ISMT LTD, MUMBAI V. ADDL CIT 10(1), MUMBAI

ITA 6008/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8548 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 04-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Keywords: Business income; Retrospective amendment; Revised return
• Section: 243B; 234B; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI P.M.JAGTAP , AM AND SHRI AMIT SHUKLA , JM ITA NO. 6008 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 7 - 200 8 ) ISMT LTD., OFF NO.10, SOHRAB BLDG. 499 KALBADEVI RD., MUMBAI. VS. ADDL. CIT 10(1), MUMBAI - 50 PAN/GIR NO . : AAACJ 9917 A ( APPELL ANT ) .. ( RESPONDENT ) /APPELLANT BY : MR. K. GOPAL /RESPONDENT BY : MR. P.K.SHUKLA DATE OF HEARING : 4 TH OCT., .2012 DATE OF PRONOUNCEMENT : 10 TH OCT.,2012 O R D E R PER AMIT SHUKLA , J M : THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 6 - 6 - 2011 , PASSED BY THE CIT(A) - 2 1 MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143 (3) FOR THE ASSESSMENT YEAR 2007 - 0 8 ON THE FOLLOWING GROUNDS OF APPEAL : - 1 . THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B & 234C IN CASE OF THE APPELLANT COMPUTING INCOME AND TAX IN TERMS OF SECTION 115JB. 2 . THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B & 234C ON THE I NCREASED BOOK PROFIT CONSEQUENT TO THE RETROSPECTIVE AMENDMENT IN SECTION 115JB. ITA NO. 6008 /20 1 1 2 3. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT IS IN DEFAULT FOR THE PURPOSE OF LEVY OF INTEREST U/S 234B & 234C. 4. THE LEARNED CIT(A) HAS ERRED IN NOT APPREC IATING THE FACT THAT THERE IS NO DEFAULT U/S 234B & 234C CONSEQUENT OF RETROSPECTIVE AMENDMENT, WHICH IS BEYOND THE APPELLANTS CONTROL. 2. FACTS IN BRIEF RELEVANT FOR THE ISSUE INVOLVED ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31 - 10 - 200 7 DECLARING NIL INCOME AND BOOK PROFIT U/S 115JB WAS WORKED OUT AND SHOWN AT RS.12,07,82,171/ - . THE SAID RETURN WAS REVISED, WHEREIN THE TOTAL INCOME THOUGH REMAINED AT NIL , HOWEVER, THE BOOK PROFIT UNDER SECTION 115JB WAS ENHANCED TO RS.1,37,13,22,521 / - AFTER INCLUDING THE PROVISION FOR DEFERRED TAX, IN VIEW OF THE INSERTION OF CLAUSE ( H ) IN EXPLANATION 1 TO SECTION 115JB BROUGHT W.E.F. 1 - 4 - 2001 . THE ASSESSEE WAS PRIMARILY AGGRIEVED BY THE LEVY OF INTEREST UNDER SECTION 234B & 234C BEFORE THE CIT(A) IN TER ALIA ON THE GROUND THAT THE BOOK PROFIT COMPUTATION IS ONLY POSSIBLE AT THE END OF THE YEAR AND UNTIL AND UNLESS ACCOUNTS GETS AUDITED AND THE BALANCE SHEET IS PREPARED , THE TAX LIABILITY CAN NOT BE DETERMINED , WHICH IS POSSIBLE ONLY AFTER THE BOOK PRO FIT IS DETERMINED. THEREFORE, THE PROVISIONS OF SECTION 207, 208, 209 & 210 CANNOT BE MADE APPLICABLE. THE SECOND ISSUE WHICH WAS CONTENDED BEFORE THE CIT(A) WAS THAT INTEREST UNDER SECTION 234B & 234C ON INCREASED TAX LIABILITY CONSEQUENT TO AMENDMENT BRO UGHT BY FINANCE ACT, 2008, GIVING RETROSPECTIVE EFFECT FROM 1 - 4 - 2001 , IN RESPECT OF DEFERRED TA X ADJUSTMENT TO THE BOOK PROFIT , CANNOT BE LEVIED. ITA NO. 6008 /20 1 1 3 3. LEARNED CIT(A), ON THE FIRST ISSUE OF LEVY OF INTEREST UNDER SECTION 234B & 234C IN COMPUTATION OF BOOK P ROFIT UNDER SECTION 115JB, HELD THAT THE SAME STANDS COVERED AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JCIT VS. ROLTA INDIA LTD., REPORTED IN 330 ITR 470 , WHEREIN IT HAS BEEN HELD THAT INTEREST UNDER SECTION 2 34B IS LEVIABLE IN THE CASE OF BOOK PROFIT COMPUTED UNDER SECTION 115JB. 4. REGARDING SECOND ISSUE ALSO, THE CIT(A) DISMISS ED THE ASSESSEES GROUND AFTER OBSERVING AND HOLDING AS UNDER : - I HAVE CONSIDERED THE FACTS OF THE CASE, THE APPELLANTS ARGUMENT APPEARS TO BE CONVINCING. HOWEVER, THE SAME ARE NOT ACCEPTABLE IN VIEW OF THE BINDING NATURE OF THE PROVISIONS OF THE ACT. AS PER PROVISIONS OF THE ACT THE INTEREST U/S 234B AND 234C ARE MANDATORILY CHARGEABLE IN CASE OF BOOK PROFIT COMPUTED U/S 115JB OF T HE ACT AS UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF ROLTA INDIA LTD 330 ITR 470. THE AO OR CIT(A) HAS NO DISCRETION TO REDUCE OR INCREASE THE INTEREST SO LEVIABLE. THE APPELLANT HAS ARGUED THAT ITS TAX LIABILITY UNDER MAT INCREASED NOT ON ACCOUNT OF ITS ANY DEFAULT BUT BY VIRTUE OF RETROSPECTIVE AMENDMENT IN THE SECTION. APPELLANTS ARGUMENT APPEARS TO BE CONVINCING BUT THE SAME IS NOT ACCEPTABLE. IN THE ASSESSMENT ORDERS OF AY 2008 - 09 OR EARLIER YEARS, THE ASSESSING OFFICER WERE ADDING BACK IN THE BOOK PROFIT PROVISION FOR DIMINISHING IN THE VALUE OF A NY ASSET THOUGH THERE WAS NO ANY SUCH PROVISION IN EXPLANATION 1 TO SECT. 115JB IN THE RELEVANT YEARS [CLAUSE (I) IN EXPLANATION 1 TO SEC.115JB WAS INSERTED BY FINANCE ACT, 2009 W.R.E FROM 01 - 04.2011] . THE KARNATAKA HIGH COURT IN THE CASE OF MYSORE BREVERIES LTD. (2009) 29 DTR (KAR) 289 ORDER DTD.17.09.2009, DELHI TRIBUNAL IN THE CASE OF DCM ENGINEERING (2010) 46 DTR (DEL) (TRIB) 505 ORDER DTD.05.09.2010 AND KARNATAKA HIGH COURT IN THE CASE OF CIT VS. NCR CORPORATION INDIA REPORTED IN (2010) 48 DTR (KAR) 57 ORDER DTD.09.09.2009 UPHELD THE ADJUSTMENT MADE IN THE BOOK PROFIT ON ACCOUNT OF DIMINISHING IN VALUE OF ANY ASSET IN VIEW OF RETROSPECTIVE AMENDMENT IN THE ACT. IN THE FACTS AND CIRCUMSTANCES , THOUG H THERE APPEARS TO BE SOME FORCE IN APPELLANTS ARGUMENT THAT THE TAX LIABILITY WAS INCREASED NOT ON ACCOUNT OF ITS DEFAULT, BUT IN VIEW OF THE BINDING NATURE OF RETROSPECTIVE AMENDMENT NO RELIEF CAN BE ALLOWED TO THE APPELLANT. THIS GROUND OF APPEAL IS TH EREFORE , DISMISSED. ITA NO. 6008 /20 1 1 4 5. LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT SO FAR AS THE SECOND ISSUE IS CONCERNED, THE SAME STAND S COVERED IN VIEW OF THE RECENT DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EMAMI LTD. VS. CIT, REPORTED IN [2011] 337 ITR 470 . 6. ON THE OTHER HAND, LEARNED DR RELIED UPON THE FINDINGS OF THE CIT(A). 7. AFTER CAREFULLY CONSIDERING THE FINDINGS GIVEN BY THE CIT(A) AS WELL AS JUDGMENTS REFERRED TO BEFORE US , WE FIND THAT SO FAR AS THE GROUND NO.1 IS CONCERNED, THAT IS LEVY OF INTEREST UNDER SECTION 234B & 234C WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB, THE SAME STANDS COVERED AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF JCIT VS. ROLTA INDIA LTD. (SU PRA) , WHEREIN IT HAS BEEN HELD THAT INTEREST UNDER SECTION 234B & 234C ARE TO BE LEVIED ON TAX CALCULATED UNDER SECTION 115JB . IN VIEW OF THIS, THE FINDING GIVEN BY THE CIT(A) STANDS CONFIRMED AND GROUND NO.1, STANDS DISMISSED . 8. SO FAR AS THE SECOND ISS UE IS CONCERNED, AS RAISED IN GROUNDS NO.2, 3 & 4, IT IS SEEN THAT IN THE ORIGINAL RETURN, THE BOOK PROFIT UNDER SECTION 115JB WAS COMPUTED AT RS. 125.05 CRORES. THEREAFTER IN VI EW OF THE INSERTION OF CLAUSE ( H ) IN EXPLANATION 1 TO SECTION 115JB BY FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1 - 4 - 2001, THE ASSESSEE FILED REVISED RETURN DECLARING HIGHER BOOK PROFIT AT RS. 137.13 CRORES. THE ASSESSEE IN THE ORIGINAL RETURN, DEFERRED THE TAX LIABILITY OF RS.17.07 ITA NO. 6008 /20 1 1 5 CRORES FROM THE NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. HOWEVER, AFTER INSERTION OF THE CLAUSE ( H ) IN EXPLANATION 1 TO SECTION 115JB W.E.F. 1 - 4 - 2001 BY FINANCE ACT, 2008 , THE AMOUNT OF DEFERRED TAX AND THE PROVISION THERE OF WAS REQUIRED TO BE ADDED BACK IN THE NET PROFIT FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT. THEREFORE, THE ASSESSEE WAS REQUIRED TO REVISE ITS RETURN. NOW, THE ISSUE IS WHETHER INTEREST UNDER SECTION 234B AND 234C CAN BE LEVIED ON THE INCREASED AMOUNT OF THE BOOK PROFIT BY VIRTUE OF TH E RETROSPECTIVE AMENDMENT. WE FIND THAT THIS ISSUE HAS BEEN DEALT WITH EXTENSIVELY BY THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF EMAMI LTD. (SUPRA) AFTER ANALYZING THE PROVISIONS OF SECTION S 234B, 234C, 207, 208 AND 211 AND ALSO THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF JCIT VS. ROLTA INDIA LTD.(SUPRA) . THEIR LORDSHIPS OBSERVED AND HELD AS UNDER : - A MERE READING OF THOSE PROVISIONS LEAVE S NO DOUBT THAT THE ADVANCE TAX IS AN AMOUNT PAYABLE IN ADVANCE DURING ANY FINANCIAL YEAR IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT IN RESPECT OF THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD BE CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THAT FINANCIAL YEAR. THUS, IN ORDER TO HOLD AN ASSESSEE LIABLE FOR PAYMENT OF ADVANCE TAX, THE L IABILITY TO PAY SUCH TAX MUST EXIST ON THE LAST DATE OF PAYMENT OF ADVANCE TAX AS PROVIDED UNDER THE ACT OR AT LEAST ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE ASSESSMENT YEAR IN QUESTION. IF SUCH LIABILITY ARISES SUBSEQUENTLY WHEN THE LAST DATE OF PAYMENT OF ADVANCE TAX OR EVEN THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE ASSESSMENT YEAR IS OVER, IT IS INAPPROPRIATE SUGGEST THAT STILL THE ASSESSEE HAD THE LIABILITY TO PAY ADVANCE TAX WITHIN THE MEANING OF THE ACT. 10 . IN THE CASE BEFORE U S, THE LAST DATE OF THE RELEVANT FINANCIAL YEAR WAS 31 - 3 - 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, THE APPELLANT PAID NO ADVANC E TAX AND SUBMITTED ITS REGULAR RETURN ON OCTOBER 31, 2001 WITHIN THE TIME FIXED BY LAW WHEREIN IT DECLARED ITA NO. 6008 /20 1 1 6 ITS TOTAL INCOME AND THE BOOK PROFIT BOTH AS NIL. HOWEVER, CONSEQUENT TO THE AMENDMENT OF THE PROVISIONS CONTAINED IN SECTION 115JB OF THE ACT BY VI RTUE 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.1,55,62,511/ - ON ACCOUNT OF THE TAX PAYABLE ON BOOK PROF IT 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 ACCEPTED SUCH RETURN OF INCOM E BUT IMPOSED INTEREST UNDER SECTION 234B AND 234C OF THE ACT AMOUNTING TO RS.44,00,937/ - AND RS.11,78,960/ - RESPECTIVELY. 11 . IN OUR OPINION, THE AMENDED PROVISION OF SECTION 115JB HAVING COME INTO FORCE WITH EFFECT FROM APRIL 1, 2001, THE APPELLANT CAN NOT 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 CONC EIVE 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 WITHIN THE DATES INDICATED IN SECTION 211 OF THE ACT WHICH INEVITABLY 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. 12 . AT THIS STAGE, WE MAY PROFITABLY RELY UPON THE OBSERVATIONS OF THE SUPRE ME 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 WITH 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 THE PUNISHMENT OF P AYMENT OF INTEREST. 13 . 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 INDIA LTD., REPO RTED 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 ALL PAYABLE O N 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 POINTED OUT T HAT MR. BAJORIA, AT THE VERY OUTSET, CONCEDED THAT THE SAID DECISION SHOULD BE APPLIED FOR ANSWERING THE FIRST QUESTION FORMULATED IN THIS ITA NO. 6008 /20 1 1 7 APPEAL AGAINST HIS CLIENT. IN OUR OPINION, THE SAID DECISION IS NOT RELEVANT FOR CONSIDERING THE SECOND AND 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 TH E SAID CASE BEFORE THE SUPREME COURT. 14 . IT APPEARS THAT THE LEARNED 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 WHERE 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 PAYMENT OF TAX IN ADVANCE WHICH WAS PHYSICALLY IMPOSSIBLE. 9. THUS, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON BLE CALCUTTA HIGH COURT, IN THE AFORESAID CASE, WE HOLD THAT THE ASSESSEE IS NOT LIABLE FOR INTEREST UNDER SECTION 243B & 234C ON INCREASED AMOUNT OF BOOK PROFIT WHICH HAS RESULTED ON THE ACCOUNT OF RETROSPECTIVE AMENDMENT. ACCORDINGLY, GROUNDS NO. 2, 3 & 4 RAISED BY THE ASSESSEE STANDS ALLOWED. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED ON THIS 10 TH DAY OF OCTOBER , 2012. 10 TH OCTOBER, 2012 SD/ - SD/ - ( ) ( P.M.JAGTAP ) ( ) ( AMIT SHUKLA ) / ACCO UNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 10 TH OCTOBER , 2012. P KM , PS ITA NO. 6008 /20 1 1 8 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI *