DCIT-2(1)(1), MUMBAI V. BOBCARDS LIMITED, MUMBAI

ITA 4297/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6713 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SINGH LD
• Assessee Lawyers: H N MOTIWALA; DALPAT SHAH LD ARS
• Keywords: Rule of consistency; Retrospective amendment; Revised return; TDS; Set aside
• Section: 143(3); 115JB; 139(5)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4485/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) BOBCARDS LIMITED BARODA HOUSE BEHIND DEWAN SHOPPING CENTRE S.V. ROAD, JOGESHWARI (WEST) MUMBAI-400 102. / VS. ACIT - 2(1)(1) AAYKAR BHAWAN M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AAACB-1989-L ( /APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO.4297/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) D CIT - 2(1)(1) AAYKAR BHAWAN ROOM NO. 561, 5 TH FLOOR M.K. ROAD MUMBAI-400 020. / VS. BOBCARDS LIMITED BARODA HOUSE BEHIND DEWAN SHOPPING CENTRE S.V. ROAD, JOGESHWARI (WEST) MUMBAI-400 102. ./ ./PAN/GIR NO. AAACB-1989-L ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI H.N. MOTIWALA & SHRI DALPAT SHAH - LD. ARS REVENUE BY : SHRI M.K. SINGH - LD.DR !' / DATE OF HEARING 21/02/2019 !' / DATE OF PRONOUNCEMENT 07/05/2019 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID CROSS APPEALS FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS)-3 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-3/IT-2/ACIT-2(1)(1)/16-17 DATED 29/03/2017. THE GROUNDS RAISED BY REVENUE READS AS UNDER: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE TAX DEDUCTED ON THE SERVICE C HARGES PAID FOR THE SERVICES PROVIDED BY VISA/MASTER CARD INTERNATIONAL, IGNORIN G THE PERTINENT FACT THAT THIS PAYMENT WAS NOT AND EXPENDITURE IN THE HANDS OF THE ASSESSEE AND HAD NOT INCURRED FOR THE PURPOSE OF THE ASSESSEES BUSINESS AND CONSEQUENTLY, THE TDS PAID WAS NOT AN ALLOWABLE DEDUCTION. THE GROUNDS RAISED BY ASSESSEE READS AS UNDER: - 1.ADDITION OF WRITEBACK OF PROVISION FOR NPA IN TH E COMPUTATION OF BOOK PROFIT U/S115JB. 1.1 THE COMMISSIONER OF INCOME TAX (APPEALS)-3 , MUMBAI, ERRED IN UPHOLDING THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.3, 63,37,431/- BEING PROVISION FOR CARD RECEIVABLE (NPA) WRITTEN BACK WHILE COMPUTING BOOK PROFIT U/S 115JB IGNORING THE FACT THAT THE SAID WRITE BACK OF THE PROVISION WAS MADE OUT OF THE PROVISIONS OF RS.34,49,82,447/- MADE IN THE PREVIOUS YEAR RELEVAN T TO A/Y:2007-08 AS PROVIDED IN CLAUSE (I) TO THE EXPLANATION 1 TO SEC 115JB. 1.2 THE SAID CIT(A) ERRED IN UPHOLDING THE VIE W OF THE AO THAT THE PROVISION OF RS.3,63,37,431/- WHICH WAS WRITTEN BACK DURING A/Y 2012-13 WAS NOT OUT OF THE - PROVISION OF RS.34,49,82,4477- ADDED BACK IN THE CO MPUTATION OF BOOK PROFIT IN THE A/Y-.2007-08. THE SAID CIT(A) ERRED IN NOT CONSIDER ING THE FACT THAT THE SAID PROVISION FOR CARD RECEIVABLE IS IN THE NATURE OF ' DIMINUTION IN THE VALUE OF ASSETS AND ANY ADDITION OF THE SAME WAS NOT REQUIRED TO BE MADE TO THE BOOK PROFIT U/SEC 115JB FOR A/Y:2007-08 ACCORDING TO THE LAW AS IT STAND IN THAT YEAR AND SEC. 115JB WAS AMENDED BY THE FINANCE (NO:2) ACT, 2009 W ITH RETROSPECTIVE EFFECT FROM A/Y:2001-02 BY INSERTION OF CLAUSE (I) IN THE EXP LANATION 1 TO SECTION 115JB. 1.3 WITHOUT PREJUDICE TO THE ABOVE, THE SAID C IT(A) ALSO ERRED IN NOT CONSIDERING THE FACT THAT IN THE A/Y-.2007-08 THERE WAS A LOSS OF RS.46,01,10,184/- AS PER BOOKS AND THAT EVEN IF THE PROVISION OF RS.34,49,82,447/- MADE FOR CARD RECEIVABLE WAS ADDED BACK IN THAT YEAR THERE WAS STILL A LOSS OF R S.11,51,27,737/-. THEREFORE, THE PROVISION MADE IN A/Y:2007-08 SHOULD BE DEEMED TO H AVE BEEN DISALLOWED IN THE COMPUTATION OF BOOK PROFIT. THE APPELLANT, THEREFOR E, SUBMITS THAT WHEN PART OF THE PROVISION MADE IN A/Y: 2007-08 WHICH WAS DEEMED TO HAVE BEEN DISALLOWED WAS WRITTEN BACK IN A/Y:2012-13 THE SAME HAS TO BE REDU CED WHILE COMPUTING BOOK PROFIT FOR A/Y 2012-13. 2.INTEREST CHARGED U/S 234B. 234C AND 234D 3 THE SAID CIT(A) ERRED IN UPHOLDING THE CHARGE OF IN TEREST U/S 234B, U/S 234C AND U/S 234D WHEN NO SUCH INTEREST WAS CHARGEABLE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY, DELETE AND/OR CHANGE ALL OR ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING. 2.1 THE ASSESSEE BEING NON-BANKING FINANCIAL COMPANY IS STATED TO BE ENGAGED IN THE BUSINESS OF CREDIT CARD OPERATIONS A ND FINANCING PAYMENTS THROUGH CREDIT CARDS AND DEBIT CARD MANAGE MENT. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSIST ANT COMMISSIONER OF INCOME TAX-CIRCLE 2(1)(1), MUMBAI [ AO] U/S. 143(3) ON 07/03/2015. THE FOLLOWING QUANTUM ADDITIONS / ADJUS TMENTS AS MADE BY LD. AO ARE THE SUBJECT MATTER OF CROSS-APPEALS BEFO RE US: - NO. NATURE OF ADDITION AMOUNT RS. (ROUNDED OFF) 1. TDS DEPOSITED FOR PAYMENT MADE TO VISA / MASTER CARD DISALLOWED WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS RS.44.13 LACS 2. DISALLOWANCE OF PROVISION WRITE-BACK ADDED WHI LE COMPUTING INCOME U/S 115JB RS.363.37 LACS THE LD. FIRST APPELLATE AUTHORITY HAS PARTLY ALLOWE D ASSESSEES APPEAL BY DELETING THE DISALLOWANCE LISTED AT SERIAL NO. 1 BU T CONFIRMED THE ADDITIONS MADE BY LD. AO U/S 115JB. THE SAME HAS GI VEN RISE TO PRESENT CROSS-APPEALS BEFORE US. 2.2 SO FAR AS THE GROUNDS RAISED BY REVENUE IS CONC ERNED, IT IS UNDISPUTED POSITION THAT THE SAME STOOD COVERED IN ASSESSEES FAVOR BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CAS E RIGHT FROM AYS 2003-04 ONWARDS TILL AY 2011-12, THE COPIES OF WHIC H HAVE BEEN PLACED ON RECORD. THE LD. FIRST APPELLATE AUTHORITY HAS PR OVIDED RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THI S TRIBUNAL RENDERED FOR AYS 2003-04 TO 2005-06. NOTHING ON RECORD SUGGE ST THAT THERE WAS ANY CHANGE IN MATERIAL FACTS OR CIRCUMSTANCES AND T HE AFORESAID RULINGS 4 WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT AY. THEREFORE, NO INFIRMITY COULD BE FOUND IN THE IMPUGNED ORDER. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISSED. 3.1 FACTS QUA THE ASSESSEES GRIEVANCE ARE THAT DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE, WHILE COMPUTING BOOK PROFITS U/S. 115JB, REDUCED PROVISIONS OF CARD RECEIVABLES W/BACK [IN SHORT WRITE-BACK] AMOUNTING TO RS.363.37 LACS. HO WEVER, IT WAS NOTED THAT THE PROVISIONS OF CARD RECEIVABLES WAS NOT ADDED BACK IN THE COMPUTATION OF BOOK PROFITS U/S 115JB IN EARLIER YEARS I.E. A.YS. 2007-08 TO 2010-11 WHEN THE PROVISION WAS MADE. ACCORDINGLY , THE ASSESSEE WAS ASKED TO JUSTIFY THE SAME. 3.2 THE ASSESSEE, VIDE REPLY DATED 27/02/2015, SUBM ITTED THAT THE AFORESAID PROVISION WAS MADE DURING AYS 2007-08 TO 2010-11 AND THE SAME WAS VOLUNTARILY DISALLOWED WHILE COMPUTING INC OME UNDER NORMAL PROVISIONS. IT WAS POINTED OUT THAT DURING ALL THES E YEARS, THE COMPANY WAS INCURRING BUSINESS LOSSES AND THEREFORE, THE BOOK PROFITS WERE SHOWN AS NIL WITHOUT MAKING ANY ADJUSTMENTS U/S 115JB AS IT WOU LD HAVE NO IMPACT ON THE TAX LIABILITY OF THE ASSESSEE . THE ATTENTION WAS ALSO DRAWN TO THE FACT THAT SECTION 115JB WAS AMEND ED BY THE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM AY 2001-02 IN VIEW OF THE DECISION OF APEX COURT RENDERED IN CIT VS. HCL COMMET SYSTEMS & SERVICES LTD. [305 ITR 409]. BY THE AMENDMENT, CLAUSE (I) WAS ADDED IN EXPLANATION 1 TO SECTION 115JB WITH RETROSPECTIVE E FFECT FROM AY 2001- 02. THE SAID CLAUSE PROVIDED THAT THE BOOK PROFITS WERE TO BE INCREASED BY THE AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTIO N IN THE VALUE OF ANY ASSET. THEREFORE, BY VIRTUE OF THE RETROSPECTIVE AM ENDMENT, THE AFORESAID 5 PROVISIONS WERE DEEMED TO BE ADDED BACK TO BOOK PROFITS U/S 115JB IN ALL THE EARLIER ASSESSMENT YEARS. THE SUBMISSIONS W ERE SUPPORTED BY THE FACT THAT IN ASSESSMENTS MADE U/S 143(3) FOR EARLIE R YEARS, NO WORKING OF BOOK PROFIT U/S 115JB WAS MADE. THE PROVISIONS MADE FROM AYS 2 007- 08 TO 2010-11 WERE TABULATED AND THE REVISED WORKIN G OF BOOK PROFITS U/S 115JB WAS PLACED ON RECORD TO SUBMIT THAT EVEN AFTE R ADDING BACK THE STATED PROVISIONS IN BOOK PROFITS , THE RESULTANT FIGURE WOULD STILL BE A LOSS WHICH WOULD HAVE NO IMPACT ON TAX LIABILITY OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE WRITE-BACK OF RS.363.37 LACS HAVE COME OUT OF PROVISIONS OF RS.3449.82 LACS MADE IN AY 2007-08 AN D THEREFORE, THE WRITE-BACK WAS RIGHTLY DEDUCTED WHILE COMPUTING BOOK PROFITS OF THE IMPUGNED AY. 3.3 HOWEVER, THE AFORESAID SUBMISSIONS COULD NOT FI ND FAVOR WITH LD. AO WHO OPINED THAT SINCE THE BOOK PROFITS OF AYS 20 07-08 TO 2010-11 WERE NOT INCREASED BY THE PROVISIONS, THE WRITE-BAC K COULD NOT BE ALLOWED AS DEDUCTION IN THE IMPUGNED AY. RESULTANTL Y, REJECTING THE ASSESSEES SUBMISSIONS, THE BOOK PROFITS WERE INCREASED TO THAT EXTENT. THE STAND OF LD. AO, UPON CONFIRMATION BY LD. FIRST APPELLATE AUTHORITY, IS UNDER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], DRAWING OUR ATTENTION TO THE WORKINGS / DOCUMENTS PLACED IN THE PAPER-BOOK, REITERATED THE SUBMISSIONS AS MADE BEFORE LD. AO AN D SUBMITTED THAT THE WRITE-BACKS WERE MADE OUT OF PROVISIONS CREATED IN AY 2007-08 AND THEREFORE, THE SAME WAS RIGHTLY CLAIMED AS DEDUCTIO N. THE LD. DR DREW OUR ATTENTION TO STATUTORY PROVISION OF SECTION 115 JB TO SUBMIT THAT THE 6 ASSESSEE DID NOT FULFIL THE CONDITION OF CLAIMING T HE WRITE-BACK AS DEDUCTION. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDI CIAL PRONOUNCEMENTS AS CITED BEFORE US. THE BASIC FACTS ARE NOT UNDER D ISPUTE. SO FAR AS THE NATURE OF PROVISIONS OF CARD RECEIVABLES IS CONCERN ED, WE FIND THAT HONBLE APEX COURT HAS SUCCINCTLY CARVED OUT THE FI NE DISTINCTION BETWEEN DEBTS PAYABLE BY THE ASSESSEE VIS--VIS DEBTS RECEIVABLE BY THE ASSESSEE IN THE CITED CASE OF CIT VS. HCL COMMET SYSTEMS & SERVICES LTD. [305 ITR 409] IN THE FOLLOWING MANNER: - AS STATED ABOVE, THE SAID EXPLANATION HAS PROVIDED SIX ITEMS, I.E., ITEM NOS.(A) TO (F) WHICH IF DEBITED TO THE PROFIT AND L OSS ACCOUNT CAN BE ADDED BACK TO THE NET PROFIT FOR COMPUTING THE BOOK PROFI T. IN THIS CASE, WE ARE CONCERNED WITH ITEM NO. (C) WHICH REFERS TO THE PRO VISION FOR BAD AND DOUBTFUL DEBT. THE PROVISION FOR BAD AND DOUBTFUL DEBT CAN B E ADDED BACK TO THE NET PROFIT ONLY IF ITEM (C) STANDS ATTRACTED. ITEM (C) DEALS WITH AMOUNT(S) SET ASIDE AS PROVISION MADE FOR MEETING LIABILITIES, OTHER TH AN ASCERTAINED LIABILITIES. THE ASSESSEE'S CASE WOULD, THEREFORE, FALL WITHIN THE A MBIT OF ITEM (C) ONLY IF THE AMOUNT IS SET ASIDE AS PROVISION; THE PROVISION IS MADE FOR MEETING A LIABILITY; AND THE PROVISION SHOULD BE FOR OTHER THAN ASCERTAI NED LIABILITY, I.E., IT SHOULD BE FOR AN UNASCERTAINED LIABILITY. IN OTHER WORDS, ALL THE INGREDIENTS SHOULD BE SATISFIED TO ATTRACT ITEM (C) OF THE EXPLANATION TO SECTION 115JA. IN OUR VIEW, ITEM (C) IS NOT ATTRACTED. THERE ARE TWO TYPES OF ' DEBT'. A DEBT PAYABLE BY THE ASSESSEE IS DIFFERENT FROM A DEBT RECEIVABLE BY THE ASSESSEE. A DEBT IS PAYABLE BY THE ASSESSEE WHERE THE ASSESSEE HAS TO P AY THE AMOUNT TO OTHERS WHEREAS THE DEBT RECEIVABLE BY THE ASSESSEE IS AN AMOUNT WHICH THE ASSESSEE HAS TO RECEIVE FROM OTHERS. IN THE PRESENT CASE 'DEBT' UNDER CONSIDERATION IS 'DEBT RECEIVABLE' BY THE ASSESSEE. THE PROVISION FOR BAD AND DOUBTFUL DEBT, THEREFORE, IS MADE TO COVER UP THE P ROBABLE DIMINUTION IN THE VALUE OF ASSET, I.E., DEBT WHICH IS AN AMOUNT RECEI VABLE BY THE ASSESSEE. THEREFORE, SUCH A PROVISION CANNOT BE SAID TO BE A PROVISION FOR LIABILITY, BECAUSE EVEN IF A DEBT IS NOT RECOVERABLE NO LIABIL ITY COULD BE FASTENED UPON THE ASSESSEE. IN THE PRESENT CASE, THE DEBT IS THE AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PAYABLE BY THE ASSES SEE AND, THEREFORE, ANY PROVISION MADE TOWARDS IRRECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE, IN OUR VIEW ITE M (C) OF THE EXPLANATION IS NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. IN THE CIRCUMSTANCES, THE AO WAS 7 NOT JUSTIFIED IN ADDING BACK THE PROVISION FOR DOUB TFUL DEBTS OF RS.92,15,187/- UNDER CLAUSE (C) OF THE EXPLANATION TO SECTION 115J A OF THE 1961 ACT. WITH A VIEW TO OVERCOME THE SAME, CLAUSE (I) WAS AD DED TO EXPLANATION- 1 TO SECTION 115JB WITH RETROSPECTIVE EFFECT FROM A Y 2001-02 VIDE FINANCE (NO.2) ACT, 2009 WHICH PROVIDED THAT THE BOOK PROFITS SHOULD BE INCREASE BY THE AMOUNT SET ASIDE AS PROVISION FOR D IMINUTION IN THE VALUE OF ANY ASSET. IT IS UNDISPUTED FACT THAT THE ASSESS EE HAD FILED RETURN OF INCOME FOR AY 2007-08 MUCH BEFORE THE DATE OF THE S AID AMENDMENT AND THEREFORE, THE SAID AMENDMENT COULD NOT BE GIVE N EFFECT TO BY FILING REVISED RETURN OF INCOME U/S 139(5) WHICH ALREADY E XPIRED ON 31/03/2009. 5.2 PROCEEDINGS FURTHER, IT IS ALSO AN UNDISPUTED F ACT THAT THE WRITE-BACK OF RS.363.37 LACS HAS BEEN MADE OUT OF PROVISIONS O F RS.3449.82 LACS MADE IN AY 2007-08. NOTHING ON RECORD CONTROVERT TH E AFORESAID FACT. WE FIND THAT IN AY 2007-08, THE ASSESSEE HAD BOOK LOSSES OF RS.4601.10 LACS AND EVEN AFTER ADDING BACK THE SAID PROVISIONS AS ENVISAGED BY THE AMENDMENT, THE RESULTANT FIGURE WO ULD HAVE STILL BEEN A NEGATIVE FIGURE AND THE ASSESSEE WOULD NOT HAVE A NY LIABILITY TO PAY TAX U/S 115JB. THEREFORE, WE FIND SUBSTANTIAL FORCE IN THESE ARGUMENTS RAISED BY LD. AR BEFORE US. 5.3 LASTLY, IT IS ALSO EVIDENT FROM ASSESSMENT ORDE R DATED 27/01/2014 OF IMMEDIATELY PRECEDING AY 2011-12 THAT SIMILAR TR EATMENT GIVEN BY THE ASSESSEE TO WRITE-BACK OF RS.1899.12 LACS IN THAT Y EAR HAS BEEN ACCEPTED BY THE REVENUE SINCE NO COMPUTATION OF BOOK PROFIT HAS BEEN MADE IN THE ASSESSMENT ORDER. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE ASSESSEES CLAIM WAS TO BE ACCEPTE D, THERE BEING NO CHANGE IN FACTUAL MATRIX. 8 5.4 BEARING IN MIND THE AFORESAID FACTUAL MATRIX, W E ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENTITLED F OR DEDUCTION OF WRITE- BACK WHILE COMPUTING BOOK PROFITS U/S 115JB FOR THE IMPUGNED AY. WE ORDER SO. GROUND NO. 1 STAND ALLOWED. 5.5 GROUND NO. 2 CONTEST LEVY OF INTEREST U/S 234. THE SAME BEING CONSEQUENTIAL AND MANDATORY WOULD REQUIRE NO ADJUDI CATION ON OUR PART. GROUND NO. 3 IS GENERAL IS NATURE. 6. THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. CONCLUSION 7. THE REVENUES APPEAL STANDS DISMISSED WHEREAS TH E ASSESSEES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH MAY, 2019 SD/- SD/- (PAWAN SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % MUMBAI; DATED : 07/05/2019 SR. PS : JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. & ''() , ) , / DR, ITAT, MUMBAI 6. ' +,- / GUARD FILE / BY ORDER, / % (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.