Deepak Nitrite Ltd., Baroda V. The DY.CIT, Circle -1(1), Baroda

ITA 50/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60263 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ITA NO AHD
• Keywords: Business expenditure; Retrospective amendment; Deemed dividend; Revised return
• Section: 43B; 115JB

Judgement Text

ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. 50/AHD/2010 (BY ASSESSEE) I.T.A. NO.470/AHD/2010 (BY DEPARTME NT) (ASSESSMENT YEAR: 2005 -06) DEEPAK NITRITE LIMITED, 9-10 KUNJ SOCIETY, ALKAPURI, BARODA-390 007. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), AAYAKAR BHAVAN, NEAR RACE COURSE CIRCLE, BARODA. (RESPONDENT) PAN: AAACD7468A APPELLANT BY : SHRI SUNIL BHANDARI. RESPONDENT BY : SHRI SAMIR TEKRIWAL, SR.D.R. ( )/ ORDER DATE OF HEARING : 20-3-2012 DATE OF PRONOUNCEMENT : 20-4-12 PER: SHRI ANIL CHATURVEDI, A.M. THESE ARE THE CROSS APPEALS, ONE FILED BY THE ASSES SEE AND THE OTHER FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A )-I, BARODA DATED 9- 10-2009 FOR THE ASSESSMENT YEAR 205-06. 2. ITA NO.50/AHD/2010 (ASSESSEES APPEAL) - ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 2 IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING G ROUNDS :- 1 . THE LD. A.O. HAS ERRED IN HOLDING THE INTEREST OF RS.1,55,357/- ON SALES TAX IS NOT ELIGIBLE FOR DEDU CTION. 2. THE LD. A.O. HAS FURTHER ERRED IN ASSESSING A SU M OF RS.38,20,047/- AS DEEMED DIVIDEND. 3. THE LD. A.O. HAS FURTHER ERRED, IN THE PROCESS O F COMPUTING BOOK PROFITS UNDER SECTION 115JA(2) OF THE ACT, IN ADDING DEEMED DIVIDEND OF RS.38,20,047/-. 4. THE LD. A.O. HAS FURTHER ERRED IN THE PROCESS OF COMPUTING BOOK PROFITS UNDER SECTION 115JA(2) OF THE ACT, IN ADDING PROVISION FOR GRATUITY OF RS.12,03,707/-. 3. GROUND NO.1 IS WITH RESPECT TO INTEREST ON SALES TAX. SINCE THE GROUND NO 1 OF ASSESSEES AND REVENUES A PPEAL ARE CONNECTED THE SAME ARE TAKEN TOGETHER FOR DISPOSAL. BRIEF FACTS ARE THAT DURING ASSESSMENT YEAR 2005-06 THE ASSESSEE AVAILED CERTAIN BENEFITS UNDER THE SALES T AX AMNESTY SCHEME IN ORDER TO DISCHARGE UNPAID SALES TAX DUES OF FINANCIAL YEAR 1995-96, 1996-97 AND 1997-98. THE TOTAL AMOUNT OF O UTSTANDING ARREARS OF SALES TAX OF THE ERSTWHILE AMALGAMATING COMPANY WAS TO THE ORDER OF RS. 36,43,260/-. AGAINST THIS, THE AMNESTY SCHEM E PERMITTED THE FULL AND FINAL SETTLEMENT BY PAYMENT OF RS 20,06,132/- C OMPRISING OF RS 18,35,946/- TOWARDS SALES TAX, RS 1,55,357/- TOWARD S INTEREST AND RS ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 3 14,829/- TOWARDS PENALTY. BEFORE THE A.O. IT WAS SU BMITTED BY THE ASSESSEE THAT THE DUES PERTAINED TO THE EARLIER YEA RS AND THE SAME WAS NOT CLAIMED AS DEDUCTION IN THE RESPECTIVE YEAR S. THE ASSESSEE CLAIMED THE PAYMENT OF RS 20,06,132 AND REQUESTED T HAT THE SAME SHOULD BE ALLOWED AS DEDUCTION TO IT ON PAYMENT BAS IS U/S 43B. THE ASSESSEE CLAIMED THIS EXPENDITURE FOR THE FIRST TIM E DURING THE ASSESSMENT PROCEEDINGS. THE A.O. DID NOT TAKE COGNI ZANCE OF THE CLAIM AND NEITHER HE ADMITTED NOR ALLOWED THE ASSES SEES CLAIM. 3.2. BEING AGGRIEVED WITH THE ORDER OF A.O., ASSESS EE PREFERRED APPEAL BEFORE THE CIT (A). 3.3. ON GOING THROUGH THE BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS FOR FINANCIAL YEARS 1995-96, 1996-97 AND 1 997-98, CIT(A) OBSERVED THAT IN THOSE YEARS THE SALES TAX HAD BEEN DIRECTLY TAKEN TO BALANCE SHEET WITHOUT DEBITING/CREDITING TO THE PRO FIT AND LOSS ACCOUNT AND HENCE THE PAYMENT OF SALES TAX HAD NOT BEEN ALLOWED AS DEDUCTION IN EARLIER YEARS. HE FURTHER OBSERVED THA T EVEN OTHERWISE THE CLAIM WOULD HAVE BEEN DISALLOWED U/S 43B IN THE EARLIER YEARS SINCE THE TAX WAS NOT ACTUALLY PAID DURING THOSE YE ARS. HOWEVER, SINCE THE TOTAL TAX PAYMENT OF RS 20,06,132/- COMPR ISED OF SALES TAX (RS 18,35,946/), INTEREST (RS 1,55,357/-) AND PENAL TY (RS 14,829/-), HE ALLOWED ONLY THE PAYMENT OF SALES TAX AMOUNTING TO RS 18,35,946/- AND DISALLOWED THE BALANCE AMOUNT RS. 1,70,186/- FO R THE REASON THAT AMOUNT WAS IN THE NATURE OF PENAL INTEREST AND PENA LTY. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 4 3.4. AGGRIEVED BY THE DISALLOWANCE OF INTEREST OF R S.1,55,357/-, THE ASSESSEE IS IN APPEAL BEFORE US AND THE REVENUE IS AGGRIEVED BY THE DECISION OF ALLOWANCE OF DEDUCTION OF RS. 18,35,946 /- U/S 43B. 3.5. BEFORE US, THE LD. A.R. SUBMITTED THAT IN RESP ECT OF SALES TAX LIABILITY FOR FY 95-96, 96-97 & 97-98 THE ASSESSE H AD MADE THE PAYMENTS UNDER THE SALES TAX AMNESTY SCHEME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE TOTAL AGGR EGATE PAYMENT MADE WAS RS 20,06,132/- WHICH CONSISTED OF SALES TA X OF RS 18,35,946/-, INTEREST OF RS. 1,55,357/-, AND PENALT Y OF RS. 14,820/-. THE PAYMENT WAS NOT CHARGED TO THE PROFIT & LOSS ACCOUN T AND TAKEN DIRECTLY TAKEN TO THE BALANCE SHEET AS PER THE ACCO UNTING POLICY CONSISTENTLY FOLLOWED BY THE ASSESSEE. CIT (A) ALLO WED THE CLAIM OF SALES TAX U/S 43B BUT NOT OF INTEREST HOLDING THE S AME TO BE OF PENAL IN NATURE. IT WAS SUBMITTED BY THE ASSESSEE THAT IT HA D COMPLIED WITH THE SALES TAX LAW, THOUGH BELATEDLY. FOR SUCH DELAY, IN DEPOSITING THE SALES TAX IT HAD TO PAY INTEREST AND PENALTY. THE L D. A.R. STRONGLY ARGUED AND STATED THAT THE INTEREST CHARGED AND PAI D UNDER THE AMNESTY SCHEME IS ONLY FOR DEFERMENT OF PAYMENT OF SALES TAX AND WAS NOT PENAL IN NATURE AND THEREFORE THE SAME SHOU LD BE ALLOWED AS DEDUCTION U/S 43B. 3.6. LD. D.R. ON THE OTHER HAND ARGUED AND POINTED OUT THAT THE ASSESSEE HAS NOT DEBITED/CREDITED SALES TAX TO THE PROFIT AND LOSS ACCOUNT AND THE SALES TAX WAS DIRECTLY TAKEN TO BAL ANCE SHEET. HE FURTHER STATED THAT NOTHING IS AVAILABLE ON RECORD TO PROVE THAT IN THE EARLIER YEAR THE SALES TAX THAT WAS COLLECTED AND N OT PAID WAS ADDED TO ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 5 THE TOTAL INCOME. ACCORDING TO HIM AS PER THE PROVI SIONS OF SECTION 43B, THE SALES TAX DEDUCTION CAN ONLY BE ALLOWED ON PAYMENT BASIS IN THE YEAR OF PAYMENT ONLY IF IN THE EARLIER YEAR THE AMOUNT WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND WHILE COMPUTING THE INCOME THE SAME WAS DISALLOWED AND WAS ADDED TO THE INCOME. FU RTHER, THE LD. D.R. COULD NOT CONTROVERT THE FACT THAT THE INTERES T PAID ON SALES TAX WAS OF PENAL IN NATURE. 3.7 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORDS PLACED BEFORE US. THE ISSUE BEFORE US IS WH ETHER THE INTEREST PAID ON SALES TAX UNDER THE AMNESTY SCHEME IS AN AL LOWABLE DEDUCTION AS BUSINESS EXPENDITURE. THE LAW IS WELL SETTLED THAT THE INTEREST PAID ON SALES TAX IS NOT OF PENAL IN NATUR E AND IS THEREFORE ALLOWABLE AS BUSINESS EXPENDITURE. THEREFORE, IN OU R OPINION THE INTEREST ON SALES TAX IS AN ALLOWABLE BUSINESS EXPE NDITURE. FURTHER, .THE INTEREST PAID ON SALES TAX UNDER THE AMNESTY S CHEME IS NOT FOR INFRINGEMENT OF ANY LAW. WE ACCORDINGLY HOLD THAT T HE ENTIRE AMOUNT OF INTEREST OF RS. 1,55,357/- AS ALLOWABLE. AS FAR AS THE FACT OF ALLOWANCE OF SALES TAX IN EARLIER YEARS IS CONCERNE D, NOTHING HAS BEEN PLACED ON BEFORE US TO PROVE THAT IN EARLIER YEARS THE SALES TAX THAT REMAINED UNPAID WAS ADDED TO THE INCOME. WE THEREFO RE FEEL THAT THIS ASPECT NEEDS TO BE VERIFIED. WE ACCORDINGLY, REMIT THIS ISSUE BACK TO THE FILE OF A.O. FOR LIMITED PURPOSE TO VERIFY AS T O WHETHER IN THE EARLIER YEARS THE UNPAID AMOUNT OF SALES TAX AT THE YEAR-EN D WAS ADDED TO THE INCOME. IF THE SAME WAS ADDED THEN THE SAME SHOULD BE ALLOWED AS DEDUCTION IN THE CURRENT ASSESSMENT YEAR U/S. 43B. AS FAR AS THE ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 6 REVENUES APPEAL IS CONCERNED, BASED ON THE ABOVE F ACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) AND ACCORDINGLY DISMISS THE REVENUES 1 ST GROUND. THE CLAIM OF THE ASSESSE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES AND OF THE REVENUE IS DISMISSED. REGARDING GROUND NO.2. 4. THE A.O. OBSERVED THAT THE ASSESSEE HAD PAID PUR CHASE CONSIDERATION OF RS.53,92,50,000/- TO ACQUIRE 2876 EQUITY SHARES OF RS.10 EACH OF YERROWADA INVESTMENT PVT. LTD. (YIPL) . THIS AMOUNT WAS SHOWN UNDER THE SCHEDULE OF FIXED ASSETS AS PAR T OF BUILDING. ASSESSEE CLAIMED THAT BY VIRTUE OF ITS HOLDING THE SHARES, IT HOLDS OCCUPANCY RIGHTS OF THE PROPERTY OWNED BY YIPL. YIP L HAD ACQUIRED LAND AND HAD CONSTRUCTED ABOUT 5 LAC SQ. FT. OF RES IDENTIAL AND COMMERCIAL SPACE. IN THE YEAR 1996, YIPL ALLOTTED O CCUPANCY RIGHTS TO ITS SHAREHOLDERS WITH RESPECT TO CONSTRUCTED, UNCON STRUCTED AND UNUTILIZED FSI. THE A.O. WAS OF THE VIEW THAT IN TH E PRESENT CASE, YIPL HAS DISTRIBUTED ITS ASSETS WHICH ARE IN THE FORM OF OCCUPANCY RIGHTS IN RESPECT OF THE PROPERTIES OWNED BY IT TO ITS SHAREH OLDERS. ACCORDING TO A.O., THE INCOME IN RESPECT OF THE PROPERTIES IN WHICH THE ASSESSEE HAS BEEN TRANSFERRED OCCUPANCY RIGHTS WILL BE IN TH E NATURE OF DEEMED DIVIDEND. THE A.O. HELD THAT THE ANNUAL RENTAL VALU E IN RESPECT OF THE OCCUPANCY RIGHTS HELD BY THE ASSESSEE HAS TO BE COM PUTED AND TO BE TAXED IN THE HANDS OF ASSESSEE AS DEEMED DIVIDEND UNDER THE HEAD INCOME FROM OTHER SOURCES. HE CONSIDERED THE RATE FOR RESIDENTIAL PROPERTY AT RS.8.855 PER SQ. FT. PER MONTH AND COMP UTED DEEMED ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 7 DIVIDEND AND TAXED IT AS INCOME FROM OTHER SOURCES . THE COMPUTATION OF DEEMED DIVIDEND WAS MADE AS UNDER:- RESIDENTIAL PROPERTY AREA RATE PER SQ. FT. PER MONTH. TOTAL ANNUAL RENTAL VALUE. 35950 SQ. FT. 8.855 38,20,047/- 5. THE ASSESSEE BEING AGGRIEVED WITH THE DECISION O F THE A.O. CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). CI T (A) CONFIRMED THE ADDITION MADE BY A.O. BY RELYING ON THE ORDER OF CI T(A) FOR ASSESSMENT YEAR 2004-05. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE US. LD. A. R. OF THE ASSESSEE AT THE OUTSET, STATED THAT ON IDENTICAL FA CTS, IN THE ASSESSEES OWN CASE, HONBLE ITAT (IN ITA NO.2778/A HD/2008) VIDE ORDER DATED 29-1-2010 HAS DELETED THE ADDITION. HE FURTHER STATED THAT THERE ARE NO CHANGE IN THE FACTS OF THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE FACTS FOR WHICH THE HBLE TRI BUNAL HAD DECIDED THE ISSUE IN ITS FAVOUR. HE PLACED ON RECORD THE CO PY OF ITAT ORDER. 7. LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT THE ISSUE IS COVERED BY ITATS DECISION IN ASSESSEES OWN CAS E AND IN ITS FAVOUR. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE UNDER CONSIDERATION HAS BEEN DEALT BY THE CO-ORDINATE BENCH FOR AY 2004-05 AND 2000-01 VI DE COMMON ORDER ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 8 DATED 29 TH JANUARY 2010. THE CO-ORDINATE BENCH HAS DELETED TH E ADDITION BY HOLDING AS UNDER:- 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE PROVISIONS OF SECTION 2(22)(A) HAS BEEN EXTRACTED B Y CIT(A) IN PARAGRAPH 6.6. OF HIS ORDER. BY READING THE AFORESA ID DEFINITION IT IS CLEAR THAT DIVIDEND WILL INCLUDE UNDER CLAUSE (A ) ONLY WHEN IT AMOUNTS TO DISTRIBUTION BY A COMPANY OUT OF ACCUMUL ATED PROFITS COUPLED WITH RELEASE OF ANY PART OF THE ASS ETS OF THE COMPANY. THEREFORE, TO ATTRACT SECTION 2(22)(A), TH E DIVIDEND CAN BE TAXED ONLY WHEN THERE IS DISTRIBUTION OUT OF ACC UMULATED PROFITS BY WAY OF RELEASE OF ANY PART OF THE ASSETS . IN THE PRESENT, CASE IT IS SEEN THAT WHEN THE ASSESSEE ACQUIRED THE SHARES, IT ALSO ACQUIRED THE OCCUPANCY RIGHT IN THE PREMISES. SUCH RIGHTS WERE ACQUIRED DURING F.Y. RELEVANT TO ASSESSMENT YE ARS 1997-98. THERE IS NO AMENDMENT TO THE ARTICLES AFTER THE SHA RES ARE ACQUIRED BY THE ASSESSEE. THUS, THERE IS NO RELEASE OF ASSESSMENT YEAR ASSETS BY YIPL TO THE ASSESSEE WHO IS A SHAREHOLDER THEREIN. THERE IS ALSO NO FINDING THAT THE DISTRIBUTION IS OUT OF ACCUMULATED PROFITS. WHAT IS BROUGHT TO TAX IS THE ANNUAL VALUE OF THE PROPERTY AND NOT PROPERTY ITSEL F. SINCE, THERE IS NO RELEASE BY THE COMPANY TO THE ASSESSEE OF ANY ASSETS AND THAT TOO OUT OF ACCUMULATED PROFITS DURING THE YEAR IN APPEAL, THE ADDITION U/S. 2(22)(A) IS NOT CALLED FOR. WE, THERE FORE, DELETE ADDITION MADE U/S. 2(22)(A) OF THE ACT. IN VIEW OF THE FACT THAT THERE BEING NO CHANGE IN T HE FACTS AND FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH WE HOLD THAT THE ADDITION OF RS.38,20,047/- AS DEEMED DIVIDEND IS UN CALLED FOR. WE THEREFORE, DELETE THE ADDITION MADE AND ACCORDINGLY ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 9. THE NEXT GROUND IS AGAINST ADDING DEEMED DIVIDEN D OF RS.38,20,047/- TO THE BOOK PROFITS U/S. 115JA. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 9 10. THE A.O. WAS OF THE VIEW THAT THE DEEMED DIVIDE ND OF RS.38,20,047/- WHICH WAS COMPUTED BY HIM AND WHICH HAS BEEN DISCUSSED HEREINABOVE, SHOULD HAVE BEEN ADDED TO TH E BOOK PROFITS FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S. 115JA. ACCORDINGLY HE ADDED IT FOR COMPUTATION OF BOOK PROFITS. 11. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF A.O. CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A). CIT (A) CO NFIRMED THE ACTION OF A.O. BY FOLLOWING THE DECISION IN EARLIER YEAR. 12. BEING AGGRIEVED BY THE DECISION OF THE CIT (A), THE ASSESSEE IS IN NOW APPEAL BEFORE US. 13. BEFORE US THE LD. A.R. STATED THAT ON SIMILAR F ACTS, THE ASSESSE HAD RAISED IDENTICAL GROUND BEFORE THE HONBLE TRIB UNAL FOR A.Y. 2004- 05. THE HONBLE TRIBUNAL DELETED THE ADDITION MADE BY THE A.O. THE LD. A.R. PLACED BEFORE US THE COPY OF THE ORDER DAT ED 29.10.2010 (ITA NO.2778/AHD/2008) OF CO-ORDINATE BENCH. 14. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND FAIRLY CONCEDED THAT THE ISSUE IS COVERED BY ITATS DECISI ON IN ASSESSEES OWN CASE AND IN ITS FAVOUR. 14.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE UNDER CONSIDERAT ION HAS BEEN DEALT ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 10 BY THE CO-ORDINATE BENCH FOR AY 2004-05 VIDE ORDER DATED 29 TH JANUARY 2010. THE CO-ORDINATE BENCH HAS DELETED THE ADDITIO N BY HOLDING AS UNDER:- 9.5. AS REGARDS THE ADDITION TO BOOK PROFIT BY A N AMOUNT OF DEEMED DIVIDEND TAXED U/S. 2(22)(A), SINCE SUCH DEE MED DIVIDEND DID NOT FORM THE PART OF BOOK PROFIT COMPU TED AS PER PART-II ADDITION III OF SCHEDULE VI TO COMPANIES AC T, 1956, IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF APOLLO TYRES (SUPRA) NO ADJUSTMENT IS CALLED FOR. WE, THEREFORE, DELETE THE ADDITION MADE IN THE BOOK PROFIT IN RESPECT OF GRAT UITY AND DEEMED DIVIDEND. 15. IN VIEW OF THE FACT THAT THERE BEING NO CHANGE IN THE FACTS AND FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH WE HOLD THAT THE ADDITION OF RS.38,20,047/- FOR COMPUTING THE BOOK P ROFITS IS UNCALLED FOR. WE THEREFORE, DELETE THE ADDITION MADE AND ACC ORDINGLY ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 16. THE NEXT GROUND OF APPEAL RELATES TO ADDING OF PROVISION FOR GRATUITY OF RS.12,03,707/- TO BOOK PROFIT U/S. 115J A. 17. THE A.O. WAS OF THE VIEW THAT THE PROVISION OF GRATUITY OF RS 12,03,707/- WAS IN THE NATURE OF UNASCERTAINED LIAB ILITY, AND THEREFORE THE SAME WAS ADDED BY HIM TO COMPUTE BOOK PROFITS I N VIEW OF EXPLANATION TO SECTION 115JB. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 11 18. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF A.O. CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A). CIT (A) CO NFIRMED THE ACTION OF A.O. BY FOLLOWING THE DECISION IN EARLIER YEAR. 19. BEING AGGRIEVED BY THE DECISION OF THE CIT(A), THE ASSESSE IS IN NOW APPEAL BEFORE US. 20. BEFORE US THE LD. A.R. STATED THAT ON SIMILAR F ACTS, THE ASSESSE HAD RAISED IDENTICAL GROUND BEFORE THE HONBLE TRIB UNAL FOR A.Y. 2004- 05. THE HONBLE TRIBUNAL DELETED THE ADDITION MADE BY THE A.O. THE LD. A.R. PLACED BEFORE US THE COPY OF THE ORDER DAT ED 29.10.2010 (ITA NO.2778/AHD/2008) OF CO-ORDINATE BENCH. 21. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND FAIRLY CONCEDED THAT THE ISSUE IS COVERED BY ITATS DECISI ON IN ASSESSEES OWN CASE AND IN ITS FAVOUR. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE UNDER CONSIDERATION HAS BEEN DEALT BY THE CO-ORDINATE BENCH FOR AY 2004-05 VIDE ORDER DAT ED 29 TH JANUARY 2010. THE CO-ORDINATE BENCH HAS DELETED THE ADDITIO N BY HOLDING AS UNDER:- 9.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE DECISION REFERRED TO BY THE TRIBUNAL IN THE CASE OF ACIT VS HOEC BHARDHI ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 12 INDIA LTD (SUPRA) WAS RENDERED EX-PARTE AND WITHOUT CONSIDERING THE DECISION OF THE HON. BOMBAY HIGH COURT IN THE C ASE OF CIT VS ECHJAY FORGINGS PVT LTD (251 ITR 15). THE HON. B OMBAY HIGH COURT HELD THAT THE PROVISION FOR GRATUITY ON THE B ASIS OF ACTUARIAL VALUATION COULD NOT BE SAID THAT IT WAS N OT AN ASCERTAINED LIABILITY. SINCE THE ADJUSTMENT TO BOOK PROFIT U/S 115JB PERMITS INCREASE BY ONLY THOSE PROVISIONS OTH ER THAN THE ASCERTAINED LIABILITY AND SINCE AS PER THE HON BOMB AY HIGH COURT, THE PROVISIONS FOR GRATUITY ON THE BASIS OF ACTUARIAL CALCULATION WAS NOT AN UNASCERTAINED LIABILITY, THE ADJUSTMENT TO BOOK PROFIT IS NOT CALLED FOR. WE THEREFORE DELETE THE ADDITION MADE IN THIS REGARD. 23. IN VIEW OF THE FACT THAT THERE BEING NO CHANGE IN THE FACTS OR ANY CONTRARY DECISION AND FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH WE HOLD THAT THE PROVISION FOR GRATUITY AMOUNTING T O RS.12,03,707/- NOT AS UNASCERTAINED LIABILITY FOR THE PURPOSE OF CALCU LATION OF BOOK PROFITS U/S 115JB AND THEREFORE CONSIDERING THE SAM E FOR COMPUTING THE BOOK PROFITS IS UNCALLED FOR. WE THEREFORE, DEL ETE THE ADDITION MADE AND ACCORDINGLY ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 24. ITA NO.470/AHD/2010 THE REVENUE IN ITS APPEAL HAS TAKEN FOLLOWING TWO GROUNDS OF APPEAL:- ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 13 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING TO ALLOW DE DUCTION OF RS.18,35,946/- U/S.43B OF THE ACT ON ACCOUNT OF SAL ES TAX AMNESTY WHICH WAS NOT CLAIMED IN THE RETURN OF INCO ME. THE ASSESSING OFFICER HAS POWER NOT TO ENTERTAIN A CLAI M FOR DEDUCTION, IF CLAIMED OTHERWISE THAN BY FILING RETU RN OR REVISED RETURN IN VIEW OF HONBLE SUPREME COURT DECISION IN THE CASE OF GOETZ (INDIA) LTD. V. CIT 157 TAXMAN 1 (SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE PROVISIO NS FOR ASSETS AMOUNTING TO RS.7 LACS HELD FOR DISPOSAL WHILE COMP UTING THE BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT. 24.1. REGARDING NO.1, THE SAME HAS BEEN ADJUDICATED TOGETHER WITH GROUND NO.1 OF ASSESSEES APPEAL EARLIER VIDE PARAG RAPH-3.5 ABOVE AND THEREFORE, THE SAME IS DECIDED IN THE MANNER IN DICATED ABOVE. 25. REGARDING GROUND NO.2, A.O. OBSERVED THAT ASSES SEE HAD NOT ADDED PROVISION FOR FIXED ASSETS HELD FOR DISPOSAL AMOUNTING TO RS.7,00,000/- FOR COMPUTING BOOK PROFIT U/S. 115JB. ACCORDING TO THE A.O. SINCE IT WAS IN THE NATURE OF UNASCERTAINED LI ABILITY, THE SAME SHOULD HAVE BEEN ADDED AS PER EXPLANATION TO SEC.11 5JB FOR COMPUTATION OF BOOK PROFITS. HE ACCORDINGLY ADDED T HE SAME. 26. ON APPEAL, CIT (A), DELETED THE ADDITION MADE B Y THE A.O. FOLLOWING THE DECISION OF CIT (A) IN EARLIER YEAR. 27. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 14 28. THE LD. D.R. STATED THAT BY VIRTUE OF AMENDMEN T BROUGHT BY FINANCE (NO.2) ACT,2009 W.E.F. 1-4-2001, BY INSERTI ON OF CL. (I) TO EXPLANATION (1) TO SECTION 115JB, THE AMOUNT SET AS IDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSETS, NEEDS TO BE ADDED TO ARRIVE AT BOOK PROFITS. 29. THE LD. A.R. OF THE ASSESSEE FAIRLY CONCEDED TH AT BY VIRTUE OF RETROSPECTIVE AMENDMENT AMOUNT OF RS.7 LACS NEEDS T O BE ADDED TO ARRIVE AT BOOK PROFITS. HE, HOWEVER STATED THAT THE AMOUNT OF RS.7 LACS IS A PROVISION MADE IN THE BOOKS IN EARLIER YEARS. NO NEW PROVISION HAS BEEN MADE IN THE ASSESSMENT YEAR UNDER CONSIDER ATION. HE, THEREFORE, REQUESTED THAT THE MATTER BE REMITTED TO THE A.O. FOR LIMITED PURPOSE OF VERIFICATION SO AS TO VERIFY AS TO WHETH ER ANY NEW PROVISION HAS BEEN MADE IN THE CURRENT YEAR. 30. THE LD. D.R. DID NOT OBJECT TO IT. 31. WE HAVE CONSIDERED THE FACTS BROUGHT BEFORE US. IT IS A FACT THAT THERE HAS BEEN RETROSPECTIVE AMENDMENT TO SEC. 115J B AS A RESULT OF WHICH PROVISION FOR DIMINUTION IN THE VALUE OF ASSE TS NEEDS TO BE ADDED TO ARRIVE AT THE BOOK PROFITS. WE THEREFORE, REMIT THE MATTER TO THE FILE OF THE A.O. FOR LIMITED PURPOSE TO VERIFY AS TO WHETHER THE PROVISION OF RS.7 LACS INCLUDES ANY PROVISION MADE IN THE CURRENT ASSESSMENT YEAR. ADDITION IS TO BE MADE OF ONLY THE INCREMENTAL AMOUNT OF PROVISION MADE DURING THE YEAR. THEREFOR E, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 15 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D WHEREAS THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATIST ICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 20-4 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) I, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.5 0 & 470/AHD/2010 ASSESSME NT YEAR 2005- 06 . 16 1.DATE OF DICTATION 12 - 4 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 19 / 4 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 19 -4 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 20 - 4 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 20 - 4 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20 - 4 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..