M/s. Kothari Sugars and Chemicals Limited, CHENNAI V. ITO (OSD), CHENNAI

ITA 613/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0834 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.613/MDS/2012 ASSESSMENT YEAR : 2006-07 M/S KOTHARI SUGARS & CHEMICALS LTD. KOTHARI BUILDINGS 115, M.G. ROAD CHENNAI 600 034 VS THE INCOME TAX OFFICER COMPANY CIRCLE II(4) CHENNAI [PAN AABCK 2495 F] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY : DR. S. MOHARANA, CIT /DR DATE OF HEARING : 31-01-013 DATE OF PRONOUNCEMENT : 12-02-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF THE CIT(A)-III, CHENNAI, DATED 14.12.2011. 2. GROUND NO.1 AND 5 ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. I.T.A.NO. 613/12 :- 2 -: 3. IN GROUND NO.2 AND 3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSMENT DETERMINING THE BOOK PROFIT AT ` 1,50,07,42,000/- WHEN THE ASSESSEE-COMPANY WAS NOT LIABLE FOR BOOK PROFI T U/S 115JB AS IT WAS UNDER THE PURVIEW OF BIFR. 4. AT THE TIME OF HEARING, THE A.R OF THE ASSESSEE VE RY FAIRLY CONCEDED THAT THE ASSESSEE WAS LIABLE TO TAX ON BO OK PROFIT U/S 115JB OF THE ACT. IN VIEW OF THIS, GROUND NOS. 2 & 3 OF THE APPEAL ARE DISMISSED. 5. IN GROUND NO.4 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ASSESSEE HAD CARRIED FORWARD LOSS AS PER BOOKS AND HENCE LOSS OR DEPRECIATION COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 115JB SHOULD HAVE BEEN REDUCED FROM THE PROFIT AND LOSS ACCOUNT UNDER EXPLANATION (III) TO SECTION 115JB. 6. THE A.R SUBMITTED THAT ALTHOUGH SUCH GROUND WAS SPECIFICALLY NOT TAKEN BEFORE THE ASSESSING OFFICER OR THE CIT(A) BUT IT IS THE DUTY OF THE CIT(A) TO DECIDE THE ISSUE COMPL ETELY. WHEN THE CIT(A) HELD THAT THE ASSESSEE WAS LIABLE TO TAX ON BOOK PROFITS U/S 115JB THEN HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO REDUCE THE AMOUNT OF LOSS OR DEPRECIATION WHICHEVER IS LOW ER FROM THE BOOK I.T.A.NO. 613/12 :- 3 -: PROFITS IN ORDER TO DETERMINE THE AMOUNT OF BOOK PR OFITS ON WHICH THE ASSESSEE WAS LIABLE TO PAY TAX. SINCE THIS HAS NOT BEEN DONE THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A SSESSING OFFICER FOR DETERMINING THE BOOK PROFITS OF THE ASSESSEE ACCOR DINGLY. THE A.R OF THE ASSESSEE HAS FURTHER FILED A WRITTEN NOTE IN SU PPORT OF HIS ARGUMENT WHICH READS AS UNDER: 115JB PROFITS HAVE BEEN COMPUTED WITHOUT SETTING O FF CARRIED FORWARD LOSSES, AS PER EXPLN (III) TO SEC 115JB THE BOOK PROFITS HA S TO BE REDUCED BY 'III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UN ABSO RBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. EXPLANATION.-FOR THE PURPOSES OF THIS CLAUSE- (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UN ABSORBED DEPRECIATION, IS NIL; OR' AS PER EXPLANATION (VII) TO SEC.115JB - PROFITS DUR ING THE PERIOD THE COMPANY WAS SICK HAS TO BE DEDUCTED. '(VII) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COM PANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPA NY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK IND USTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986 ), AND ENDING WITH THE ASSESSMENT YEAR DURING WHICH TH E ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO O R EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION.-FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA ) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986). I.T.A.NO. 613/12 :- 4 -: THEREFORE NO LOSSES CAN BE SET OFF AGAINST THE BOOK PROFITS OF THE COMPANY FOR THE YEARS DURING THE PERIOD THE COMPANY WAS SICK THE CARRIED FORWARD LOSSES HAVE TO BE REWORKED ON T HE BASIS OF EXPLANATION (VII) AND ADJUSTED AGAINST THE PROFITS OF THE CURRENT YEAR. 7. ON THE OTHER HAND, THE CIT/DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASSESSEE, BEFORE US, POINTED OUT THAT IN COMPUTING BOOK PROFITS U/S 115JB, THE ASSESSEE IS ENTITLED FOR DEDUCTION OF T HE AMOUNT OF BROUGHT FORWARD LOSSES AS PER BOOKS OR UNABSORBED DEPRECIAT ION AS PER BOOKS WHICHEVER IS LESS IN VIEW OF THE PROVISIONS OF CLA USE (III) OF EXPLANATION TO SECTION 115JB(2) OF THE ACT. THERE IS NO DISPUT E ABOUT THE ABOVE PROPOSITION. THE ASSESSEE FURTHER CONTENDED THAT FOR WORKING OUT SUCH BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIA TION AS PER BOOKS PROFITS OF THE YEARS IN WHICH THE ASSESSEE W AS A SICK COMPANY SHOULD BE IGNORED. WE ARE UNABLE TO AGREE WITH THE ABOVE CONTENTION OF THE ASSESSEE AS THERE IS NO SUCH PROVISION IN S ECTION 115JB OF THE ACT. THE PLAIN LANGUAGE EMPLOYED IN CLAUSE (III) O F EXPLANATION TO SECTION 115JB(2) PROVIDES FOR SET OFF OF UNABSORBED LOSSES AS PER BOOKS OR UNABSORBED DEPRECIATION AS PER BOOKS WHICH EVER IS LESS AND IT I.T.A.NO. 613/12 :- 5 -: IS NOWHERE PROVIDED THAT EVEN WHEN SUCH LOSSES OR U NABSORBED DEPRECIATION IS ADJUSTED WITH SUBSEQUENT YEARS PRO FITS EVEN THEN SUCH ADJUSTMENT IS TO BE IGNORED WHEN THE ASSESSEE IS N OT LIABLE TO PAY TAX ON BOOK PROFITS BECAUSE OF THE PROVISIONS OF CLAUSE (VII) OF EXPLANATION TO SECTION 115JB(2). NO MATERIAL HAS BEEN BROUGHT BEFORE US TO SHOW THAT THERE WAS ANY UNABSORBED DEPRECIATION AS PER B OOKS AND BROUGHT FORWARD LOSSES AS PER BOOKS WHICH COULD BE SET OFF IN VIEW OF THE PROVISIONS OF CLAUSE (III) OF EXPLANATION TO SECTIO N 115JB (2) OF THE ACT FOR COMPUTING THE BOOK PROFITS OF THE YEAR UNDER CO NSIDERATION. WE, THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE. THEREFORE, TH E GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 12 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 12 TH FEBRUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR