The ACIT, Circle-4, Ahmedabad V. Fascel Limited(Known as Vodafone, Ahmedabad

ITA 41/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9951 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 02-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Unabsorbed depreciation; Set aside
• Section: 115JB; 10B; 143(1); 143(2); 32; 12; 10; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.41/AHD/2008 (ASSESSMENT YEAR:-2004-05) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-8, 4 TH FLOOR,A WING, AJANTA COMMERCIAL CENTRE, ASHRAM ROAD,AHMEDABAD V/S VODAFONE ESSAR(GUJRAT) LTD. (FORMERLY FASCEL LTD.), 6 TH FLOOR, SAKAR-II, ELLIS- BRIDGE, AHMEDABAD [PAN: AAACF 1190 P] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI ANIL KUMAR, DR ASSESSEE BY:- SHRI DHINAL SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 30- 10-2007 OF THE LD. CIT(APPEALS)-VIII, AHMEDABAD,RAI SES THE FOLLOWING GROUNDS:- 1 THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-VII I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE OF SALES PROMOTION EXPENDITURE AMOUNTING TO RS.11,35,033/-. 2 THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-VIII , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO T O CONSIDER THE LOSS AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHILE COM PUTING THE BOOK PROFIT U/S 115JB OF THE ACT WITHOUT TAKING INTO CONSIDERAT ION THE PROVISIONS OF SECTION 79. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME-TAX (A)-VIII, AHMEDABAD OUGH T TO HAVE UPHELD THE ORDER OF THE AO. 4 IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD . COMMISSIONER OF INCOME-TAX (A)-VIII, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. ADVERTING FIRST TO GROUND NO.1 RELATING TO DISAL LOWANCE OF SALES PROMOTION EXPENDITURE, THE FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.4,51,49,320/- FI LED ON 30-10-2004 BY THE ASSESSEE, PROVIDING CELLULAR SERVICES IN THE STATE OF GUJARAT, ITA NO.41/AHD/2008 2 AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTE D FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 09-09- 2005.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER[AO IN SHORT] NOTICED THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.5,30,81,586/- ON ACCOUNT OF SALES PROMOTION EXPE NSES. ON PERUSAL OF DETAILS FILED BY THE ASSESSEE, THE AO FU RTHER NOTICED AN AMOUNT OF RS.11,35,033/- ON ACCOUNT OF MARRIAGE GI FTS & GIFT VOUCHERS ETC. SINCE THE ASSESSEE DID NOT FURNISH CO PIES OF GIFT VOUCHERS NOR PLACED ANY OTHER EVIDENCE BEFORE THE A O IN SUPPORT OF JUSTIFICATION OF THE EXPENDITURE ON THESE GIFTS, TH E AO DISALLOWED THE AMOUNT. 3. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE ON THE GROUND THAT THESE EXPENSES WERE INCURRED FOR THE PU RPOSE OF BUSINESS OR FOR STAFF WELFARE, RELYING, INTER ALIA , ON THE DECISION DATED 17-08-2007 OF THE ITAT IN THE ASSESSEES OWN CASE FOR AY 2003-04. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). BOTH THE PARTIES AG REED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION DATED 17-08-200 7 OF THE ITAT IN ITA NO.1930/AHD/2007 IN THE ASSESSEES OWN CASE FO R THE AY 2003- 04, FOLLOWED SUBSEQUENTLY IN THEIR DECISION DATED 20-02-2009 IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 IN ITA NO.3 002/AHD/2008. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT WHILE ADJUDICATING A SIMILA R CLAIM IN THEIR ORDER DATED 17-08-2007 IN THE ASSESSEES OWN CASE F OR AY 2003-04 IN ITA NO.1930/AHD/2007, THE TRIBUNAL HELD AS UNDE R:- ITA NO.41/AHD/2008 3 24 RIVAL SUBMISSIONS OF THE PARTIES HAVE BEEN CONS IDERED CAREFULLY AND THE RECORDS GONE THROUGH. NOTHING HAS BEEN BROUGHT BEFORE US ON RECORD TO JUSTIFY THE DISALLOWANCE BY ADOPTING 1/10 TH FORMULA. THE EXPENDITURE ON THE EMPLOYEES ARE COVERED BY THE DECISION OF THE SU PREME COURT IN THE CASE OF SHAHZADA NAND AND SONS, 108 ITR 358, WHEREI N, IT HAS BEEN HELD THAT IT IS FOR THE ASSESSEE TO DECIDE THE COMMERCIA L EXPEDIENCY AS TO WHAT IS TO BE GIVEN TO THE EMPLOYEES AND THE SAME CANNOT BE DISALLOWED. SIMILARLY, OUT OF GENERAL EXPENSES, NO RESTRICTIONS BEING THERE. IN THE CURRENT YEAR, THERE SEEMS TO BE NO JUSTIFICATION FO R DISALLOWING WHICH WAS INCURRED WHOLLY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE CIT(A) IS RIGHT IN DELETING BOTH THE ADDITIONS MADE BY THE AO. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THESE TWO GROUNDS . 5.1 FOLLOWING THE AFORESAID DECISION, THE ITAT DE CIDED A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THEIR ORDER DATE D 20-02-2009 FOR THE AY 2002-03. 6. IN THE LIGHT OF AFORESAID FINDINGS OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AYS 2002-03 AND 2003-04, ESPECIALL Y WHEN THE FACTS OBTAINING IN THE YEAR UNDER CONSIDERATION ARE UNDISPUTEDLY SIMILAR TO THE FACTS IN THE AYS 2002-03 AND 2003-04 AND THE REVENUE HAVE NOT PLACED ANY MATERIAL IN ORDER TO ENABLE US TO TAKE DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). THEREFORE, GROUND N O.1 IN THE APPEAL IS DISMISSED. 7. GROUND NO..2 RELATES TO APPLICATION OF PROVISION S OF SEC. 79 OF THE ACT WHILE COMPUTING BOOK PROFITS U/S 115JB OF T HE ACT. WHILE DETERMINING BOOK PROFITS IN TERMS OF PROVISIONS OF SECTION 115JB OF THE ACT, THE AO INVOKED THE PROVISIONS OF SECTION 7 9 OF THE ACT AND DISALLOWED THE CLAIM FOR LOSS ON THE GROUND THAT TH ERE WAS SUBSTANTIAL CHANGE IN SHAREHOLDING OF THE ASSESSEE COMPANY IN THE PERIOD RELEVANT TO AY 2000-01.INTER ALIA, THE AO RE LIED ON CBDT CIRCULAR NO.495 DATED 22-09-1987. ITA NO.41/AHD/2008 4 8. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE, FOLLOWING THE DECISION DATED 17-08-2007 O F THE ITAT IN THE ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO.1195/A HD/2007. 9. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID DECISION OF THE LEARNED CIT(A). BOTH THE PARTIES AG REED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION DATED 17 -08-2007OF THE ITAT IN ITA NO.1195/AHD/2007 IN THE ASSESSEES OWN CASE FOR THE AY 2003-04, FOLLOWED SUBSEQUENTLY IN THEIR DECISIO N DATED 20-02- 2009 IN THE ASSESSEES OWN CASE FOR AY 2002-03 IN ITA NO.2883/AHD/2008 . 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE, THE ITAT IN THEIR AFORESAID DECISION DATED 17-08-2007 FOR THE A Y 2003-04 IN ITA NO.1195/AHD/2007, CONCLUDED AS UNDER:- 8. RIVAL SUBMISSIONS OF THE PARTIES HAVE BEEN CONS IDERED CAREFULLY AND THE RECORDS GONE THROUGH. THE PROVISIONS OF SECTION 1153B AS THEY STOOD AT THE RELEVANT TIME READ AS UNDER: SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN CO MPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINE D IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSE, 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, 2001, IS LESS THAN SEVEN AND ONE-HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PRO FIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABL E BY THE ASSESSEE ON SUCH TOTAL COME SHALL BE. THE AMOUNT OF INCOME-TAX AT THE RATE OF SEVEN AND ONE-HALF PERCENT. (2) EVERY ASSESSEE, BEING A COMPANY, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR TH E RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956): PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS I NCLUDING PROFIT AND LOSS ACCOUNT, - ITA NO.41/AHD/2008 5 (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 BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE P ROVISIONS 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 ITS DIFFERENT FROM THE PREVIOUS YEAR UNDER THIS ACT, - (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PRE/., AC COUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUNTIN G STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPRECIATI ON' WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FIN ANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION,FOR THE PURPOSES OF THIS SECTION, 'BOO K 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 T HE PROVISION THEREFOR; OR (B) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVE R NAME CALLED OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC OR (C) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS M ADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR (D) THE AMOUNT BY WAY OF PROVISION FOR LOSSES O F SUBSIDIARY COMPANIES; OR (E) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOSED; OR ITA NO.41/AHD/2008 6 (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 OR SECTION 10A OR SECTION 10B OR S ECTION 11 OR SECTION 12 APPLY. IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (F) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY - (I) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVIS ION (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 O THERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUC H AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO A N ASSESSES IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES C REATED 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 RE DUCED FROM THE BOOK PROFIT .UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCRE ASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WIT HDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115 3A. AS THE CASE MAY BE; OR (II) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVI SIONS OF SECTION 10 OR 10A OR SECTION 10B OR SECTION 11 OR SECTION 12 APPL Y, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND-LOSS ACCOUNT; OR (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSOR BED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNTS EXPLANAT ION - FOR THE PURPOSES OF THIS CLAUSE - (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY I F THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL; OR (IV) THE AMOUNT OF PROFIT ELIGIBLE FOR DEDUCTION UN DER SECTION 80HHC, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE ( C) OF SUB-SECTION (3) OR SUB-SECTION (3A), AS THE CASE MAY BE, OF THAT SECTI ON, AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION; OR (V) THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UN DER SECTION 80HHE COMPUTED UNDER SUB-SECTION (3) OR SUB-SECTION (3A) AS THE CASE MAY BE, OF THAT SECTION, AND SUBJECT TO THE CONDITION SPECI FIED IN THE SECTION; OR (VI) THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U NDER SECTION 80HHF COMPUTED, UNDER SUBJECTION (3) OF THAT SECTION, AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION; OR . ITA NO.41/AHD/2008 7 (VII) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMP ANY FOR THE ASSESSMENT YEAR COMMENCING AND FROM THE ASSESSMENT YEAR RELEVA NT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK IN DUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK IND USTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) AND ENDI NG WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMP ANY 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-SECTIO N (I) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT; 1985 (1 OF 1986). (3) NOTHING CONTAINED IN SUB-SECTION (1) SHALL AFFE CT THE DETERMINATION OF THE AMOUNTS IN RELATION TO THE RELEVANT PREVIOUS YE AR TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR OR YEARS UNDER THE PROVISION S OF SUB-SECTION (2) OF SECTION 32 OR SUB-SECTION (3) OF SECTION 32A OR CLA USE (II) OF SUB-SECTION (1) OF SECTION 72 OR SECTION 73 OR SECTION 74 OR SUB-SE CTION (3) OF SECTION 74A. (4) EVERY COMPANY TO WHICH THIS SECTION APPLIES, SH ALL FURNISH A REPORT IN THE PRESCRIBED FORM FROM AN ACCOUNTANT 3S DEFINE D IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, CERTIFYING TH AT 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 SUBSECTION (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 CO MPANY, MENTIONED IN THIS SECTION.' 9. ON BARE READING OF THESE PROVISIONS, IT IS APPAR ENT THAT SECTION 115JB IS A SPECIAL PROVISION FOR PAYMENT OF MINIMUM TAX BY C ERTAIN COMPANIES. THIS MINIMUM TAX IS TO BE PAID ON THE BOOK PROFIT AND TH AT DECLARED TO BE TOTAL INCOME OF THE ASSESSEE. THE BOOK PROFIT IS COMPUTED NOT APPLYING THE NORMAL PROVISIONS OF COMPUTATION OF INCOME UNDER TH E ACT BUT AS PROVIDED IN THE EXPLANATION BELOW SUB-SECTION 2 TO SECTION 1 15JB OF THE ACT. SUB- SECTION 2 PROVIDES FOR THE COMPUTATION OF PROFIT & LOSS A/C FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE-VI TO THE COMPANIES ACT, 1956. THE PROFIT AS PER THE PROFIT & LOSS A/C IS TO BE FURTHER INCREASED OR REDUCED AS P ER THE EXPLANATION THEREUNDER TO ARRIVE THE BOOK PROFIT. 10 CLAUSE (III) OF THE EXPLANATION, WHICH IS EXTRAC TED ABOVE, SPECIFICALLY PROVIDES THAT THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AS PER THE BOOKS OF ACCOUNTS IS TO BE REDUCED FROM THE BOOK PROFIT AND IT IS LOWER OF THE TWO AMOUNTS, THAT IS TO BE REDUCED. AGAIN IT IS THE AMOUNT WHICH IS AS PER THE BOOKS OF ACCOUNT THA T IS TO BE REDUCED AND ITA NO.41/AHD/2008 8 NOT AS PER THE INCOME TAX RECORDS WHICH HAS BEEN CO MPUTED UNDER THE PROVISIONS OF THE ACT. 11 ON A COMBINED READING OF SECTION (1), SUB-SECTIO N (2) AND THE EXPLANATION THEREUNDER, IT IS EVIDENT THAT IT IS TH E LOSS THAT IS AS PER THE BOOKS OF ACCOUNT WHICH IS TO BE CONSIDERED AND NOT THE AMOUNT THAT IS ALLOWABLE OR NOT ALLOWABLE UNDER ANY PROVISIONS OF THE ACT. THE REVENUE AUTHORITIES, IN OUR OPINION, THEREFORE, ARE NOT JUS TIFIED IN NOT ALLOWING THE LOWER OF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNAB SORBED DEPRECIATION FOR ASSESSMENT YEAR 2000-01 AND EARLIER YEARS ON THE GR OUND THAT THERE WAS A CHANGE IN SHAREHOLDING IN ASSESSMENT YEAR 2000-01 A ND THAT BECAUSE OF THE PROVISIONS OF SECTION 79, SUCH LOSS IS NOT TO B E ALLOWED TO BE CARRIED FORWARD TO AN ASSESSEE. 12. AS AFORESAID, THE ADMISSIBILITY OF LOSS AS PER OTHER PROVISIONS OF THE ACT, HAS NOTHING TO DO WITH THE COMPUTATION OF BOOK PROFIT AND THAT IS MADE CLEAR BY THE PROVISIONS OF SECTION (III) OF THE EXP LANATION WHICH PROVIDES IT IS THAT AMOUNT THAT IS TO BE REDUCED WHICH IS LOWER OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AS PER THE BOOKS OF ACCOUNT. IF IT IS APPEARING IN THE BOOKS OF ACCOUNTS AND NOT SET-OFF IN THE SUBSEQUENT YEAR'S PROFIT, THE EFFECT IS TO BE GIVEN IN THE IMP UGNED YEAR OF PROFIT WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE. 13. THIS IS ALSO THE SPIRIT OF SECTION 115JB WHICH HAS BEEN INTRODUCED ON THE PREMISES THAT THE COMPANIES ARE DECLARING DI VIDEND BUT DO NOT PAY ANY TAX TO THE INCOME TAX DEPARTMENT BECAUSE OF CER TAIN INCENTIVES AVAILABLE TO THE ASSESSEE UNDER THE ACT. WHEN THE D IVIDEND COULD BE PAID THE LEGISLATURE THOUGHT IT FIT THAT THERE IS NO REA SON WHY ASSESSEE SHOULD NOT PAY A MINIMUM TAX AT LEAST TO THAT EXTENT OF TH E INCOME. 14 THE PROVISIONS OF SECTION 79, WHICH ARE REFERRED TO BY THE REVENUE IN REJECTING THE CLAIM OF THE ASSESSEE, READS AS UN DER: CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPANIES. 79. NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAP TER, WHERE A CHANGE IN SHAREHOLDING HAS TAKEN PLACE IN A PREVIOU S YEAR IN THE CASE OF A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC AR E SUBSTANTIALLY INTERESTED, NO LOSS INCURRED IN ANY YEAR PRIOR TO T HE PREVIOUS YEAR SHALL BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF T HE PREVIOUS YEAR UNLESS (A) ON THE LAST DAY OF THE PREVIOUS YEAR THE SHARES OF THE, COMPANY CARRYING NOT LESS THAN FIFTY-ONE PER CENT OF THE VO TING POWER WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY-ONE PER CENT OF THE VO TING POWER ON THE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED : ITA NO.41/AHD/2008 9 PROVIDE THAT NOTHING CONTAINED IN THIS SECTION SHAL L APPLY TO A CASE WHERE A CHANGE IN THE SAID VOTING POWER TAKES PLACE IN A PR EVIOUS YEAR CONSEQUENT UPON THE DEATH OF A SHAREHOLDER OR ON ACCOUNT OF TR ANSFER OF SHARES BY WAY OF GIFT TO ANY RELATIVE OF THE SHAREHOLDER MAKING S UCH GIFT: PROVIDED FARTHER THAT NOTHING CONTAINED IN THIS SEC TION SHALL APPLY TO ANY CHANGE IN THE SHAREHOLDING OF AN INDIAN COMPANY WHI CH IS A SUBSIDIARY OF A FOREIGN COMPANY AS A RESULT OF AMALGAMATION OR DE MERGER OF A FOREIGN COMPANY SUBJECT TO THE CONDITION THAT FIFTY-ONE PER CENT SHAREHOLDERS OF THE AMALGAMATING OR DEMERGED FOREIGN COMPANY CONTINUE T O BE THE SHAREHOLDERS OF THE AMALGAMATED OR THE RESULTING FO REIGN COMPANY. (B) [OMITTED TOY THE FINANCE ACT, 1988, W.E.F. 1-4- 1989]. 15 THIS IS A NON-OBSTANTE CLAUSE DEALING WITH ALLOW ANCE OF CARRY FORWARD LOSS TO AN ASSESSEE. THIS IS A PROVISION AP PLICABLE TO AN ASSESSEE WHILE COMPUTING THE NORMAL INCOME OF THE ASSESSEE A ND THAT IS WHY THE ASSESSEE ITSELF HAS REDUCED THE LOSS FOR ASSESSMENT 2000-01 AND PRIOR IN COMPUTING ITS NORMAL INCOME. BUT IN SO FAR AS MINIM UM ALTERNATIVE TAX IS CONCERNED, IT IS TO BE LEVIED WITH REFERENCE TO BOO K PROFIT AND IN ARRIVING AT THE BOOK PROFIT, THE LOWER OF THE AMOUNT AT BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION WHICH IS APPEARING IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE HAS TO BE ALLOWED AND AS AFORESAID, IR RESPECTIVE OF THE FACT, WHETHER, THE SAME IS ALLOWABLE UNDER THE OTHER PROV ISIONS OF THE ACT OR NOT. 16 SUB-SECTION (5) OF SECTION 115J OF THE ACT, ON F IRST BRUSH READING, GIVES AN IMPRESSION THAT IT IS RE-INCORPORATION OF THE PROVISIONS OF THE ACT TO A COMPANY WHICH ARE EXCLUDED BY SUB-SECTION (1) OF SECTION 115JB. A CLOSURE LOOK, HOWEVER, MAKES IT CLEAR THAT IT REINC ORPORATE ONLY THOSE PROVISIONS WHICH ARE NOT OTHERWISE PROVIDED IN SECT ION 115JB. CLAUSE (III) OF THE EXPLANATION SPECIFICALLY PROVIDES FOR THE AL LOWANCE OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AND, THEREFORE T HE OTHER PROVISIONS OF THE ACT RELATING TO THE EARLIER YEARS LOSS OR UNAB SORBED DEPRECIATION WOULD NOT BE APPLICABLE. BECAUSE CLAUSE (III) OF THE EXPL ANATION STATES THAT SUCH LOSS OR UNABSORBED DEPRECIATION HAS TO BE AS PER TH E BOOKS OF ACCOUNTS AND NOT AS COMPUTED UNDER INCOME TAX ACT, THEREFORE , IN OUR OPINION, SUB- SECTION (5) IS ALSO OF NO HELP TO THE REVENUE. IN A NY CASE, AS UNDERSTOOD, VIDE CBDT CIRCULAR NO.13 OF 2001 DATED 9-11-2001, T HIS CLAUSE APPLIES ONLY FOR PROVISIONS OTHER THAN COMPUTATION AND SINC E THE LOSS OR UNABSORBED DEPRECIATION IS A PART OF THE COMPUTATIO N OF BOOK PROFIT UNDER SECTION 115JB ITSELF, THE PROVISIONS OF SECTION 115 JB(5) WOULD NOT ENROPE OTHER PROVISIONS OF THE ACT. 17 IN OUR CONSIDERED OPINION, THEREFORE, REVENUE AU THORITIES ARE NOT JUSTIFIED IN REDUCING THE LOSS FOR ASSESSMENT YEAR 2000-01 AND EARLIER ASSESSMENT YEARS BY INVOKING SECTION 79 OF THE ACT, WHICH IS A POSITION UNDER THE INCOME TAX ACT, WHEREAS, THE LOWER OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION THAT IS TO BE REDUCED UN DER CLAUSE (III) OF THE ITA NO.41/AHD/2008 10 EXPLANATION, IS TO BE THE AMOUNT AS PER THE BOOKS O F ACCOUNT OF THE ASSESSEE. WE, ACCORDINGLY, REVERSE THE ORDERS OF TH E CIT(A) AS WELL ASSESSING OFFICER AND DIRECT THE AO TO CONSIDER THE LOSS AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE IRRESPECTIVE OF THE FAC T WHETHER THE SAME IS ALLOWABLE OR NOT UNDER SECTION 79 OF THE ACT. 11. THE AFORESAID DECISION WAS FOLLOWED BY THE ITAT IN THEIR ORDER DATED 20-02-2009 WHILE ADJUDICATING A SIMILAR ISSUE IN AY 2002-03 ALSO. 12. IN THE LIGHT OF AFORESAID FINDINGS OF THE IT AT IN THE ASSESSEES OWN CASE FOR THE AYS 2002-03 AND 2003-04, ESPECIALL Y WHEN THE FACTS OBTAINING IN THE YEAR UNDER CONSIDERATION ARE UNDISPUTEDLY SIMILAR TO THE FACTS IN THE AYS 2002-03 AND 2003-04 AND THE REVENUE HAVE NOT PLACED ANY MATERIAL IN ORDER TO E NABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). THEREFORE, GROU ND NO.2 IN THE APPEAL IS ALSO DISMISSED. 13. GROUND NOS.3 AND 4, BEING MERE PRAYER, DO NOT R EQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . 14. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 8-09-2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 8-09-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S FACEL LIMITED [NOW KNOWN AS VODAFONE ESSAR L TD. (GUJARAT)], 6 TH FLOOR, SAKAR-II, ELLIS-BRIDGE, AHMEDABAD 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -8, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII, AHMEDABAD ITA NO.41/AHD/2008 11 5. DR, BENCH-A, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD