MOUNTPARK CREATIVCE P.LTD, MUMBAI V. ITO 1(2)(3), MUMBAI

ITA 3910/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3694 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india
• Section: 143(3); 115JB; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3910/MUM/2016 ASSESSMENT YEAR: 2011 - 12 MOUNTPART CREATIVE PVT. LTD. TARDEO AC MARKET BUILDING, 7 TH FLOOR, SUITE 47, MUMBAI - 400034. VS. INCOME TAX OFFICER - 1(2)(3), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AABCM1761G APPELLANT RESPONDENT ASSESSEE BY : MR. BIREN GABHAWALA, AR REVENUE BY : M R . MANOJ KUMAR SINGH, DR DATE OF HEARING : 02/08/2018 DATE OF PRONOUNCEMENT : 08/08/2018. ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 2 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED IN COMPUTING 'BOOK PROFIT' AT RS.73,32,838/ - UNDER SECTION 115JB OF THE I.T. ACT, MOUNTPART CREATIVE ITA NO. 3910/MUM/2016 2 1961 VIDE ORDER DATED 17.01.2014 PASSED UNDER SECTION 143(3) OF THE I.T ACT, 1961 AS AGAINST RS.23,32,838/ - COMPUTED BY YOUR APPELLANT. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT AMOUNT OF CAPITAL GAIN IN RESPECT WHEREOF BENEFIT OF REINVESTM ENT UNDER SECTION 54EC OF THE I.T. ACT IS AVAILABLE BY THE APPELLANT CANNOT BE REDUCED FROM THE 'BOOK PROFIT' AND THAT THE BENEFIT IS ONLY AVAILABLE FOR SECTION 10(38) AND NOT FOR EXEMPTION IN SERIES OF SECTION 54 AND SECTION 54EC HAS NO APPLICATION IN COM PUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT FOR EXCLUSION OF EXEMPTED CAPITAL GAINS. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE IS NOTHING IN CHAPTER X II - B PROVIDING FOR D ISALLOWANCE OF ELIGIBLE EXEMPTION UNDER SECTION 54EC OF THE ACT ON CAPITAL GAINS IN THE COURSE OF ASSESSMENT BASED ON 'BOOK PROFIT' AND THAT WHAT IS DEEMED TO BE INCOME UNDER SECTION 45 OF THE ACT CANNOT BE INCO ME FOR THE PURPOSE OF SECTION 115 JB OF THE AC T FOR THE SIMPLE REASON THAT 'BOOK PROFIT' CANNOT INCLUDE DEEMED INCOME. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 18.09.2011 DECLARING TOTAL INCOME OF RS.22,72,700/ - U NDER THE REGULAR PROVISIONS AND BOOK PROFIT AT RS.23,32,838/ - U/S 115JB . WHILE CALCULATING THE BOOK PROFIT OF RS.23,32,838/ - U/S 115JB, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.50,00,000/ - U/S 54EC. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 22.01.2014 COMPUTING THE BOOK PROFIT U/S 115JB AT RS.73,32,838/ - . IN THE ASSESSMENT ORDER, THE AO HELD THAT THE ASSESSEE WAS NOT ENTITLED TO EXCLUSION OF RS.50,00,000/ - (EXEMPT U/S 54EC FOR LONG TERM CAPITAL GAINS), WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. MOUNTPART CREATIVE ITA NO. 3910/MUM/2016 3 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A), HAVING DISCUSSED THE ORDER OF THE TRIBUNAL IN M/S TECHNICARTS (P) LTD. V. ITO (2011) 46 SOT 294 (MUM.), GROWTH AVENUE SECURITIES PVT. LTD. V. DCIT (2010) 128 TTJ 426 (DEL), RAIN COMMODITIES 41 DTR 449 (HYDERABAD) AND THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN VEEKAY LAL INVESTMENT PVT. LTD. 249 ITR 597 (BOM), RELIED ON THE RATIO LAID DOWN IN THE ABOVE DECISIONS AND CONFIRMED THE ORDER OF THE AO THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 54EC, WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE ACT. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ISSUE IN THE INSTANT CASE HAS BEEN DECIDED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. METAL & CHROMIUM PLATER (P.) LTD. (2016) 76 TAXMANN.COM 229 (MAD.). 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE DECISION IN VEEKAY LAL INVESTMENT CO. PVT. LTD . (SUPRA) AND SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMIS SIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN VEEKAYLAL INVESTMENT CO. (SUPRA) , RELIED ON BY THE LD. DR , THE HONBLE HIGH COURT HELD THAT IF FOR COMPUTING THE TOTAL INCOME UNDER THE NORMAL PROVISIONS, THE CAPITAL GAINS COMPUTED U/S 45 HAS TO BE TAKEN INTO ACCOUNT, IT WAS NOT UNDERSTOOD HOW IN COMPUTING THE BOOK PROFITS U/S 115J, THE ASSESSEE COULD EXCLUDE C APITAL GAINS. THE FACTS IN THE INSTANT CASE ARE DIFFERENT AS DELINEATED ABOVE. MOUNTPART CREATIVE ITA NO. 3910/MUM/2016 4 IN METAL & CHROMIUM PLATER (P.) LTD. (SUPRA) , THE ASSESSEE FILED ITS RETURN OF INCOME CLAIMING EXEMPTION U/S 54EC OF THE ACT. THE AO DID NOT QUESTION THE ELIGIBILITY OF THE ASSESSEE TO SUCH EXEMPTION IN REGULAR COMPUTATION. IN SO FAR AS THE TAX PAYABLE AS PER REGULAR COMPUTATION WAS LESS THAN 7.5% OF THE BOOK PROFITS, THE PROVISIONS OF MINIMUM ALTERNATE TAX (MAT) STOOD ATTRACTED. THE AO, WHILE PROCESSING THE COMPUTATION OF TAX IN TERMS OF SECTION 115JB, TOOK A VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO THE GRANT OF RELIEF U/S 54EC. THE CIT(A) AS WELL AS TRIBUNAL, HOWEVER, ALLOWED THE ASSESSEES CLAIM. ON REVENUES APPEAL , THE HONBLE HIGH COURT HELD THAT (I) THE ALLOWANCE OR OTHERWISE OF THE CLAIM UNDER SECTION 54EC HAS TO BE SEEN IN THE CONTEXT OF THE PROVISIONS OF SECTION 115JB WHICH IS SELF CONTAINE D CODE OF ASSESSMENT. THE LEVY OF TAX IS ON THE BOOK PROFITS AFTER EFFECTING VARIOUS UPWARD AND DOWNWARD ADJUSTMENTS AS SET OUT IN TERMS OF THE EXPLANATION THERETO. THE PROVISIONS OF SUB - SECTION (5) OF SECTION 115JB OPEN THE ASSESSMENT TO THE APPLICATION OF ALL OTHER PROVISIONS CONTAINED IN THE ACT EXCEPT IF SPECIFICALL Y BARRED BY THAT SECTION ITSELF , (II) THUS, THE ADJUSTED BOOK PROFITS WOULD BE FURTHER ELIGIBLE TO THE BENEFITS SET OUT IN THE OTHER PROVISIONS OF THE ACT AND THE PLAIN LANGUAGE OF SECTION 1 15JB THUS ADMITS OF THE GRANT OF RELIEF UNDER SECTION 54EC IN AN ASSESSMENT THERE UNDER , (III) THUS, WHILE AN ASSESSMENT UNDER SECTION 115JB WOULD BE CONCLUDED EXCLUSIVELY ON THE BASIS OF THE BOOK PROFITS AS ADJUSTED BY THE ITEMS SET OUT IN THE EXPLANATION THERE UNDER , IN AN ASSESSMENT IN TERMS OF SECTION 115JA OR JB, THE ADJUSTED BOOK PROFITS WOULD BE FURTHER SUBJECTED TO THE EFFECT OF OTHER PROVISIONS OF THE ACT THAT ARE SPECIFICALLY MOUNTPART CREATIVE ITA NO. 3910/MUM/2016 5 BROUGHT INTO PLAY BY VIRTUE OF SUB - SECTION (4) OF SECTION 1 15JA AND (5) OF SECTION 115JB. 7.1 IN THE INSTANT CASE, THE AO HAS ALLOWED THE CLAIM OF DEDUCTION OF RS.50,00,000/ - U/S 54EC, WHILE CALCULATING THE NORMAL INCOME. ONLY WHEN COMPUTING THE BOOK PROFIT U/S 115JB, THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION OF RS.50,00,00 0/ - U/S 54EC. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE JUDGMENT OF THE HONBLE MADRAS HIGH COURT AND HOLD THAT THE ASSESSEE - COMPANY IS ENTITLED TO CLAIM DEDUCTION U/S 54EC WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE ACT. 8. IN THE RESULT, THE APPEA L IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/08/2018. SD/ - SD/ - ( C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 08/08/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI