M/s Morya Steel Ltd., Indore V. The Dy. Commissioner of Income Tax 1(1), Indore

ITA 466/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53915 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: C RAWKA
• Keywords: Share purchase agreement
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCM2051K I.T.A.NO. 466/IND/2010 A.Y. : 2007-08 M/S. MOIRA STEEL LIMITED, DY. CIT, 1(1), 103, LAXMI TOWER, VS INDORE. 576, M. G. ROAD, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI C. RAWKA, FCA RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 17.08.2011 DATE OF PRONOUNCEMENT : 29.09.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, INDORE, DATED 03.05.2010 FOR THE ASSE SSMENT YEAR 2007-08. 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN LAW AND THE FACTS OF THE CASE IN CO NFIRMING THE -: 2: - 2 ASSESSED BOOK PROFIT U/S 115JB AT RS. 39,26,942/- B Y THE AO INSPITE OF THE FACT THAT THE ASSESSEE COMPANY STILL IN THE BIFR AND HAVING A NEGATIVE NET WORTH. THE CALCULATION OF BOOK PROFIT U/S 115JB MADE BY THE AO AND CONFIRMED BY THE LD. C IT(A) IS TOTALLY WRONG AND ILLEGAL ON THE FACTS OF THE CASE. 3. THE FACTS ARE THAT THE ASSESSEE CLAIMED THAT THE COMPANY IS NOT LIABLE FOR TAX U/S 115JB BEING BIFR REGISTERED COMPANY. THE CLAIM OF THE APPELLANT WAS NOT FOUND T ENABLE BY THE ASSESSING OFFICER IN VIEW OF CLAUSE (VII) OF SE CTION 2 OF SECTION 115JB OF THE ACT AS PER WHICH A COMPANY IS EXEMPT FROM MAT WHEN ITS NET WORTH IS NOT POSITIVE. THE AO WORKED OUT THE NET WORTH IN THE ORDER ITSELF WHICH IS POSI TIVE AND HENCE THE AO WORKED OUT THE BOOK PROFIT U/S 115JB A T RS. 39,26,943/-. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE AOS ACTION AGAINST WHICH THE ASSESSEE IS IN FURTHE R APPEAL BEFORE US. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS REGISTERED UNDER BIFR HAVING NEGATIVE N ET -: 3: - 3 WORTH. BY ADDING THE SHARE APPLICATION MONEY RECEIV ED DURING THE YEAR, THE AO INCREASED THE NET WORTH BY SHARE A PPLICATION MONEY, WHICH RESULTED INTO POSITIVE NET WORTH. THE MONEY RECEIVED ON SHARE APPLICATION WAS STANDING IN THE A CCOUNT OF SHARE APPLICATION MONEY AND NO SHARE CERTIFICATES W ERE ISSUED FOR THE SAME TILL END OF THE RELEVANT FINANCIAL YEA R. UNLESS SHARES ARE ISSUED, THE SHARE APPLICATION MONEY CANN OT BE TAKEN INTO ACCOUNT FOR INCREASING THE NET WORTH. WI THOUT CONSIDERING THE SHARE APPLICATION MONEY, THE NET WO RTH OF ASSESSEE WAS NEGATIVE. AN INDUSTRIAL COMPANY HAVING NEGATIVE NET WORTH IS EXCLUDED FROM THE PROVISIONS OF SECTIO N 115JB. AS PER CLAUSE (VII) OF SUB SECTION (2) OF SECTION 115J B, A COMPANY IS EXEMPT FROM MAT WHEN NET WORTH IS NOT POSITIVE. RELEVANT CLAUSE (VII) READS AS UNDER :- (VII) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER -: 4: - 4 SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986), AND ENDING WITH ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE, NET WORTH SHALL HAVE THE MEANING ASSIGNED TO ITS IN CLAUSE (GA) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 ( 1 OF 1986). 6. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IS NOT GOING TO INCREASE ITS NET WORTH TILL THE SHARE CERTIFICAT ES ARE ISSUED AND SHARES ARE ALLOTTED TO RESPECTIVE APPLICANT. AC CORDINGLY, AT THE END OF THE YEAR, THE NET WORTH OF THE ASSESSEE COMPANY WAS NEGATIVE, THEREFORE, NOT LIABLE TO MAT. 7. IN VIEW OF THE ABOVE, THE AO WAS NOT JUSTIFIED IN L EVYING TAX ON ITS BOOK PROFIT. -: 5: - 5 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH SEPTEMBER, 2011. CPU* 289