M/s Vardhman Textiles Limited, Ludhiana V. ACIT, Ludhiana

ITA 6/CHANDI/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9784 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Rectification of order; Question of law
• Section: 143(3); 115JB; 154; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.6/CHD/2015 ASSESSMENT YEAR :2010-11 M/S VARDHMAN TEXTILES LIMITED VS. ACIT CHANDIGARH ROAD CIRCLE 1 LUDHIANA LUDHIANA PAN NO. AABCM4692E & ITA NO.7/CHD/2015 ASSESSMENT YEAR :2009-10 M/S VARDHMAN YARNS & THREADS LTD. VS. ACIT CHANDIGARH ROAD CIRCLE 1 LUDHIANA LUDHIANA PAN NO. AACCV2554K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUBHASH AGGARWAL RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 07/07/2016 DATE OF PRONOUNCEMENT : 12/07/2016 ORDER PER ANNAPURNA GUPTA A.M. BOTH THE APPEALS HAVE BEEN FILED BY DIFFERENT ASSES SEES AGAINST SEPARATE ORDERS OF CIT(A)-I, LUDHIANA DT. 28/10/2014. SINCE IDENTICAL ISSUE HAS BEEN RAISED IN BOTH THE APPEALS, THEY ARE BEING DISPOSED OFF BY A COMMON ORDER. 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN ITA NO. 6/CHD/2015. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE ORDER PASSED BY THE LD. CIT(A) IS CONTR ARY TO LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S, IN ADOPTING AN INCONSISTENT APPROACH WHEN COMPARED WITH PREVIOUS Y EARS, FOR CALCULATION OF MINIMUM ALTERNATE TAX TO BE CARRIED FORWARD. 2 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S BY ADOPTING A METHODOLOGY W.R.T MINIMUM ALTERNATE TAX IN VARIATIO N TO THAT PROVIDED IN SECTION 115JAA AND 115JB OF THE INCOME TAX ACT, 1961. 3. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES TO DETERMINATION OF THE POINT AT WHICH TAX CREDIT UNDER SECTION 115JAA IS TO BE G IVEN, WHETHER AFTER LEVYING SURCHARGE AND EDUCATION CESS ON THE TAX CALCULATED AS PER THE NORMAL PROVISION OR BEFORE. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT ASSESS MENT U/S 143(3) WAS FRAMED ON THE ASSESSEE AND ITS INCOME UNDER THE NORMAL PRO VISIONS OF THE INCOME TAX ACT, 1961, WAS ASSESSED AT RS. 185,02,78,680/- AS A GAINST RS. 150,50,27,380/- RETURNED BY THE ASSESSEE. THE BOOK PROFITS OF THE A SSESSEE UNDER SECTION 115JB OF THE ACT WERE RETURNED AND ASSESSED AT RS. 272,99,76 ,648/-. TAX COMPUTED UNDER THE NORMAL PROVISIONS BEING MORE THAN THAT U/S 115J B, THE TAX LIABILITY OF THE ASSESSEE WAS DETERMINED TO BE PAYABLE UNDER THE NOR MAL PROVISIONS AT RS. 55,49,07,440/-. AGAINST THE SAME, MAT CREDIT U/S 11 5JA, BROUGHT FORWARD FROM ASSESSMENT YEAR 2008-09 AND 2009-10 AMOUNTING TO RS . 14,54,10,944/- WAS SET OFF. SUBSEQUENTLY IT WAS NOTICED BY THE AO THAT WHI LE COMPUTING TAX LIABILITY, SURCHARGE AND EDUCATION CESS OF RS. 5,54,90,744/- A ND RS. 1,83,11,946/- RESPECTIVELY WAS NOT LEVIED ON THE ASSESSED TAX, RE SULTING IN SHORT DEMAND OF RS. 1,93,39,656/-. ACCORDINGLY PROCEEDINGS UNDER SECTIO N 154 OF THE ACT WERE INITIATED, TO RECTIFY THE AFORESAID MISTAKE AND THE REAFTER ORDER WAS PASSED U/S 154, MAKING THE AFORESTATED RECTIFICATION. CONSEQUE NTIAL ENHANCEMENT OF THE TAX LIABILITY OF THE ASSESSEE WAS MADE AS FOLLOWS: ASSESSED INCOME : RS. 185,02,78,680/- TAX ON ABOVE INCOME : RS. 55,49,07,440/- ADD: SURCHARGE : RS. 5,54,90,744/- TOTAL : RS. 61,03,98,184/- ADD: EDUCATION CESS : RS. 1,83,11,946/- GROSS DEMAND : RS. 62,87,10,130/- ADD INTEREST U/S 234C : RS. 73,24,302/- 3 TOTAL : RS. 63,60,34,432/- LESS: ALREADY PAID : RS. 47,12,83,833/- BALANCE PAYABLE : RS. 16,47,50,599/- LESS: DEMAND CREATED : RS. 14,54,10,943/- ADJUSTED UNDER SECTION 143(3) BALANCE DEMAND PAYABLE : RS. 1,93,39,656/- 5. AGGRIEVED BY THE SAME THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE LD. CIT(A), WHERE IT WAS ARGUED ON BEHALF OF TH E ASSESSEE THAT THE ADDITIONAL DEMAND HAD ARISEN ON ACCOUNT OF DIFFERENT METHODOLO GY FOLLOWED BY THE REVENUE TO DEFINE THE TERM TAX. THE ASSESSEE ARGUED THAT WHILE FOR THE PURPOSE OF DETERMINING TAX CREDIT UNDER SECTION 115JAA FOR ASSESSMENT YEAR 2008-09 AND 2009-10, SURCHARGE AND CESS HAD BEEN EXCLUDED, ON T HE OTHER HAND WHILE CALCULATING THE TAX PAYABLE FOR THE IMPUGNED YEAR A GAINST WHICH MAT CREDIT WAS SET OFF, SURCHARGE AND CESS HAD BEEN INCLUDED. THE ASSESSEE ARGUED THAT THIS WAS AN ANOMALY AND HENCE THE RECTIFICATION SOU GHT TO BE MADE WAS ERRONEOUS. FURTHER THE ASSESSEE ARGUED THAT THE MET HODOLOGY FOLLOWED BY THE ASSESSEE OF SETTING OFF MAT CREDIT FROM THE TAX LIA BILITY OF THE ASSESSEE DETERMINED, BEFORE INCLUDING SURCHARGE AND CESS, WA S IN CONFORMITY WITH ITR -6 FORMS PRESCRIBED BY THE CBDT. THE ASSESSEE FURTHER POINTED OUT THAT THE FORMS HAVE BEEN AMENDED TO INCLUDE SURCHARGE AND CESS IN THE TAX LIABILITY ONLY WITH EFFECT FROM ASSESSMENT YEAR 2012-13. 6. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE UPHELD THE ORDER OF THE AO, REFRAMING THE QUESTION BEFORE IT AS BEING THE CORRECT DETERMINATION OF THE AMOUNT AVAILABLE FOR SET OFF O N ACCOUNT OF CREDIT OF MAT, WHETHER IT WOULD INCLUDE SURCHARGE AND CESS. RELYIN G UPON THE DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF M/S RICHA GLOBAL E XPORTS PVT. LTD. VS. ACIT IN ITA NO. 2303/DEL/2012. LD. CIT(A) HELD THAT THE MAT CRE DIT UNDER SECTION 115JAA WILL ONLY BE OF INCOME TAX AND NOT OF SURCHARGE AND EDUC ATION CESS. 7. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 4 8. BEFORE US LD. COUNSEL FOR THE ASSESSEE RELIED UP ON ITS ARGUMENTS MADE BEFORE THE LD. CIT(A) AND FURTHER STATED THAT THE I SSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF A NUMBER OF JUDGM ENTS OF THE HONBLE TRIBUNAL. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOW ING DECISIONS IN SUPPORT OF ITS CONTENTION. 1. DCIT VS. VACMENT INDIA LTD. ITA NO. 93/2014 A.Y . 2011-12 DATED 22.05.2014 2. WYETH LTD. VS. ACIT (MUM) ITA NO. 6682/11 DT. 0 9/01/2015 FOR ASSESSMENT YEAR 2007-08. 3. DCIT VS. GODREJ OIL PALM LTD. (MUM) IN ITA NO. 5 098/13 DT. 14/01/2015 FOR ASSESSMENT YEAR 2011-12. LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT TH E FINDING OF THE AGRA BENCH OF THE HONBLE ITAT IN THE CASE OF DCIT VS. VACMENT IN DIA LTD. (SUPRA) HAS BEEN UPHELD BY THE HONBLE ALLAHABAD HIGH COURT IN ITS O RDER DT. 29/10/2014 REPORTED AT 369 ITR 304. LD. COUNSEL THEREFORE CONTENDED THA T THE SET OFF, OF MAT CREDIT SHOULD HAVE BEEN ALLOWED TO IT BEFORE THE LEVY OF S URCHARGE AND CESS ON THE TAX DETERMINED AS PAYABLE UNDER THE NORMAL PROVISIONS O F THE INCOME TAX ACT 1961, AND THEREFORE THE RECTIFICATION ORDER PASSED BY THE AO UNDER SECTION 154 WAS ERRONEOUS AND BAD IN LAW. 9. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE LD. CIT(A) AND FURTHER ON THE DECISION OF THE HONBLE ITAT DELHI B ENCH IN THE CASE OF M/S RICHA GLOBAL EXPORTS PVT. LTD. (SUPRA). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEF ORE US. 11. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER ADJUSTMENT ON ACCOUNT OF MAT CREDIT IS TO BE MADE AGAINST THE TAX DETERMINED UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, BEFORE LEV YING SURCHARGE AND CESS OR OTHERWISE. THIS ISSUE WE FIND HAS BEEN DECIDED IN F AVOUR OF THE ASSESSEE BY THE ALLAHABAD HIGH COURT IN THE CASE OF DCIT VS. VACMEN T INDIA LTD. (SUPRA) 369 ITR 304 WHEREIN THE HONBLE HIGH COURT HELD AT PARA 5 - 7 OF ITS ORDER AS UNDER: 5 5. THE ONLY QUESTION WHICH IS RAISED PERTAINS TO TH E COMPUTATION OF TAX IN ACCORDANCE WITH THE MODALITIES WHICH ARE PRESCRIBED IN THE RELEVANT FORM, ITR-6. INSOFAR AS IS MATERIAL, THE RELEVANT ENTRIES IN THE FORM (PART B-TTI) ARE AS FOLLOWS: 3 GROSS TAX PAYABLE (ENTER HIGHER OF 2C AND 1) 4 CREDIT UNDER SECTION 115JAA OF TAX PAID IN EARLIE R YEARS (IF 2C IS MORE THAN 1) (7 OF SCHEDULE MATC) 5 TAX PAYABLE AFTER CREDIT UNDER SECTION 115JAA[(3- 4)] 6 SURCHARGE ON 5 7 EDUCATION CESS, INCLUDING SECONDARY AND HIGHER ED UCATION CESS ON (5+6) 8 GROSS TAX LIABILITY (5+6+7) 6. THE AFORESAID ENTRIES LEAVE NO MANNER OF AMBIGUI TY IN REGARD TO THE METHOD OF COMPUTATION OF TAX LIABILITY. ENTRY 3 REQ UIRES COMPUTATION OF THE GROSS TAX PAYABLE. UNDER ENTRY 4, CREDIT IS REQUIRED TO B E GIVEN UNDER SECTION 115JAA OF THE ACT OF THE TAX PAID IN EARLIER YEARS. ENTRY 5 R EQUIRES A COMPUTATION OF THE TAX PAYABLE AFTER CREDIT UNDER SECTION 115JAA OF THE AC T. THE MATTER IS PLACED BEYOND DOUBT BY THE PARENTHESIS, WHICH INDICATES TH AT TAX PAYABLE UNDER ENTRY 5 IS TO BE ARRIVED AT BY DEDUCTING THE CREDIT UNDER S ECTION 115JAA OF THE ACT (UNDER ENTRY 3) FROM THE GROSS TAX PAYABLE (UNDER E NTRY 4). THE SURCHARGE IS COMPUTED ON THE AMOUNT REFLECTED IN ENTRY 5. 7. THE TRIBUNAL HAS NOTED THAT FROM THE NEXT ASSESS MENT YEAR, ASSESSMENT YEAR 2012-13, THE POSITION WAS MATERIALLY ALTERED, BUT IN THE PRESENT CASE, SINCE THE DISPUTE RELATED TO ASSESSMENT YEAR 2011-12, TH E METHOD OF COMPUTATION, AS DIRECTED BY THE COMMISSIONER (APPEALS), WAS PLAINLY IN ACCORDANE WITH THE METHODOLOGY AS PROVIDED IN ITR-6. THE TRIBUNAL IN C ONFIRMING THE ORDER OF THE COMMISSIONER (APPEALS) HAS, HENCE, NOT COMMITTED AN Y ERROR. THE APPEAL WILL NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS , ACCORDINGLY, DISMISSED. IT IS CLEAR FROM THE ABOVE THAT THE HONBLE HIGH CO URT, AFTER TAKING INTO CONSIDERATION THE RELEVANT ENTRIES IN ITR-6, HELD T HAT MAT CREDIT IS TO BE ADJUSTED FROM THE GROSS TAX PAYABLE AND THEREAFTER ON THE BA LANCE, SURCHARGE IS TO BE COMPUTED. THE MUMBAI BENCH OF THE HONBLE ITAT FOLL OWED THE ABOVE PROPOSITION OF THE ALLAHABAD HIGH COURT IN THE CASE OF WYETH LTD. VS. ACIT(MUM) IN ITA 6682/11 DT. 09/01/2015, AND IN THE CASE OF D CIT VS. GODREJ OIL PALM LTD. (MUM) IN ITA NO. 5098/13 FOR ASSESSMENT YEAR 2011- 12. IN THE CASE OF WYETH LTD. (SUPRA) THE HONBLE BENCH CLARIFIED THAT MAT AS WEL L AS NORMAL TAX BEFORE ALLOWING MAT CREDIT, HAS TO BE TAKEN ON PARITY. MEA NING THEREBY THAT IF MAT CREDIT DOES NOT INCLUDE THE SURCHARGE AND CESS THEN THE NORMAL TAX LIABILITY SHOULD ALSO NOT INCLUDE THE SAME BEFORE SETTING OFF MAT CREDIT AND VICE VERSA. THE RELEVANT FINDINGS OF THE HONBLE BENCH AT PARA 5 ARE REPRODUCED HEREUNDER: 6 5. THUS IT IS CLEAR THAT THE HONBLE HIGH COURT HAS TAKEN INTO ACCOUNT THE ORDER OF ENTRIES IN THE FORM ITR-6 FOR THE A.Y. 201 1-12 IN THE SAID CASE AND HELD THAT AS PER FORM ITR-6, THE MAT CREDIT HAS TO BE GIVEN A GAINST THE GROSS TAX PAYABLE EXCLUSIVE OF SURCHARGE/CESS AND ONLY AFTER THE MAT CREDIT TAX LIABILITY, THE SURCHARGE AND CESS HAS TO BE CALCULATED FOR THE PUR POSE OF WORKING OUT THE GRAND TAX LIABILITY. WE ALSO FIND MERIT AND SUBSTAN CE IN THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT IF THE MAT CREDIT IS TAKEN INT O ACCOUNT WITHOUT INCLUDING THE SURCHARGE AND EDUCATION CESS THEN THE SURCHARGE AND EDUCATION CESS ON THE TAX LIABILITY HAS TO BE CALCULATED ONLY AFTER ALLOWING THE MAT CREDIT. ALTERNATIVELY, THE AMOUNT OF MAT CREDIT SHOULD ALSO INCLUDE SURCHARGE AND EDUCATION CESS FOR THE PURPOSE OF ALLOWING THE CREDIT AGAINST THE TAX LIAB ILITY INCLUSIVE OF SURCHARGE AND EDUCATION CESS. THEREFORE, THE MAT AS WELL AS NORMA L TAX BEFORE ALLOWING THE MAT CREDIT HAS TO BE TAKEN ON PARITY EITHER EXCLUSION O F SURCHARGE AND EDUCATION CESS OR INCLUSIVE OF SURCHARGE AND EDUCATION CESS OR INC LUSIVE OF SURCHARGE AND EDUCATION CESS. ACCORDINGLY WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW THE MAT CREDI T AGAINST THE TAX LIABILITY PAYABLE BEFORE SURCHARGE AND EDUCATION CESS OR ALTE RNATIVELY THE AMOUNT OF MAT CREDIT SHOULD ALSO BE INCLUSIVE OF SURCHARGE AN D EDUCATION CESS AND THEN ALLOW THE CREDIT AGAINST THE TAX PAYABLE INCLUSIVE OF SURCHARGE AND EDUCATION CESS. IN THE IMPUGNED CASE, THE ASSESSEE HAD STATED THAT THE MAT CREDIT DOES NOT INCLUDE SURCHARGE AND CESS, WHICH FACT WE FIND, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THEREFORE, FOLLOWING THE PROPOSITION L AID DOWN BY THE CO-ORDINATE BENCH IN THE ABOVE NOTED CASES, ALSO THE DECISION O F THE HONBLE ALLAHABAD HIGH COURT WE HOLD THAT THE ADJUSTMENT OF MAT CREDI T UNDER SECTION 115JAA IS TO BE MADE FROM THE TAX DETERMINED AS PAYABLE BEFORE I NCLUDING SURCHARGE AND CESS THEREON. THE RELIANCE PLACED BY THE LD. DR ON THE DECISION O F THE DELHI BENCH OF THE ITAT IN THE CASE OF M/S RICHA GLOBAL EXPORTS PVT. LTD. ( SUPRA) WE FIND IS MISPLACED AS THE ISSUE BEFORE THE BENCH IN THAT CASE WAS TOTALLY DIFFERENT. THE ISSUE IN THAT CASE WAS WHETHER THE AMOUNT OF MAT CREDIT UNDER SEC TION 115JA WOULD INCLUDE SURCHARGE AND CESS ON THE TAX PAYABLE ON THE BOOK P ROFIT OF THE ASSESSEE. THE ISSUE IN THAT CASE DID NOT RELATE TO THE POINT AT W HICH MAT CREDIT WAS TO BE ADJUSTED AGAINST THE TAX PAYABLE BY THE ASSESSEE, T HEREFORE THE DECISION RENDERED IN THE CASE OF M/S RICHA GLOBAL EXPORTS PV T. LTD. (SUPRA) WOULD NOT APPLY IN THE PRESENT CASE. WE MAY ADD THAT THE ISSUE BEFORE US PERTAINS TO REC TIFICATION BEING MADE UNDER SECTION 154 AND IT IS TRITE LAW THAT ONLY ERRORS WH ICH ARE APPARENT FROM THE RECORD CAN BE RECTIFIED UNDER THESE PROCEEDINGS. EVEN IF F OR A MOMENT, THE DECISION IN 7 THE CASE OF M/S RICHA GLOBAL EXPORTS PVT. LTD. (SUP RA)MAY BE CONSIDERED TO BE APPLICABLE TO THE ASSESSES CASE, THOUGH WE HAVE HEL D IT OTHERWISE IT IS EVIDENT THAT THERE ARE CONFLICTING VIEWS ON THE ISSUE AT HA ND, IN VIEW OF THE JUDGMENTS CITED BY THE ASSESSEE IN ITS FAVOUR ALSO. IN SUCH C IRCUMSTANCES IT CANNOT BE SAID THAT THE ISSUE IN THE PRESENT CASE IS OF AN APPAREN T ERROR WHICH CAN TO BE RECTIFIED UNDER SECTION 154 AND IN VIEW OF THE SAME ALSO WE HOLD THAT PROCEEDINGS UNDER SECTION 154 ARE NOT LEGALLY VALID . IN VIEW OF THE ABOVE WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW THE MAT CREDIT AGAIN ST THE TAX LIABILITY PAYABLE BEFORE SURCHARGE AND EDUCATION CESS. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO. 7/CHD/2015 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE ORDER PASSED BY THE LD. CIT(A) IS CONTR ARY TO LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S, IN ADOPTING AN INCONSISTENT APPROACH WHEN COMPARED WITH PREVIOUS YEARS, FOR CAL CULATION OF MINIMUM ALTERNATE TAX TO BE CARRIED FORWARD. 3. THAT THE LD. CIT(A)HAS ERRED IN LAW AND ON FACTS BY ADOPTING A METHODOLOGY W.R.T MINIMUM ALTERNATE TAX IN VARIATION TO THAT PR OVIDED IN SECTION 115JAA AND 115JB OF THE INCOME TAX ACT, 1961. 14. THE ISSUE RAISED IN THIS CASE IS IDENTICAL TO T HAT IN ITA NO. 6/CHD/2015 WHICH HAS BEEN ADJUDICATED BY US IN PARA 11 OF THE AFORES TATED APPEAL. FOLLOWING THE SAME, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE . 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :12/07/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR