Su-kam Power Systems Ltd., Gurgaon V. Addl. CIT, Haryana

ITA 5214/DEL/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0211 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 14-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: DR RAKESH GUPTA SH A ANAND
• Section: 37; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, A CCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO: 5214 /DEL/20 1 0 A.Y.: 20 07 - 08 SU - KAM POWER SYSTEMS LTD. VS. ACIT, RANGE 9 PLOT NO.54, PHASE VI ROOM NO.185, C.R.BLDG. UDYOG VIHAR, SECTOR 37 HARYANA GURGAON PAN: AAFCS 0019 P (APPELLANT) (RESPONDENT) A SSESSEE BY : DR.RAKESH GUPTA, SH. A.ANAND AND SH.SOMIL AGGARWAL, ADV. REVENUE BY : SH. KK JAISWAL, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD.CIT(APPEALS) - XII, NEW DELHI DATED 29.9.2010 PERTAINING TO THE A.Y. 2007 - 08 ON THE FOLLOWING GROUNDS. 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF EXPENSE OF RS.19,62,662/ - AS CLAIMED BY THE APPELLANT COMPANY U/S 35D(1)(I) R.W.S. 35D(2) AS THE SAME WAS INCURRED BY THE APPELLANT COMPANY FOR PROCURING SHARE CAPITAL WHICH WAS USED FOR EXTENSION OF INDUSTRIAL UNDERTAKING BY WAY OF SETTING UP A NEW UNIT. 2. (A) THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDING BACK OF THE AMOUNT OF WEALTH TAX OF RS.69,041/ - AND FRINGE BENEFIT TAX OF RS.67,28, 695/ - WHILE COMPUTING THE BOOK PROFIT U/S 115 JB. (B) THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN INCLUDING THE FBT AND WEALTH TAX UNDER THE DEFINITION OF AMOUNT OF INCOME TAX AS GIVEN IN EXPLANATION 2 TO SUB SECTION 2 OF SECTION 115 JB BY ENLARGING THE S COPE OF THE WORD INCLUDES . ITA NO. 5214/DEL/2010 A.Y. 2007 - 08 SU - KAM POWER SYSTEMS LTD. 2 (C ) THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN INCLUDING THE FBT IN INCOME TAX WHEN THE SAME IS SPECIFICALLY EXCLUDABLE AS PER CBDT CIRCULAR. (D) THE LD.CIT(A) ERRED IN LAW IN TREATING WEALTH TAX AND INCOME TAX AT PAR WHEN THE SAME ARE LEVIABLE UNDER DIFFERENT TAX LAWS. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 2. HEARD DR.RAKESH GUPTA, LD.COUNSEL FOR THE ASSESSEE ALONG WITH SHRI A.ANAND AND SH.SOMIL AGGARWAL AND SH.KK JASWAL, SR.D.R. ON BEHALF OF THE REVENUE. 3. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS . 4. GROUND NO.1 IS DISMISSED AS NOT PRESSE D . 5. GROUND NO.2 IS ON THE ISSUE OF COMPUTATION OF BOOK PROFITS U/S 115 JB OF THE INCOME TAX ACT, 1961 (THE ACT). THE ASSESSEE CONTENDS THAT FRINGE BENEFIT TAX ( FBT ) AND WEALTH TAX SHOULD NOT BE ADDED WHILE COMPUTING BOOK PROFITS U/S 115 JB OF THE ACT . THIS CONTENTION OF THE ASSESSEE HAS TO SUCCEED FOR THE REASON THAT : (A) THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF JCIT, S.R.5, KOLKATA VS. USHA MARTI N E INDUSTRIES LTD. (2007) 104 ITD 249 (KOLKATA) ( SPECIAL BENCH ) AT PARA 46 HELD AS FOLLOWS. 46. IN THE CASE OF USHA MARTIN INDUSTRIES LTD. (SUPRA) THE AO HAS ALSO MADE THE ADDITION OF RS.1,25,000 IN RESPECT OF PROVISION FOR WEALTH TAX. THE SAME WAS DELETED BY THE CIT(A). THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT(A) ITA NO. 5214/DEL/2010 A.Y. 2007 - 08 SU - KAM POWER SYSTEMS LTD. 3 IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE HAVE ALREADY STATED ABOVE THAT FOR THE PURPOSE OF S.115 JA THE ADDITION TO THE BOOK PROFIT, WHICH IS COMPUTED AS PER PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, CAN BE MADE ONLY IF IT IS PERMISSIBLE BY ITEM NOS. (A) TO (F) OF THE EXPLANATION TO S.115 JA. WE FIND THAT AS PER CLAUSE (A) TO EXPLANATION ANY AMOUNT OF INCOME TAX PAID OR PAYABLE AND THE PROVISION THEREFORE IS LIABLE TO BE ADDED TO THE BOOK PROFIT. HOWEV ER, THERE IS NO SUCH PROVISION FOR MAKING THE ADDITION WITH REGARD TO WEALTH TAX. SINCE THE PROVISION FOR WEALTH TAX DOES NOT FALL WITHIN ANY OF THE ITEMS OF EXPLANATION TO S.115 JA, WE HOLD THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY T HE AO IN THIS REGARD. IN VIEW OF THE ABOVE, WE REJECT THE REVENUE S APPEAL IN THE CASE OF USHA MARTIN INDUSTRIES LTD. (SUPRA). (B) SIMILAR IS THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ECHJAY FORGINGS P.LTD. (2001) 251 ITR 15 (BO M) HELD AS FOLLOWS. ADDITION OF WEALTH TAX PAID BY THE ASSESSEE TO THE NET PROFIT: MR.DESAI, THE LD.SR.COUNSEL FOR THE DEPARTMENT, FAIRLY CONCEDES THAT THE NET PROFIT, AS SHOWN IN THE PROFIT AND LOSS ACCOUNT, WILL NOT BE INCREASED BY THE AMOUNT OF WEAL TH TAX PAID BECAUSE UNDER CLAUSE (A) OF THE EXPLANATION TO SECTION 115 JA, WHAT IS CONTEMPLATED IS THE AMOUNT OF INCOME TAX PAID. UNDER THE SAID CLAUSE, PAYMENT OF WEALTH TAX IS NOT CONTEMPLATED. THEREFORE, THE NET PROFIT SHALL NOT BE INCREASED BY THE A MOUNT OF WEALTH TAX PAID BY THE ASSESSEE. 5.1. SIMILARLY AS FAR AS FBT IS CONCERNED THE CBDT IN ITS CIRCULAR NO.8/2005 CLARIFIED IN QUESTION NO.39 THAT WHEN THERE IS NO SPECIFIC ITEM IN THE EXPLANATION TO S.115 JB OF THE ACT, THE FBT IS NOT REQUIRED TO BE ADDED WHILE COMPUTING BOOK PROFITS. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BHUSHAN STEELS LTD. IN ITA 324/2012 JUDGEMENT DT. 24.8.2012 HAD HELD THAT FBT CANNOT BE ADDED TO NET PROFIT AND THE SAME IS ALLOWABLE AS A ITA NO. 5214/DEL/2010 A.Y. 2007 - 08 SU - KAM POWER SYSTEMS LTD. 4 DEDUCTION AS FBT DOES NOT FALL UNDER THE EXPRESSION INCOME TAX . RESPECTFULLY FOLLOWING THE SAME, WE ALLOW GROUND NO.2 OF THE ASSESSEE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2015 . SD/ - SD/ - ( A.T. VARKEY ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 22 ND JULY, 2015 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR