M/s. Jaroda Plantations Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4420/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61612 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 04-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: V K GARG S
• Section: 234B; 115JB; 2

Judgement Text

ITA NO. 4420/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4420/DEL/2011 A.Y. : 2005-06 M/S JARODA PLANTATIONS PVT. LTD., A-46, FRIENDS COLONY, NEW DELHI 110 065 (PAN : AAACJ5252A) VS. INCOME TAX OFFICER, WARD 4(2), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. ANIL CHOPRA AND SH. V.K. GARG, ADVOCATES DEPARTMENT BY : MS. Y. KAKKAR, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM PER SHAMIM PER SHAMIM PER SHAMIM YAHYA: AM YAHYA: AM YAHYA: AM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VII, NEW DELH I DATED 28.7.2011 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF ` 35,31,500/- BEING THE AMOUNT OF LONG TERM CAPITAL GAIN ON SALE OF LAND COMPUTED AS PER TH E ITA NO. 4420/DEL/2011 2 PROVISIONS OF THE ACT, IN THE BOOK PROFIT FOR MAT PURPOSES U/S. 115JB OF THE ACT. 2. THAT THE INCOME COMPUTED AS PER THE PROVISIONS OF THE ACT CANNOT BE THE BASIS OF ADDITION TO BOOK PROFIT FOR THE PURPOSES OF MAT U/S. 115JB AS THE SAME IS NOT COVERED UNDER ANY OF THE CLAUSES OF THE EXPLANATION TO SECTION 115JB OF THE ACT. THE ADDITION HAS BEEN CONFIRMED ON ERRONEOUS VIEWS AND / OR NON- APPRECIATION OF THE FACTS AND LAW INVOLVED. THE ADDITION TO BOOK PROFIT AS MADE BY THE ASSESSING OFFICER IS LIABLE TO BE DELETED. 3. THAT THE ADDITIONAL INTEREST U/S. 234A OF ` 1 8665/- AND U/S. 234B OF ` 285234/-. LEVIED BY THE ASSESSI NG OFFICER DESERVES TO BE DELETED OR REDUCED. 4. THAT THE GROUNDS OF APPEAL AS HEREIN ARE WITHOU T PREJUDICE TO EACH OTHER. 5. THAT THE APPELLANT RESPECTFULLY CRAVES LEAVE T O ADD, AMEND, ALTER AND / OR FOREGO ANY GROUND(S) OR BEFOR E THE TIME OF HEARING. 3. IN THIS CASE DURING THE COURSE OF ASSESSMENT ASSE SSEES COUNSEL SUBMITTED BEFORE THE ASSESSING OFFICER THAT LONG TERM CAPITAL GAIN OF ` 33,56,550/- HAS BEEN WORKED OUT UNDER THE PROVIS IONS OF THE ACT AND THE SAME IS NOT THE PROFIT AS PER THE P&L ACCOUNT AS PER THE BOOKS. IT WAS FURTHER SUBMITTED THAT U/S. 115JB OF THE ACT FOR CALCULATING BOOK PROFIT OF A COMPANY, THE PROFIT AND LOSS ACCOUNT IS TO BE PREPARED IN ITA NO. 4420/DEL/2011 3 ACCORDANCE WITH THE PROVISIONS OF PART-II AND PART -III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. HENCE, IT WAS SUBMITTED THA T NO ADJUSTMENT IS PERMISSIBLE WHILE CALCULATING BOOK PROFIT FOR THE PURPOSES OF SECTION 115JB AND PROFIT AS REFLECTED IN THE PROFIT AND LOS S ACCOUNT IS TO BE CONSIDERED AS BOOK PROFIT. ASSESSING OFFICER DID NOT FIND THE ASSESSEES SUBMISSIONS TENABLE. ASSESSING OFFICER OPINED THAT AS PER THE REQUIREMENT OF THE COMPANIES ACT, THE LONG TERM CAPITAL GAINS AS WORKED OUT BY THE ASSESSEE HIMSELF ABOVE AMOUNTING T O ` 35,31,500/- SHOULD HAVE BEEN SHOWN IN THE P&L ACCOUNT BUT THE SA ME WAS NOT DONE FOR THE REASON BEST KNOWN TO THE ASSESSEE. THEREFORE, ASSESSING OFFICER HELD THAT THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. LONG TERM CAPITAL GAIN ON SALE OF LAND AMOUNTING TO ` 35,31,500/- WAS ACCORDINGLY ADDED BACK FOR THE PURP OSE OF COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE IT ACT, 1961. 4. ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF IT AT, SPECIAL BENCH, HYDERABAD IN THE CASE OF RAIN COMMODITIES LTD. VS. DCIT 131 TTJ 514 (HYD.) 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. ITA NO. 4420/DEL/2011 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE HONBLE A PEX COURT IN THE CASE OF APOLLO TYRES LTD. VS. [2002] 255 ITR 273 ( SC), FOR THE PROPOSITION THAT WHILE DETERMINING THE BOOK PROFITS U/S 115J, THE ASSESSING OFFICER COULD NOT RE-COMPUTE THE PROFITS IN THE PROFIT AND LOSS ACCOUNT BY MAKING ADJUSTMENTS. LD. COUNSEL FURT HER REFERRED THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF K INETIC MOTOR CO. LTD. VS. DCIT; C.I.T. VS. HCL COMNET SYSTEMS AND SERVICES LTD. (305 ITR 409 [SC]); MALAYA MANORMA CO. LTD. VS. C.I.T. 300 ITR 0251 (SC); MOSER BAER INDIA LTD. VS. DCIT [2007] 17 SOT 510 (DEL); C.I .T. VS. VIJAYASHREE FINANCE AND INVESTMENT COMPANY (P) LTD. (KER) (216 CTR 191). THE CRUX OF THE LD. COUNSEL OF THE ASSESSEES SUBMISSION IS THAT ASSESSING OFFICER IS NOT PERMITTED TO MAKE ANY CHANGE IN THE PROFIT AND LOSS ACCOUNT WHICH HAS BEEN AUDITED AND CERTIFIED BY THE AUDITORS OF THE COMPANY AND APPROVED IN THE AGM. AS REGARDS THE DEC ISION OF THE ITAT, SPECIAL BENCH RELIED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), LD. COUNSEL SOUGHT TO BRING DISTINCTION BY STATING THAT IN THAT CASE IT WAS UNDISPUTED FACT THAT THE LONG TERM CAPI TAL GAIN EARNED BY THE ASSESSEE WAS INCLUDED IN THE NET PROFIT DETERMIN ED AS PER PROFIT AND LOSS ACCOUNT PREPARED AS PER PART II AND PART II I OF SCHEDULE VI OF ITA NO. 4420/DEL/2011 5 THE COMPANIES ACT AND ASSESSEE SOUGHT EXCLUSION OF T HE SAME IN WHICH THE SPECIAL BENCH HAS HELD THAT WAS NOT PERMIS SIBLE. LD. COUNSEL FURTHER REFERRED THE DECISION OF VIJAYASHRE E FINANCE AND INVESTMENT COMPANY (P) LTD. OF KERALA HIGH COURT WHER EIN IT WAS HELD THAT THE APEX COURT IN THE ABOVE CITED CASE HAS HEL D THAT THE ASSESSING OFFICER , WHILE COMPUTING THE INCOME U/S. 115J OF THE ACT HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN P ROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING I NCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO TH E SAID SECTION. IN THE SAID CASE ONE QUESTION FRAMED BY THE HONBLE HIGH CO URT WAS THAT WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE T HE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PROFIT ON SALE OF LAND C ARRIED TO CAPITAL RESERVE CANNOT BE ADDED TO BOOK PROFIT. THE HIGH COURT HA D ANSWERED THE QUESTION BY UPHOLDING THE ORDER OF THE TRIBUNAL. IT WAS HELD THAT THE PROFIT ON SALE OF LAND CARRIED TO CAPITAL RESERVE C ANNOT BE ADDED TO BOOK PROFIT U/S. 115J. 7. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE DECISION OF THE AUTHORITIES BELOW AND ITAT, SPE CIAL BENCH DECISION RELIED UPON BY THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). ITA NO. 4420/DEL/2011 6 SHE FURTHER REFERRED TO THE DECISION OF THE HONBL E HIGH COURT OF KOLKATA IN THE CASE OF GKW LIMITED VS. C.I.T. VIDE O RDER DATED 13 TH JULY, 2011. IN THIS CASE, THE QUESTION FRAMED WAS WHETHE R THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PROFIT ON SALE OF FIXED ASSETS AMOUNTING TO ` 6,02,91,024/- FORMED PART OF THE BOOK PROFIT UNDER SECTION 115JA OF THE IT ACT, 1961. THE HONBLE COU RT HAS HELD THAT IT IS THE ABSURD TO SUGGEST THAT THE PROFIT ON SALE OF FI XED ASSETS AMOUNTING TO ` 6,02,91,024/- DID NOT FORM PART OF THE BOOK PRO FIT UNDER SECTION 115JA OF THE IT ACT. IT WAS HELD THAT TRIBUNAL RIG HTLY DECIDED THE AFORESAID POINT IN FAVOUR OF THE REVENUE. LD. D EPARTMENTAL REPRESENTATIVE FURTHER RELIED UPON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF SUMMER BUILDERS (P) LTD. DCIT IN ITA NOS. 2512 TO 2514 (MUM) OF 2009 VIDE ORDER DATED 13.1.2012. IN TH IS CASE IT WAS HELD THAT NOT CREDITING PROFIT ON SALE OF SHARES TO PROFIT AND LOSS ACCOUNT WAS CONTRARY TO SIGNIFICANT ACCOUNTING POL ICY OF ASSESSEE ITSELF AS WELL AS REQUIREMENTS OF PARTS II AND II OF SCHEDUL E VI OF COMPANIES ACT, 1956. IT WAS HELD THAT ASSESSING OFFICER HAD RIGHTLY BROUGHT PROFIT ON SALE OF SHARES TO TAXATION UNDER MAT PROVISIONS O F SECTION 115JB. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT LD. COUNSEL OF THE ASSESSE E HAS CITED THE JUDGEMENT FROM KERALA HIGH COURT IN THE CASE OF C.I.T . VS. VIJAYSHREE ITA NO. 4420/DEL/2011 7 FINANCE AND INVESTMENT COMPANY (P) LTD. WHICH MANDATES THAT PROFIT ON SALE OF LAND CARRIED TO CAPITAL RESERVES CANNOT BE ADDED TO BOOK PROFIT U/S. 115J. 9. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND CITED THE JUDGEMENT FROM THE HIGH COURT OF KOLKATA IN THE CASE O F GKW LIMITED VS. C.I.T. WHEREIN VIDE ORDER DATED 13 TH JULY, 2011IT WAS HELD PROFIT ON SALE OF FIXED ASSETS DID NOT FORM PART OF THE BOOK P ROFIT UNDER SECTION 115JA OF THE IT ACT. THUS, WE ARE FACING A SITU ATION, WHERE ONE HIGH COURT DECISION IS IN FAVOUR OF THE ASSESSEE AND ANO THER HIGH COURTS DECISION IS IN FAVOUR OF THE REVENUE. IN SUCH CI RCUMSTANCES, IN OUR CONSIDERED OPINION, THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD. VS. DCIT 131 TTJ 514 (HYD.) WOULD BE APPLICABLE. IN PARA 20 & 22 OF THE SAID DECISION THE SPECIAL BENCH HAS EXPOUNDED AS UNDER:- 20. IT IS EVIDENT FROM ABOVE THAT, THE MOOT QUESTION TH AT NEEDS TO BE DECIDED IS WHETHER PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT PERMITS THE EXCLUSION OF THE CAPITAL GAIN FROM THE PROFIT AND LOSS ACCOUNT OR NOT? IN OTHER WORDS, CAN A PROFIT AND LOSS ACCOUNT DRAWN UP WITH OUT CONSIDERING THE CAPITAL GAIN SAID TO BE IN ACCORDAN CE WITH ITA NO. 4420/DEL/2011 8 THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI O F THE COMPANIES ACT OR NOT?..... 22. THE ISSUE WHETHER CAPITAL GAINS HAD TO BE INCL UDED IN BOOK PROFITS AROSE BEFORE THE BOMBAY HIGH COURT IN T HE CASE OF VEEKAYLAL INVESTMENT CO. (P) LTD. (SUPRA). IN THAT CASE, THE COURT HELD THAT IF FOR COMPUTING THE TOTA L INCOME UNDER THE NORMAL PROVISIONS, THE CAPITAL GAIN COMPU TED UNDER SECTION 45 OF THE ACT HAS TO BE TAKEN INTO AC COUNT, IT WAS NOT UNDERSTOOD HOW IN COMPUTING THE BOOK PROFITS UNDER SECTION 115J OF THE ACT, THE ASSESSEE COULD EXCLUDE CAPITAL GAIN. THE ASSESSEE IS REQUIRED TO TAKE INT O ACCOUNT INCOME BY WAY OF CAPITAL GAIN UNDER SECTION 45 OF THE ACT. IN THE CIRCUMSTANCES, WHILE COMPUTING THE BOOK PROF ITS UNDER THE COMPANIES ACT, THE ASSESSEE HAS TO INCLUDE CAPITAL GAIN FOR COMPUTING THE BOOK PROFITS UNDER SE CTION 115J. EVEN UNDER CLAUSE 3(XII) OF PART II OF SCHED ULE VI TO THE COMPANIES ACT, 1956, PROFITS OR LOSSES IN RESPEC T OF TRANSACTIONS OR TRANSACTIONS OF AN EXCEPTIONAL OR NON- RECURRING NATURE ARE TO BE DISCLOSED. THIS SHOWS C LEARLY THAT CAPITAL GAIN SHOULD BE INCLUDED FOR THE PURPOSES O F COMPUTING BOOK PROFITS. ITA NO. 4420/DEL/2011 9 10. A READING OF THE ABOVE MAKES IT CLEAR THAT THE S PECIAL BENCH HAS EXPOUNDED THAT PROFIT AND LOSS ACCOUNT DRAWN UP WIT HOUT CONSIDERING THE CAPITAL GAIN CANNOT BE SAID TO BE IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III OF THE COMPANIES ACT. IT WAS HELD THAT ASSESSEE IS REQUIRED TO TAKE INTO ACCOUNT INCOME BY WAY OF CAPI TAL GAIN UNDER SECTION 45 OF THE ACT. WHILE COMPUTING THE BOOK PR OFITS UNDER THE COMPANIES ACT, THE ASSESSEE HAS TO INCLUDE CAPITAL G AIN FOR COMPUTING THE BOOK PROFITS UNDER SECTION 115J. THUS, RESPEC TFULLY FOLLOWING THE ITAT, SPECIAL BENCH DECISION CITED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS), ACCORDINGLY, WE UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/4/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 13/4/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY COPY COPY COPY FORWARDED TO: FORWARDED TO: FORWARDED TO: FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES