KAIKOBAD BYRAMJEE & SON ( AGENCY) P.LTD, MUMBAI V. ASST CIT 1(2)(1), MUMBAI

ITA 4/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0894 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 02-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RMAJEE
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 234B; 14A; 115JB; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4/MUM/2017 ASSESSMENT YEAR: 2013 - 14 KAIKOBAD BYRMAJEE & SONS (AGENCY) PVT. LTD., 1, TIMES OF INDIA, GYMNASIUM ROAD, D.N. ROAD, MUMBAI - 1. VS. ASST. CIT - 1(2)(1), AAYAKAR BHAVAN MUMBAI - 400020. PAN NO. AAACK1805K APPELLANT RESPONDENT ASSESSEE BY : MR. SURENDRA NIJSURE, AR REVENUE BY : MR. MANOJ KUMAR SINGH, DR DATE OF HEARING : 28/08/2018 DATE OF PRONOUNCEMENT : 19/11/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2013 - 14. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF TH E INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND OF APPEAL READS AS UNDER: 1. THAT THE ACIT HAS ERRED IN ADDING RS.20,25,174/ - UNDER CLAUSE (F) OF EXPLANATION - 1 AS EXPENSES RELATED TO THE INCOME EXEMPTED U/S 10 (OTHER KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 2 THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF) OR SECTION 11 OR SECTION 12. 2. THAT THE ACIT HAS ERRED IN CHARGING INTEREST U/S 234B AND U/S 234C OF THE IT ACT. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013 - 14 DECLA RING TOTAL INCOME AT RS.90,06,850/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.20,25,174/ - IN THE PROFIT & LOSS ACCOUNT TOWARDS PRINCE COURT PROPERTY EXPENSES . IN RESPONS E TO A QUERY RAISED BY THE AO TO EXPLAIN AS TO WHY THE SAID EXPENSES SHOULD NOT BE DISALLOWED, THE ASSESSEE VIDE LETTER DATED 27.11.2015 ACCEPTED THE DISALLOWANCE. ACCORDINGLY, THE AO DISALLOWED THE EXPENSES OF RS.20,25,174/ - CLAIMED ON ACCOUNT OF PRINCE COURT PROPERTY . THE AO MADE A DISALLOWANCE OF THE ABOVE SUM OF RS.20,25,174/ - IN BOTH THE NORMAL COMPUTATION OF INCOME AND COMPUTATION OF MAT AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. SINCE THE TAX PAYABLE UNDER THE NORMAL PROVISION WAS LOWER THA N THE TAX PAYABLE U/S 115JB, THE AO DETERMINED THE TAX LIABILITY U/S 115JB OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) REFERRED TO THE FOLLOWING MAT COMPUTATION DONE BY THE AO A S PER PAGE 3 OF HIS ASSESSMENT ORDER DATED 07.01.2016 WHICH IS AS UNDER: NET PROFIT AS PER P & L A/C. 2,42,62,278/ - ADD: DISALLOWANCE AS DISCUSSED IN PARA 4 20,25,174/ - KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 3 ABOVE DISALLOWANCE U/S 14A 1,21,819/ - 21,46,993/ - 2,64,09,271/ - LESS: INCOME EXEMPT U/S 10, 10AA, 11 OR 12 22,53,835/ - BOOK PROFIT 2,41,55,436/ - THE LD. CIT(A) HELD, BY OBSERVING THE CALCULATION DONE BY THE AO AND ALSO THE LETTER GIVEN BY THE APPELLANT DATED 27.11.2015 , THAT THE NET PROFIT ARRIVED BY THE ASSESSEE OF RS.2,42,62,278/ - IS SHORT OF RS.20,25,174/ - AS THE ABOVE EXPENDITURE IS SUPPOSED TO BE DISALLOWED WHILE CALCULATING THE MAT COMPUTATION. HOLDING THAT IT IS A MISTAKE APPARENT FROM RECORD AND NO CONNECTION WIT H THE APPLICATION OF 115JB ADJUSTMENT AS CLAIMED BY THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS.20,25,174/ - MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) COMPUTATION OF INCOME FOR AY 2013 - 14, (II) COMPLETE SET UP ITR, (III) ACCOUNTS FOR THE YEAR 2012 - 13 AND (IV) FORM 3CA - 3CD. IT IS STATED BY HIM THAT THE ABOVE DOCUMENTS WERE FILED BEFORE THE AO AS WELL AS THE LD. CIT(A). ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN APOLLO TYRES L TD. V. CIT (2002) 255 ITR 273 (SC) AND CIT V. ECHJAY FORGINGS (P.) LTD . (2001) 251 ITR 15 (BOM). 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE NET PROFIT ARRIVED BY THE ASSESSEE OF RS.2,42,62,278/ - IS SHORT OF RS.20,25,174/ - , AS THE ABOVE EXPENDITURE IS SUPPOSED TO BE DISALLOWED WHILE CALCULATING THE KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 4 MAT COMPUTATION. AS IT IS A MISTAKE APPARENT FROM RECORD AND IT HAS NO CONNECTION WITH THE APPLICATION OF 115JB ADJUSTMENT, THE LD. DR SUBMITS THAT THE ORDER OF THE LD. CIT(A) BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE DECISIONS RE LIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN APOLLO TYRES LTD. (SUPRA), THE ASSESSEE - COMPANY, WHILE DETERMINING ITS NET PROFIT, HAD PROVIDED FOR ARREARS OF DEPRECIATION IN ITS PROFIT AND LOSS ACCOUNT WHICH ACCORDING TO THE REVENUE WAS NOT IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. HENCE, THE AO, WHILE CONSIDERING THE CASE OF THE ASSESSEE - COMPANY U/S 115J, RECOMPUTED THE SAID PROFIT AND LOSS ACCOUNT OF THE COMPANY SO AS TO EXCLUDE THE PROVISIONS MADE FOR ARREARS OF DEP RECIATION. ON APPEAL, THE TRIBUNAL HELD THAT AN AO HAS NO AUTHORITY TO REOPEN THE ACCOUNTS OF A COMPANY WHICH ARE CERTIFIED BY THE AUDITORS OF THE COMPANY AS HAVING BEEN MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT AND WHICH HAVE BEEN ACCEPTED IN THE GENERAL MEETING OF THE COMPANY AS WELL AS BY THE REGISTRAR OF COMPANIES. ON REFERENCE, THE HONBLE HIGH COURT REVERSED THE TRIBUNALS ORDER. ON FURTHER APPEAL THE HONBLE SUPREME COURT HELD THAT THE ASSESSING OFFICER WHILE COMPUTING THE I NCOME U/S 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNTS ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER, HAS LIMITED POW ER OF MAKING ADDITIONS AND REDUCTIONS AS KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 5 PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. IN THE INSTANT APPEAL, THE APPELLANT VIDE LETTER DATED 27.11.2015 HAS STATED BEFORE THE AO THAT THE PROPERTY EXPENSES OF RS.20,25,174/ - WAS WRONGLY NOT DISALLOWED WHILE COMPUTING THE TOTAL INCOME. HERE IT IS NOT A CASE OF GOING BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. HERE IS A CASE WHEREIN THE NET PROFIT ARRIVED BY THE ASSESSEE OF RS.2,42,62,278/ - IS SHORT OF RS.20,25,174/ - . T HEREFORE, THE PRESENT CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE ABOVE DECISION RELIED ON BY THE LD. COUNSEL. IN EC HJAY FORGINGS (P.) LTD . (SUPRA), THE ASSESSEE FILED A LOSS RETURN FOR THE AY 1990 - 91. WHILE COMPUTING THE BOOK PROFITS U/S 115J, THE AO DISALLOWED THE DEDUCTION CLAIMED ON ACCOUNT OF W EALTH T AX PAYMENT, PROVISIONS FOR DOUBTFUL DEBTS, GRATUITY, BONUS AND IN RESPECT OF FOREIGN EXCHANGE RATE DIFFERENCE. THE FIRST APPELLATE AUTHORITY AGREED WITH THE VIEWS OF THE AO. THE TRIBUNAL, HOWEVER, H ELD THAT THE DISALLOWANCE MADE BY THE D EPARTMENT U/S 115J WAS IMPERMISSIBLE. ON APPEAL BY THE REVENUE U/S 260A, THE HONBLE HIGH COURT HELD THAT: WHILE APPLYING SECTION 115J, THE ASSESSING OFFICER HAD TO GO BY COMPUTATION OF THE BOOK PROFIT AS PERMITTED UNDER THE COMPANIES ACT. BY VIRTUE OF SECTION 115J, IN THE CASE OF A COMPANY WHOSE TOTAL INCOME AS COMPUTED UNDER THE INCOME - TAX ACT IS LESS THAN 30 PER CENT OF THE BOOK PROFIT, THE TOTAL INCOME KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 6 CHARGEABLE TO TAX WILL BE 30 PER CENT OF THE BOOK PROFIT AS C OMPUTED. FOR THE PURPOSES OF SECTION 115J, BOOK PROFIT WILL BE THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH SCHEDULE VI TO THE COMPANIES ACT SUBJECT TO CERTAIN ADJUSTMENTS. THE NET PROFIT, AS CALCULATED ABOVE, WILL BE INCREASED, INTER ALIA , BY THE AMOUNTS DEBITED TO THE PROFIT AND L OSS ACCOUNT IN THE PRESENT CASE. T HE TRIBUNAL HAD FOUND, ON FACTS, CORRECTLY, THAT THE SAID AMOUNT OF RS.1,38,234 HAD BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE COMPANIES ACT. HENCE, THE DEPARTMENT ERRED IN ADDING THE SAID AMOUNT TO THE NET PROFIT. IN THE ABOVE CASE, THE AO DISALLOWED THE DEDUCTION CLAIMED ON ACCOUNT OF WEALTH - TAX PAYMENT, PROVISIONS FOR DOUBTFUL DEBTS, GRATUITY, BONUS AND IN RESPECT OF FOREIGN EXCHANGE DIFFER ENCE. IN THE INSTANT APPEAL, THE APPELLANT VIDE LETTER DATED 27.11.2015 HAS STATED BEFORE THE AO THAT THE PROPERTY EXPENSES OF RS.20,25,174/ - WAS WRONGLY NOT DISALLOWED WHILE COMPUTING THE TOTAL INCOME. HERE IS A CASE WHEREIN THE NET PROFIT ARRIVED BY THE ASSESSEE OF RS.2,42,62,278/ - IS SHORT OF RS.20,25,174/ - . THEREFORE, THE PRESENT CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE ABOVE DECISION RELIED ON BY THE LD. COUNSEL. 7.1 HERE IS A CASE WHEREIN THE NET PROFIT ARRIVED BY THE ASSESSEE OF RS.2,42,62,278/ - IS SHORT BY RS.20,25,174/ - . IT HAS HAPPENED BECAUSE THE ASSESSEE DID NOT DISALLOW THE SAID EXPENSES OF RS.20,25,174/ - WHILE COMPUTING THE TOTAL INCOME. AS PER SECTION 115 JB (2), EVERY COMPANY SHALL PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. WHERE THE PROFIT AND LOSS ACCOUNT SUBMITTED IS KAIKOBAD BYRMAJEE ITA NO. 4/MUM/2017 7 NOT AS PER PART II AND III OF THE SCHEDULE VI OF THE COMPANIES ACT, THE AO HAS POWER TO ALTER THE NET PROFIT. AS MENTIONED EARLIER, THE ASSESSEE VIDE LETTER DATED 27.11.2015 BEFORE THE AO ACCEPTED THAT THE SAID EXPENSE WAS ERRONEOUSLY NOT DISALLOWED WHILE COMPUTING THE TOTAL INCOME. IN THE RESULT, THE NET PROFIT ARRIVED AT BY THE ASSESSEE WAS SHORT OF RS.20,25,174/ - . AS THE STARTING POINT OF COMPUTATION OF MAT U/S 115JB IS PROFIT BEFORE TAX, WE UPHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED . OR DER PRONOUNCED IN THE OPEN COURT ON 19/11/2018. SD/ - SD/ - (SANDEEP GOSAIN) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 19/11/2018 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// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI