THE ADIT (IT)-3(2), MUMBAI V. M/S. BESIX KIER DABHOL S.A.-INDIA PROJECT OFFICE, MUMBAI

ITA 4977/MUM/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6193 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 19-10-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 13-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NARENDRA SINGH
• Keywords: Business income; Capital receipt
• Section: 143(3); 115JB

Judgement Text

I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI L BENCH, MUMBAI [CORAM : N V VASUDEVAN JM, AND PRAMOD KUMAR AM] ITA NO.: 4250/MUM/07 ASSESSMENT YEAR: 2003-04 BESIX KIER DABHOL, SA .. APPELLANT VS. DEPUTY DIRECTOR OF INCOME TAX -(INTERNATIONAL TAXATION) CIRCLE 3 (2), MUMBAI 400 020 .. RESPOND ENT ITA NO.: 4977/MUM/07 ASSESSMENT YEAR: 2003-04 ASSISTANT DIRECTOR OF INCOME TAX -(INTERNATIONAL TAXATION) CIRCLE 3 (2), MUMBAI 400 020 .. RESPOND ENT VS. BESIX KIER DABHOL, SA .. APPELLANT APPEARANCES: SUNIL M LALA, FOR THE ASSESSEE NARENDRA SINGH, FOR THE ASSESSING OFFICER O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE CIT (A)S ORDER DATED 29 TH MARCH 2007, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2003-04. I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 2 OF 7 2. WE WILL FIRST TAKE UP THE APPEAL FILED BY THE AS SESSEE, I.E. ITA NO 4250/MUM/07. 3. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS 26,29,193. 4. LEARNED REPRESENTATIVES AGREE THAT SO FAR AS THI S ISSUE IS CONCERNED, WHATEVER WE DECIDE IN ASSESSEES APPEAL FOR THE ASS ESSMENT YEAR 2002-03, WHICH INVOLVED IDENTICAL ISSUE AND WHICH WAS HEARD ALONGWITH THIS APPEAL, WILL FOLLOW MUTATIS MUTANDI HERE AS WELL. THE MATERIAL FACTS AND CIRCUMSTANCES OF THE CASE AND GRIEVANCE OF THE ASSE SSEE, BARRING THE QUANTUM OF DISALLOWANCE THOUGH, ARE EXACTLY THE SAME AS IN THE ASSESSMENT YEAR 2002- 03; THERE IS NO DISPUTE ON THIS ASPECT OF THE MATTE R. THE CIT(A) HAS ALSO MERELY FOLLOWED HIS ORDER FOR THE ASSESSMENT YEAR 2 002-03. VIDE OUR ORDER DATED 10 TH NOVEMBER 2010, ON ASSESSEES APPEAL FOR THE ASSESS MENT YEAR 2002-03, WE HAVE UPHELD THE GRIEVANCE OF THE ASSESS EE AND DIRECTED THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWAN CE. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US FOR THE SAID ASSESSMENT YEAR. A COPY OF THE SAID ORDER IS DEEMED TO BE ATTACHED TO, AND FORMING PART OF, THIS ORDER AS WELL. RESPECTFULLY F OLLOWING THE SAME, WE UPHOLD THIS GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSES SING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS 26,29,193. 5. GROUND NO. 1 IS THUS ALLOWED. 6. IN GROUND NO. 2, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN NOT REDUCING THE INTEREST OF RS 2,36,35,987 FROM NET PROFIT TO ARRIV E AT THE BOOK PROFIT UNDER SECTION 115 JB OF THE ACT. I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 3 OF 7 7. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, IT IS NECESSARY TO TAKE NOTE OF A FEW MATERIAL FACTS OF THE CASE. DURI NG THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT, IN THE COMPUTATION OF TAX LIABILITY UNDER SECTION 115 JB O F THE ACT, THE ASSESSEE HAS REDUCED AN AMOUNT OF RS 2,36,35,987 BEING INTEREST PERTAINING TO EARLIER YEARS, FROM NET PROFIT AS PER PROFIT AND LOSS ACCOU NT. THE ASSESSING OFFICER AS OF THE VIEW THAT SECTION 115JB DOES NOT PROVIDE FOR ANY SUCH DEDUCTION IN COMPUTATION OF BOOK PROFIT. HE, THEREFORE, DENIED THE ADJUSTMENT CLAIMED BY THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE CIT(A). IT WAS CONTENDED BY THE ASSESSEE THAT THIS RECEIPT BY THE ASSESSEE IS ON ACCOUNT OF INTEREST ON INCOME TAX REFUNDS FOR TH E ASSESSMENT YEAR 2000- 01. IT WAS SUBMITTED BY THE ASSESSEE THAT THE INTER EST WAS ACTUALLY RECEIVED ON 30 TH APRIL 2003, AND THUS THIS INCOME DID NOT ACCRUE IN THE RELEVANT PREVIOUS YEAR BUT IN THE ASSESSMENT YEAR 2004-05. IT WAS ALSO POINTED OUT THAT UNDER THE INCOME TAX ACT, 1961, IT IS WELL SET TLED PRINCIPLE THAT THE INCOME THAT HAS ACCRUED OR HAS BECOME DUE , WHICH I S REQUIRED TO BE OFFERED TO TAX. ON THIS REASONING, THE ASSESSEE DEFENDED EX CLUSION OF INTEREST OF RS 2,36,35,987 FROM NORMAL INCOME OFFERED TO TAX AS AL SO FROM BOOK PROFIT UNDER SECTION 115 JB. A REFERENCE WAS ALSO MADE TO HONBL E SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS SHOORJI BALLABHDAS & CO (46 ITR 144). NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE CIT(A). L EARNED CIT(A) OBSERVED THAT REFERENCE TO SHOORJI BALLABHDAS & CO (SUPRA) WAS UNWARRANTED INASMUCH AS THE ISSUE IN THE PRESENT CONTEXT IS DETERMINATIO N OF INCOME UNDER SECTION 115JB AND NOT THE NORMAL PROVISIONS OF THE ACT. HE WAS OF THE VIEW THAT, AS HELD BY HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD S CIT (255 ITR 273), ONLY SUCH ADJUSTMENTS CAN BE MADE TO THE PROF IT AS PER PROFIT AND LOSS ACCOUNT AS ARE SPECIFICALLY AUTHORIZED BY THE MANDA TE OF LEGISLATIVE PROVISIONS REGARDING BOOK PROFITS. HE EXTENSIVELY QUOTED FROM THE JUDGMENT OF HONBLE SUPREME COURT AND HELD THAT IT WAS BEYOND THE POWER S OF THE ASSESSING OFFICER TO MAKE ADJUSTMENTS TO THE PROFIT AS PER PR OFIT AND LOSS ACCOUNT EXCEPT I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 4 OF 7 TO THE EXTENT LAW SPECIFICALLY PROVIDES SO. IN THE ABSENCE OF ANY PROVISION ENABLING ADJUSTMENT ON ACCOUNT OF INTEREST RELATABL E TO EARLIER YEARS, THE ADJUSTMENT SOUGHT BY THE ASSESSEE WAS DECLINED. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO DISTURB THE FINDINGS O F THE LEARNED CIT(A). AS HE RIGHTLY OBSERVED, IN VIEW OF HONBLE SUPREME COURT S JUDGMENT IN THE CASE OF APOLLO TYRES (SUPRA), IT IS NOT OPEN TO THE ASSESSI NG OFFICER TO MAKE ANY ADJUSTMENTS IN THE AUDITED PROFIT AND LOSS ACCOUNT SAVE AND EXCEPT, AS PERMITTED BY THE STATUE ITSELF. THE LAW SO LAID D OWN BY HONBLE SUPREME COURT IS BINDING UNDER ARTICLE 141 OF THE CONSTITUT ION OF INDIA. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF HONBLE SUPREME COU RT, WE UPHOLD THE STAND OF THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN T HE MATTER. 9. GROUND NO. 2 IS THUS DISMISSED. 10. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN LEVY ING INTEREST UNDER SECTION 234 B OF THE ACT. 11. THE SHORT ISSUE IN THIS GRIEVANCE IS WHETHER OR NOT INTEREST UNDER SECTION 234 B CAN BE LEVIED IN RESPECT OF TAX LI ABILITY UNDER SECTION 115 JB. LEARNED REPRESENTATIVES AGREE THAT THIS ISSUE IS NO W COVERED, IN FAVOUR OF THE ASSESSEE, BY HONBLE JURISDICTIONAL HIGH COURTS JU DGMENT IN THE CASE OF CIT VS NATURAL GEMS LIMITED (327 ITR 269), EVEN THOUGH LEARNED DEPARTMENTAL REPRESENTATIVE RATHER DUTIFULLY RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW. HONBLE HIGH COURT HAS HELD THAT INTEREST U NDER SECTION 234 B AND 234 C CANNOT LEVIED IN RESPECT OF TAX LIABILITY UNDER S ECTION 115 JB. 12. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF HO NBLE JURISDICTIONAL HIGH I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 5 OF 7 COURT, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE, AND , ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE LEVY OF INTEREST UN DER SECTION 234 B IN RESPECT OF MAT LIABILITY UNDER SECTION 115JB. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 13. GROUND NO. 3 IS THUS ALLOWED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 15. WE NOW TAKE UP THE APPEAL FILED BY THE ASSESSIN G OFFICER I.E. ITA NO. 4977/MUM/07. 16. GRIEVANCES RAISED BY THE ASSESSING OFFICER ARE AS FOLLOWS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN LAW BY TREATING THE CUSTOM DUTY DRA W BACK, ON PLANT AND MACHINERY, RECEIVED AS CAPITAL RECEIPT AS AGAIN ST THE BUSINESS RECEIPT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN TAKING THE GENERAL INTERPRE TATION OF LAW INSTEAD OF SECTION 28(IIIC) OF THE INCOME TAX ACT I N RESPECT OF REFUND OF CUSTOM DUTY DRAWN ON RE-EXPORT OF PLANT A ND MACHINERY OF RS 4,33,04,141 AND ALLOWING IT TO THE EXTENT OF RS 3,36,70,771 AS PART OF SALES CONSIDERATION. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN TREATING THE RECEIPT OF CUSTOM DUTY DRAW BACK ON PLANT AND MACHINERY AS DEEMED SALE PROCEEDS. 17. ALL THESE GRIEVANCES ARE INTERCONNECTED, AND, T HEREFORE, BEING TAKEN UP TOGETHER FOR DISPOSAL. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT OTHER INCOME, DISCLOSED IN THE PROFIT AND LO SS ACCOUNT, INCLUDED CUSTOM DUTY DRAWBACK/ REFUND OF RS 4,33,04,141. IT WAS THE N SUBMITTED BY THE ASSESSEE THAT DUE TO OVERSIGHT THIS AMOUNT HAS NOT BEEN ADDED TO SALE I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 6 OF 7 CONSIDERATION RECEIVED BY THE ASSESSEE ON SALE OF I TS ASSETS, AND THAT, WITH A VIEW TO RECTIFY THIS MISTAKE, THE ASSESSING OFFICER MAY REDUCE THE SHORT TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE ON SALE OF ITS ASSETS BY RS 4,33,04,141. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURN ISH THE REASONS OF NOT OFFERING RS 4,33,04,141, BEING REFUND OF CUSTOM DUT Y DRAWBACK, AND EVIDENCE OF THE FACT THAT THE CUSTOM DUTY WAS NOT CLAIMED AS A DEDUCTION EARLIER. IT WAS SUBMITTED BY THE ASSESSEE THAT THE CUSTOM DUTY PAID ON IMPORTED MACHINES WAS CAPITALIZED, AS REFLECTED BY THE AUDITED ACCOUN TS, AND THAT IT WAS NEVER CLAIMED AS A REVENUE DEDUCTION. HOWEVER, THE ASSES SEE EXPRESSED INABILITY TO FURNISHING DETAILS SO AS TO CO-RELATE THE AMOUNT OF CUSTOM DUTY DRAWBACK OF RS 4,33,04,141 WITH THE AMOUNT CAPITALIZED THE RES PECTIVE YEARS I.E. AY 1999- 00 TO AY 2001-02 AS RECORDS OF THE ASSESSEE WERE D AMAGED IN 26 JULY 2005 RAINS. IN THE ABSENCE OF THESE DETAILS, THE ASSESS ING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND ALSO SUBMITTED ALL THE NECESS ARY DETAILS REGARDING CORRELATING THE CUSTOM DUTY PAYMENTS. BASED INTER ALIA ON THE SUBMISSIONS SO FILED, AND HAVING NOTED THAT THE ASSESSING OFFICER, IN HIS REMAND REPORT, HAS NOT RAISED ANY SPECIFIC OBJECTIONS ON THIS CORRELAT ING THE CUSTOM DUTY PAYMENTS, THE CIT(A) DELETED THE IMPUGNED DISALLOWA NCE. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 18. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 19. IN OUR CONSIDERED VIEW, AND PARTICULARLY HAVING REGARD TO THE FACT THAT THE ASSESSEE HAD EXPRESSED INABILITY TO FURNISH NEC ESSARY DETAILS AT THE ASSESSMENT STAGE, WE DEEM IT FIT AND PROPER TO REMI T THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER GIVING ASSESSEE YET ANOTHER OPPORTUNITY OF FURNISHING NECESSARY DETAILS. THE A SSESSEE HAS SIMPLY BYPASSED THE ASSESSING OFFICER BY NOT PROVIDING RE QUISITIONED DETAILS, AND AN OPPORTUNITY TO PROPERLY EXAMINE THE CLAIM OF THE AS SESSEE HAS BEEN LOST FOR I TA NO.: 4250 AND 4977 /MUM/07 ASSESSMENT YEAR: 2003-04 PAGE 7 OF 7 THE ASSESSING OFFICER. LET ALL THE RELEVANT DETAILS BE PLACED BEFORE THE ASSESSING OFFICER, AND LET ASSESSEE MAKE ALL THE SU BMISSIONS BEFORE HIM. THE ASSESSING OFFICER WILL THEN DISPOSE OF THE MATTER A FRESH IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEAKING ORDER AND AFTER DEALI NG WITH THE CONTENTION OF THE ASSESSEE. IT WAS SO ANNOUNCED IN THE OPEN COURT DURING THE COURSE OF HEARING OF THIS APPEAL ALSO. WE, THEREFORE, REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER IN THE ABOVE TERMS. 20. THE APPEAL FILED BY THE ASSESSING OFFICER IS TH US ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 21. TO SUM UP, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSING OFFICER IS ALLOWED FOR STATISTICAL PU RPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF NOVEMBER, 2010. SD/- SD/- (N V VASUDEVAN) (PRAMOD KUMAR ) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; 30 TH DAY OF NOVEMBER, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE DIRECTOR OF INTERNATIONAL TAXATION , MU MBAI 4. THE COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, L BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY OR DER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI