M/s Foods, Fats & Fertilisers Ltd., Tadepallegudem V. THE Addl. CIT., RAJAHMUNDRY RANGE, Rajahmundry

ITA 491/VIZ/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72696 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A O SAME WAS NOT PRESSED; ACCORDINGLY SAM
• Keywords: Business income; Retrospective amendment; Revised return; Revenue expenditure
• Section: 234B; 115JB; 11

Judgement Text

ITA NO. 491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 491/ VIZAG/ 20 1 2 ASSESSMENT YEAR : 2007 - 08 FOODS, FATS & FERT ILISERS LTD TADEPALLIGUDEM VS. ADDL CIT, RAJAHMUNDRY RANGE RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAACF 2643K ASSESSEE B Y: SHRI C. SUBRAHMANYAM, CA REVENUE B Y: SHRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 09.12.2013 DATE OF PRONO UNCEMENT : 13 .12.2013 ORDER PER B . RAMAKOTAIAH, : - THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE CIT(A) VISAKHAPATNAM DATED 30.8.2012. EVEN THOUGH ASSESSEE HAS RAISED GROUND ON ANOTHER ISSUE OF CLAIM OF REVENUE EXPENDITURE TREATED AS CAPITA L BY THE A.O., THE SAME WAS NOT PRESSED AND ACCORDINGLY THE SAME WAS DISMISSED . 2. THE ONLY GROUND ON WHICH ASSESSEE IS CONTESTING THE PRESENT APPEAL IS CHARGEABILITY OF INTEREST U/S 234B & 234C OF THE INCOME - TAX ACT IN VIEW OF THE RETROSPECTIVE AMENDME NT OF SECTION 115JB BY THE FINANCE ACT 2008 W . E . F . 1.4.2001 BY INSERTING CLAUSE (H) IN EXPLANATION 1 TO SECTION 115JB OF THE ACT REGARDING DIFFERED TAX PROVISIONS. 3. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON DATED 27 TH OCT07 ADMITTING LOSS OF RS.5,85,65,474/ - AND BOOK PROFITS U/S 115 JB AT RS.8,75,60,152/ - . SUBSEQUENTLY ASSESSEE COMPANY FILED REVISED RETURN ON DATED 27 TH SEPTEMBER, 2008 ADMITTING SAME LOSS BUT BOOK PROFITS WAS REVISED TO RS.13,22,31,264/ - FROM THE EARLIER AMOUNT OF RS.8,75, 60,152/ - . THE ENHANCEMENT IN BOOK PROFITS BY RS.4,46,71,112/ - IS ON ACCOUNT OF ADJUSTMENT CARRIED OUT PERTAINING TO DEFERRED TAX KEEPING IN VIEW THE RETROSPECTIVE ITA NO.491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM 2 AMENDMENT OF SECTION 115JB, BY THE FINANCE ACT, 2008, W. E . F. 1.4.01 INSERTING CL AUSE( H ) IN EXPLANATION 1 TO SECTION 115JB. 4. THE ASSESSING OFFICER WHILE ACCEPTING THE REVISED COMPUTATION OF 115JB LEVIED INTEREST U/S 234B & 234 C. IT WAS THE CONTENTION OF ASSESSEE THAT IT CANNOT BE EXPECTED TO IMAGINE THE SUBSEQUENT AMENDMENT AND PAY ADVANCE T AX AND THEREFORE LEVY OF INTEREST U/S 234B & 234 C ARE NOT WARRANTED. AO DID NOT AGREE. THE LD. CIT(A) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ROLTA INDIA LTD. 330 ITR 470, WHEREIN IT WAS HELD THAT INTEREST U/S 234B & 234C CAN BE CH ARGED ON TAX CALCULATED ON BOOK PROFITS, UPHE LD THE AO S ORDER. ACCORDINGLY, ASSESSEE IS AGGRIEVED. 5. THE LD. COUNSEL SUBMITTED THAT VIDE FINANCE ACT, 2008, CL . (H) IN EXPLANATION - 1 TO SEC. 115JB HAS BEEN INSERTED. THEREFORE, THE ASSESSEE COMPANY , WHILE PAYING ADVANCE TAX, COULD NOT TAKE INTO CONSIDERATION CL.(H) TO ADD BACK 'DEFERRED TAX' TO 'BOOK PROFITS'. IT IS THE CASE OF THE ASSESSEE THAT INTEREST LIABILITY U/S.234B, UNDER CONTEST IN THE PRESENT APPEAL, HAD ARISEN BECAUSE OF A PROVISION BRO UGHT INTO STATUTE SUBSEQUENT TO THE PAYMENT OF ADVANCE TAX WITH RETROSPECTIVE EFFECT BY WHICH DEFERRED TAX HAS TO BE ADDED BACK IN COMPUTATION OF THE BOOK PROFITS. IN THIS REGARD LD. COUNSEL RELIED ON THE DECISION OF HON'BLE ITAT BANGALORE BENCH REPORTED IN (2010) 46 DTR 41(BANG) AND SUN PETRO CHEMICAL PVT. LTD. ITA NO.L010/AHD./2009. FURTHER IT WAS SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF MAX INDIA LTD. 295 ITR 282 HAS HELD THAT POSITION OF LAW IS TO BE CONSIDERED AS IT STANDS ON THE DATE WHEN THE ORDER WAS PASSED. IN THIS REGARD IT IS STATED THAT THE ASSESSEE HAS PAID ADVANCE TAX AS PER LAW AS IT STOOD AT THE RELEVANT POINT OF TIME. THEREFORE, THE ASSESSEE CANNOT BE PENALIZED WITH REGARD TO RETROSPECTIVE AMENDMENT BROUGHT IN TO SECTION 11 5JB OF THE I.T. ACT. IT IS SUBMISSION OF THE ASSESSEE THAT THE HON'BLE SUPREME COURT IN THE CASE OF STAR INDIA PVT. LTD. VS COMMR. OF CENTRAL EXCISE REPORTED IN 280 ITR 321 OBSERVED: 'LIABILITY TO PAY INTEREST WOULD ARISE ONLY ON DEFAULT. SUCH LIABILITY ALTHOUGH CREATED RETROSPECTIVELY CAN NOT ENTAIL PUNISHMENT OF PAYMENT OF INT EREST WITH RETROSPECTIVE EFFECT . ITA NO.491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM 3 6. THE LD. COUNSEL FURTHER RELIED ON THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT I N THE CASE OF EMAMI VS. CIT(A.Y 2001 - 02) . THE HON'BLE HIGH COURT AT PARA - 16 OBSERVED THAT ADMITTEDLY THE APPELLANT HAD NO LIABILITY TO PAY ANY AMOUNT OF ADVANCE TAX IN ACCORDANCE WITH THE THEN LAW PREVAILING. IT WAS FURTHER SUBMITTED THAT LEARNED CIT(A) WHILE DISPOSING OFF THE APPEAL RELIED ON THE DECISION OF THE APEX COURT IN ROLTA INDIA LTD. 330 ITR 470 WHEREIN THE HON'BLE APEX COURT HAS HELD THAT INTEREST U/S.2346 & 234C CAN BE CHARGED ON TAX CALCULATED ON BOOK PROFITS. THE SUBMISSION OF ASSESSEE IS THAT THERE IS NO DISPUTE WITH REGARDS TO CHARGE OF INTEREST U/S.234B . THE ASSESSEE GRIEVANCE IN THE PRESENT APPEAL IS THAT IT CANNOT BE PUNISHED FOR A RETROSPECTIVE AMENDMENT BY WHICH TIME THE ADVANCE TAX HAS ALREADY BEEN PAID. THE LEARNED CIT(A) FAILED TO ADDRESS THIS ISSUE. 7 . LD. D.R. HOWEVER, SUPPORTED THE ORDER OF T HE CIT(A) TO SUBMIT THAT IT IS MANDATORY . 8 . W E HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS AS PLACED ON RECORD. THERE IS NO DISPUTE WITH REFERENCE TO THE FACTS THAT ASSESSEE ORIGINALLY HAS FILED 115JB COMPUTATION DECLARING BOOK PROFIT AT RS.8,75,60 ,152/ - . C ONSEQUENT TO THE AMENDMENT BROUGHT LATER ON , THE BOOK PROFIT WAS DECLARED AS RS.13,22,31,264/ - BY ADDING BACK THE DIFFERED TAX OF RS.4 , 46 , 71 , 112/ - . THESE FACTS CAN BE NOTICED IN THE ASSESSMENT ORDER AS WELL AS FROM CIT(A)S ORDER. IT IS ALSO A FACT THAT PROVISIONS OF SECTION 115JB WERE AMENDED BY FINANCE A C T , 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.2001. THIS ISSUE WAS CONSIDERED BY THE COORDINATE BENCH AT CHENNAI IN THE CASE OF JSW STEEL LTD. VS. ACIT 5 ITR (TRIB) 31 , WHERE IT IS HELD THAT ASSE SSEE WAS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT ON THE INCREMENTAL AMOUNT OF TAX COMPUTED U/S 115JB WHICH AROSE DUE TO RETROSPECTIVE AMENDMENT IN 115JB REQUIRING BOOK PROFIT TO BE INCREASED BY PROVISION FOR DE FER R ED TAX. FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF STAR INDIA PVT. LTD. VS. COMMISSIONER OF CENTRAL EXCISE 280 ITR 321 (SC) , T HE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EMAMI LTD. VS. CIT IN ITA NO.199 OF 2006 DATED 17.6.2011 CONSIDERED SIMILAR ISSUE AS UNDER: ITA NO.491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM 4 IN THE CASE BEFORE US, THE LAST DATE OF THE RELEVANT FINANCIAL YEAR WAS MARCH 31, 2001 AND ON THAT DAY, ADMITTEDLY, THE APPELLANT HAD NO LIABILITY TO PAY ANY AMOUNT OF ADVANCE TAX IN ACCORDANCE WITH THE THEN LAW PREVAILING IN THE COUNTRY. CONSEQUENTLY, TH E APPELLANT PAID NO ADVANCE TAX AND SUBMITTED ITS REGULAR RETURN ON OCTOBER 31, 2001 WITHIN THE TIME FIXED BY LAW WHEREIN IT DECLARED ITS TOTAL INCOME AND THE BOOK PROFIT BOTH AS NIL. HOWEVER, CONSEQUENT TO THE AMENDMENT OF THE PROVISIONS CONTAINED IN SECT ION 115JB OF THE ACT BY VIRTUE OF FINANCE ACT, 2002 WHICH WAS PUBLISHED IN THE OFFICIAL GAZETTE ON MAY 11, 2002 GIVING RETROSPECTIVE EFFECT TO THE AMENDMENT FROM APRIL 1, 2001, THE APPELLANT FIRST VOLUNTARILY PAID A SUM OF RS.1,55,62,5117 - ON ACCOUNT OF THE TAX PAYABLE ON BOOK PROFIT AS PROVIDED IN AMENDED PROVISION OF SECTION 115 JB AND THEN FILED ITS REVISED RETURN OF MARCH 31, 2003 DECLARING ITS BUSINESS INCOME AS NIL BUT THE BOOK PROFIT UNDER SECTION 115JB AS RS.20,63,65,711/ - . THE ASSESSING OFFICER ACCE PTED SUCH RETURN OF INCOME BUT IMPOSED INTEREST UNDER SECTION 234B AND 234C OF THE ACT AMOUNTING TO RS.44,00,937/ - AND RS.11,78,960/ - RESPECTIVELY. IN OUR OPINION, THE AMENDED PROVISION OF SECTION 115JB HAVING COME INTO FORCE WITH EFFECT FROM APRIL 1, 2001 , THE APPELLANT CANNOT BE HELD DEFAULTER OF PAYMENT OF ADVANCE TAX. AS POINTED OUT EARLIER, ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR, AS THE BOOK PROFIT OF THE APPELLANT IN ACCORDANCE WITH THE THEN PROVISION OF LAW WAS NIL, WE CANNOT CONCEIVE OF ANY 'ADVANCE TAX' WHICH IN ESSENCE IS PAYABLE WITHIN THE LAST DAY OF THE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR AS PROVIDED IN SECTIONS 207 AND 208 OR 17 WITHIN THE DATES INDICATED IN SECTION 211 OF THE ACT WHICH I NEVITABLY FALLS WITHIN THE LAST DATE OF FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR. CONSEQUENTLY, THE ASSESSEE CANNOT BE BRANDED AS A DEFAULTER IN PAYMENT OF ADVANCE TAX AS MENTIONED ABOVE. AT THIS STAGE, WE MAY PROFITABLY RELY UPON THE OBSERVA TIONS OF THE SUPREME COURT IN THE CASE OF STAR INDIA P. LTD VS. COMMISSIONER OF CENTRAL EXCISE, REPORTED IN (2006) 280 ITR 321, STRONGLY RELIED UPON BY MR. BAJORIA, WHERE THE APEX COURT IN THE CONTEXT OF IMPOSITION OF SERVICE TAX BY THE FINANCE ACT, 2002 W ITH RETROSPECTIVE EFFECT HELD THAT THAT THE LIABILITY TO PAY INTEREST WOULD ARISE ONLY ON DEFAULT AND IS REALLY IN THE NATURE OF QUASI - PUNISHMENT AND THUS, ALTHOUGH THE LIABILITY TO PAY TAX AROSE DUE TO RETROSPECTIVE EFFECT OF LAW, SAME SHOULD NOT ENTAIL T HE PUNISHMENT OF PAYMENT OF INTEREST. ALTHOUGH MR. NIZAMUDDIN, THE LEARNED COUNSEL APPEARING ON BEHALF OF THE REVENUE, IN THIS CONNECTION, STRONGLY RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF JOINT COMMISSIONER OF INCOME TAX VS. ROLTA INDI A LTD., REPORTED IN (2011) 330 ITR 470, WE FIND THAT IN THAT CASE THE QUESTION WAS WHETHER INTEREST UNDER SECTION 234B OF THE ACT COULD BE CHARGED ON THE TAX CALCULATED ON THE BOOK PROFIT UNDER SECTION 115JA AND IN OTHER WORDS, WHETHER ADVANCE TAX WAS AT A LL PAYABLE ON BOOK PROFITS UNDER SECTION 115JA OF THE ACT. THE SUPREME COURT ANSWERED THE SAID QUESTION IN THE AFFIRMATIVE AND FURTHER HELD THAT THE PROVISIONS OF INTEREST ON DEFAULT AS PROVIDED IN SECTIONS 234B AND 234C WOULD ALSO APPLY. WE HAVE ALREADY P OINTED OUT THAT MR. BAJORIA, AT THE VERY OUTSET, CONCEDED THAT THE SAID DECISION SHOULD BE APPLIED FOR ANSWERING THE FIRST QUESTION FORMULATED IN THIS APPEAL AGAINST HIS CLIENT. IN OUR OPINION, THE SAID DECISION IS NOT RELEVANT FOR CONSIDERING THE SECOND A ND THE THIRD QUESTIONS AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE A DEFAULTER IN PAYMENT OF ADVANCE TAX IF HE HAD NO LIABILITY TO MAKE PAYMENT OF SUCH TAX ON THE LAST DATE OF A FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR AS SUCH QUESTION DID NOT ARISE IN THE SAID CASE BEFORE THE SUPREME COURT. IT APPEARS THAT THE LEARNED ITA NO.491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM 5 TRIBUNAL HAS NOT AT ALL CONSIDERED THE AFORESAID ASPECT AS TO THE LIABILITY OF THE ASSESSEE TO MAKE PAYMENT OF THE ADVANCE TAX ON THE LAST DAY OF THE FINANCIAL YEAR I.E. MARCH 31 , 2001 WHEN ITS BOOK PROFIT WAS NIL ACCORDING TO THE THEN LAW OF THE LAND. THE VARIOUS DECISIONS OF THE OTHER HIGH COURTS AND THE TRIBUNALS RELIED UPON BY THE TRIBUNAL DID NOT EFFECTIVELY CONSIDER THE QUESTION WHETHER EVEN IN A CASE LIKE THE PRESENT ONE WH ERE ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD NO LIABILITY TO PAY ADVANCE TAX, HE WOULD BE NEVERTHELESS ASKED TO PAY INTEREST IN TERMS OF SECTION 234B AND SECTION 234C OF THE ACT FOR DEFAULT IN MAKING P AYMENT OF TAX IN ADVANCE WHICH WAS PHYSICALLY IMPOSSIBLE. WE, THEREFORE, PARTLY ALLOW THE APPEAL BY ANSWERING THE FIRST QUESTION IN THE AFFIRMATIVE AND AGAINST THE ASSESSEE AND THE SECOND AND THE THIRD QUESTIONS IN THE NEGATIVE AND AGAINST THE REVENUE. 9 . IN VIEW OF THE ABOVE PRINCIPLES LAID DOWN, RESPECTFULLY FOLLOWING THE SAME , WE HAVE NO HESITATION IN HOLDING THAT ASSESSEE IS NOT LIABLE TO PAY INTEREST ON THE INCREMENTAL TAX LIABILITY CONSEQUENT TO ADDITION OF DE FERRED TAX AMOUNT , AS THERE W AS NO LIAB ILITY TO ADVANCE TAX AT THE RELEVANT POINT OF TIME. IN VIEW OF THIS, ASSESSEES GROUNDS ON THIS ISSUE ARE CONSIDERED ALLOWED. AO IS DIRECTED TO WORK OUT THE INTEREST ACCORDINGLY BY EXCLUDING THE INCREMENTAL TAX AMOUNT ON DEF ER R ED TAX THAT WAS ADDED FROM THE COMPUTATION OF TAX LIABILITY FOR THE PURPOSE OF WORKING OUT INTEREST U/S 234B & 234 C. IN CASE ASSESSEE IS LIABLE FOR INTEREST U/S 234B & 234 C , IF THERE IS ANY SHORTFALL ON THE ORIGINAL INCOME DECLARED , THIS ORDER DOES NOT LIMIT THE SAME. AO IS DIRECT ED TO CONSIDER THE CALCULATION OF INTEREST ONLY TO THE EXTENT OF D EF ER R ED TAX WHICH IS THE SUBJECT MATTER OF THIS APPEAL. THE GROUNDS ARE CONSIDERED ALLOWED ACCORDINGLY. 10 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT O N 13 TH DEC 13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER , 20 1 3 ITA NO.491/VIZAG/2012 FOODS, FATS & FERTLISERS LTD., TADEPALLIGUDEM 6 COPY TO 1 FOODS, FATS & FERTILIZERS LTD., TANUKU ROAD, TADEPALLIGUDEM, W.G. DI ST. 2 ADDL. CIT, RAJAHMUNDRY RANGE, RAJAHMUNDRY 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE T RIBUNAL VISAKHAPATNAM