BEFORE MAKING ANY ADJUSTMENT TO BOOK PROFIT, THE ASSESSING OFFICER IS REQUIRED TO ENSURE THAT THE ITEM PROPOSED TO BE ADDED FALLS IN ANY ONE OF THE AFORESAID CLAUSES. THE HON'BLE SUPREME COURT IN APOLLO TYERS LTD. (SUPRA), HAS CLEARLY LAID DOWN THAT THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET PREPARED AS PER COMPANIES AC T, 1956, CANNOT BE RE WRITTEN BY THE ASSESSING OFFICER SO LONG AS THESE HAVE BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III OF SCHEDULE VI OF COMPANIES ACT, 1956. THUS, IN MY CONSIDERED VIEW, THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER UNDER THE NORMAL PROVISIONS OF THE ACT, SHOULD NOT HAVE BEEN ADDED TO THE BOOK PROFITS AT ALL AND THE LEARNED CIT(A) OUGHT TO HAVE DELETED IT IN TOTO. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 115JB, FOR ` 1,56,18,208, IS DIREC TED TO BE DELETED. THE STANDARD BATTERIES LIMITED 10 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.07.2015 SD/ - R.C. SHARMA ACCOUNTANT MEMBER MUMBAI, DATED : 30.07.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI