THE ACIT, - 4(1), Indore V. M/S. YASH TECHNOLOGIES PVT. LTD., Indore

ITA 616/Ind/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7143 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-10-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 05-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S S SOLANKI
• Keywords: Capital asset; Business income; Depreciation; Transfer pricing; International transaction; Bad and doubtful debts; Set aside
• Section: 92C; 143(3); 10AA; 115JB; 40(a)(ia); 6; 28

Judgement Text

YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO 616/IND/2018 ASSESSMENT YEAR 2014-15 PAN : AAACY1868M ACIT-4(1), V/S M/S. YASH TECHNOLOGIES PVT. LTD, INDORE 201-205, BANSI TRADE CENTRE, 581/5, M.G. ROAD, INDORE (REVENUE) (RESPONDENT) REVENUE BY SMT. ASHIMA GUPTA, CIT ASSESSEE BY SHRI S.S. SOLANKI, CA DATE OF HEARING 1 0 .1 0 .201 9 DATE OF PRONOUNCEMENT 31 . 1 0.2019 O R D E R PER MANISH BORAD. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF REVENUE PERTAINING TO ASSESSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- II (IN SHORT LD.CIT(A)], INDORE DATED 06.04.2018 WHICH IS AR ISING OUT OF THE ORDER U/S 143(3) OF THE ACT DATED 30.12.2017 FRAMED BY ACIT-4(1), INDORE. YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVE LOPMENT SERVICES. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 WA S FILED ON 21.11.2014 DECLARING INCOME U/S 28 TO 44D OF THE AC T AT RS. 15,30,51,500/- AND BOOK PROFIT U/S 115JB AT RS.76,6 5,48,837/-. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY L D. A.O ASSESSING TOTAL INCOME U/S 28 TO 44D AT RS.19,17,06 ,073/- AND U/S 115JB AT RS.80,52,03,407/- MAKING ADDITIONS OF GAIN FROM FOREIGN CURRENCY AT RS.1,52,82,274/-, ADDITION DUE TO ATTRI BUTION OF STAFF SALARY TO SEZ UNITS AT RS.2,07,68,143/- AND DISALLO WANCE U/S 40(A)(IA) AT RS.26,04,156/-. AGGRIEVED ASSESSEE PRE FERRED APPEAL BEFORE LD. CIT(A) AND SUCCEEDED. 3. NOW AGGRIEVED REVENUE IS IN APPEAL BEFORE TH E TRIBUNAL RAISING FOLLOWING GROUNDS OF APPEAL; ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A):- 1.WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN SUMMARILY DELETING THE ADDITION OF GAIN FR OM FOREIGN CURRENCY MADE AT RS. 1,52,82,274/- HOLDING, IN A SUMMARY MANNER T HAT THE SAME IS BUSINESS INCOME, WITHOUT GIVING ANY FACTUAL FINDING REGARDING THE DETAILS AND NATURE OF RECEIPT OF FOREIGN INCOME FLUCTUATION . YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN DELETING THE PROPORTIONATE ADDITION OF RS. 2,07,68,143/- MADE ON ACCOUNT OF ATTRIBUTION OF COMMON SALARY OF STAFF TO THE SEZ UNITS, WITHOUT GIVING ANY FACTUAL FINDING, DESPITE THE FACT THAT N EITHER THE ASSESSEE HAS DISALLOWED SUCH EXPENSES IN THE RETURN OF INCOME NO R FILED THE DETAILS OF SUCH EXPENSES DISALLOWABLE, DESPITE SUFFICIENT OPPO RTUNITIES GIVEN BY THE AO 3. THE LD. CIT(A) DID NOT PROVIDE ANY OPPORTUNITY D URING THE COURSE OF APPELLATE PROCEEDINGS TO THE AO TO EXAMINE THE NEW EVIDENCE PRODUCED BEFORE HIM BY THE ASSESSEE REGARDING ATTRIBUTION OF SALARY, WHICH WAS NOT PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS DESPITE OPPORTUNITIES PROVIDED FOR THE SAME. 4. THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE DISALLOWANCES OF SALARY EXPENSES ATTRIBUTABLE TO SEZ UNITS CANNOT BE ADDED TO BOOK PROFIT FOR THE PURPOSE OF TAX LIABILITY U/S 115JB(F) PROVIDES FOR INCLUSION OF THE SAME TO THE BOOK PROFIT. 5. THE APPELLANT CRAVES LEAVE TO ADD TO '8R DEDUCT FROM OR OTHERWISE AMEND THE ABOVE GROUNDS OF APPEAL. 4. THROUGH GROUND NO.1 REVENUE HAS CHALLENGED THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF TREATING GAIN FROM FOREIGN EXCHANGE FLUCTUATION AS INCOME FROM OTHER SOURCES AT RS.1,52 ,82,274/-. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS LD. A.O OBSERVED THAT THERE WAS A NET G AIN OF FOREIGN CURRENCY OF RS.1,52,82,274/- DURING THE YEAR FROM T HE TWO SPECIAL ECONOMIC ZONE UNITS FOREIGN REMITTANCE. LD. A.O T REATED THE ALLEGED YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 4 GAIN AS INCOME FROM OTHER SOURCES WHICH CANNOT BE CLAIMED EXEMPT U/S 10AA OF THE ACT. HOWEVER LD. CIT(A) HELD THAT THE ALLEGED GAIN IS A PART OF THE BUSINESS RECEIPTS REVENUE IN NATURE A ND THEREFORE IS ELIGIBLE FOR EXEMPTION U/S 10AA OF THE ACT. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 6. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D AND SUPPORTING ORDER OF LD. A.O. 7. PER CONTRA LD. COUNSEL FOR THE ASSESSEE ARGUED R EFERRING TO THE FOLLOWING WRITTEN SUBMISSIONS PLACED ON RECORD:- 3.0 GROUND NO.1 RAISED BY THE AO RELATES TO DELETIO N OF ADDITION ON MADE OF GAIN FROM FOREIGN CURRENCY FLUCTUATION O F RS. 1,52,82,274/-.. 3.1 THIS GROUND WAS MADE BY THE AO IN SPITE OF THE FACT THAT THE ASSESSEE ITSELF HAS ADDED THIS AMOUNT IN ITS INCOME . 3.2 FURTHER THE AO'S ADDITION IS BASED ON FINDING T HAT 'INCOME OF THE NATURE BOOKED AS 'INCOME FROM OTHER SOURCES' CA NNOT BE CLAIMED AS EXCEPT U/S 10AA. 3.3 THIS OBSERVATION OF THE AO IS FACTUALLY INCORRE CT. THE ASSESSEE HAS OFFERED THIS INCOME AS BUSINESS INCOME IN YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 5 COMPUTATION AS WELL AS IN THE BALANCE SHEET. PERHAP S HE GOT CONFUSED WITH THE FACT THAT THIS AMOUNT IS SHOWN AS OTHER INCOME IN P&L A/C. THERE IS HUGE DIFFERENCE BETWEEN OTHER INCOME AND INCOME FROM OTHER SOURCES. 3.4 THAT THIS INCOME WAS RIGHTLY BEEN SHOWN AS BUSI NESS INCOME AS THE GAIN/LOSS FROM FOREIGN CURRENCY FLUCTUATION WAS ARISING DURING THE COURSE OF BUSINESS AND WAS INCIDENTAL TO BUSINESS. IT WAS NOT THE CASE THAT THE ASSESSEE WAS INVOLVED IN FOREIGN CURRENCY TRANSACTION SEPARATELY. RATHER THE GAIN IN FOREIGN CURRENCY FLUCTUATION WAS OUTCOME OF BUSINESS ACTIVI TY. 8. LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD VS. CIT REPORTED IN 116 ITR 1 AND RELYING ON THIS JUDGMENT, LEARNED CIT(A) HAS RIGHTLY HELD THAT THIS ITEM PARTAKE THE CHARACT ER OF BUSINESS INCOME AND PRAYED FOR ALLOWING THE CLAIM. 9. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDER OF LD. A.O. 10. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORDS PLACED BEFORE US. GRIEVANCE OF THE REVENUE IS AGAINST T HE DELETION OF ADDITION OF FOREIGN EXCHANGE FLUCTUATION AIN OF RS. 1,52,82,274/-. LD. A.O TREATED IT AS INCOME FROM OTHER SOURCE NOT EL IGIBLE FOR YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 6 EXEMPTION U/S 10AA OF THE ACT AS NOT DIRECTLY RELAT ED TO THE BUSINESS OF THE ASSESSEE. 11. LD. CIT(A) DELETED THE IMPUGNED ADDITION OBSERV ING AS FOLLOWS; 5.0 THIS GROUND OF APPEAL IS WITH REGARD TO ADDITI ON OF RS. 1,52,82,274/- ON ACCOUNT OF GAIN FROM FOREIGN CURRE NCY. 5.1 THE APPELLANT HAS STATED HIS SUBMISSION THAT WH ILE COMPUTING TOTAL INCOME, THE FIGURE OF 1,52,82,274/- HAS ALREA DY BEEN INCLUDED HENCE THERE CAN BE NO FURTHER ADDITION OF THE SAME AMOUNT. 5.2 THE APPELLANT HAS FURTHER STATED THAT EVEN THE FINDING GIVEN BY THE A.O. BY ADJUDICATION OF NATURE OF THIS INCOME A S INCOME FROM OTHER SOURCES IS WRONG. FOR THIS, RELIANCE WAS PLAC ED ON THE DECISION OF HONOURABLE APEX COURT IN THE CASE OF SUTLEJ COTT ON MILL LTD V / S CIT WEST BENGAL REPORTED IN 116 ITR 1. 5.3 I HAVE VERIFIED FROM THE AUDITED ACCOUNTS OF TH E APPELLANT AS WELL AS FROM COMPUTATION OF INCOME THAT THIS AMOUNT OF RS.1,52,82,274/HAS ALREADY BEEN OFFERED BY THE APPE LLANT IN ITS INCOME. THEREFORE, THERE WAS NO JUSTIFICATION IN AD DING THIS INCOME AGAIN. FURTHER, THE CONTENTION OF THE APPELLANT THA T THIS INCOME IS INCOME FROM BUSINESS AND NOT INCOME FROM OTHER SOUR CES SEEMS CORRECT IN VIEW OF DECISION OF APCX COURT REFERRED ABOVE. 5.4 IN VIEW OF THE ABOVE FACTS THE ADDITION SO MADE BY THE A.O. OF RS. 1,52,82,274/- IS DELETED. AS A RESULT, THIS GRO UND OF APPEAL IS ALLOWED. YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 7 12. IN THE FINDING OF LD. CIT(A) RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SU TLEJ COTTON MILLS LTD WHEREIN THE HONBLE APEX COURT HELD AS UNDER; 'THE LAW MAY, THEREFORE, NOW BE TAKEN TO BE WELL SE TTLED THAT WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCOUNT OF APPRECI ATION OR DEPRECIATION IN THE VALUE OF FOREIGN CURRENCY HELD BY IT, ON CONVER SION INTO ANOTHER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE A TRADING PROFIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSEE ON REV ENUE ACCOUNT OR AS A TRADING ASSET OR AS A PART OF CIRCULATING CAPITAL E MBARKED IN THE BUSINESS. BUT, IF ON THE OTHER HAND, THE FOREIGN CURRENCY IS HELD AS A CAPITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOULD BE OF C APITAL NATURE.' 13. IN THE LIGHT OF THE ABOVE JUDGMENT IT HAS TO BE EXAMINED THAT WHETHER THE ALLEGED GAIN IS ON ACCOUNT OF REVENUE P ROCEEDS RECEIVED FROM THE SPECIAL ECONOMIC ZONE. WE FIND THAT THERE IS NO DISPUTE TO THIS FACT THAT THE ALLEGED AMOUNT IS THE NET OF GAI N/LOSS OF THE FOREIGN CURRENCY RECEIVED DURING THE YEAR FROM THE REVENUE OPERATIONS CARRIED OUT BY THE ASSESSEE IN THE SPECIAL ECONOMIC ZONE UNITS RUNNING AT HYDERABAD AND PUNE. THEREFORE THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD (SUPRA) AND THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION TREATING THE AMOUNT AS PART OF RELIEF ELIGIBLE FOR EXEMPTION U/S 10AA OF THE ACT. EVEN OTHERWISE THE A SSESSEE IS YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 8 REQUIRED TO PAY TAX ON THE BOOK PROFIT U/S 115JB OF THE ACT AND THE ALLEGED AMOUNT HAS ALREADY BEEN ADDED IN THE BOOK P ROFIT AND THUS SUBJECTED TO TAX. THIS FACT HAS ALSO BEEN HIGHLIGH TED IN THE FINDING OF LD. CIT(A). WE THEREFORE IN THE FACTS AND CIRCUMST ANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT, FIND NO REASON TO INTERFERE IN THE FINDING OF LD. C IT(A). ACCORDINGLY GROUND NO.1 OF THE REVENUE STANDS DISMISSED. 14. NOW WE TAKE UP GROUND NO.2 & 3 OF THE REVENUE W HEREIN THE ISSUE RELATES TO DISALLOWANCE OF SALARY EXPENDITURE OF RS. 2,07,68,143/- ALLEGED TO HAVE BEEN WRONGLY CLAIMED BY THE ASSESSEE AS PART OF NON SEZ UNITS. BRIEF FACTS RELATING TO THI S GROUND ARE THAT THE LD. A.O OBSERVED THAT A SUM OF RS.. 71,74,65,462/- IS DEBITED AS SALARY AND WAGES IN THE PROFIT & LOSS ACCOUNT OF NON SEZ UNITS WHILE THE CORRESPONDING FIGURES IN THE HYDERABAD SEZ AND PUNE SEZ ARE RS.88,28,94,436/- AND RS.16,25,90,059/-. AFTER EXA MINATION OF THE DETAILS LD. A.O FURTHER OBSERVED THAT SALARY TO 8 EMPLOYEES , WHO ARE AT THE HELM OF AFFAIRS WORKING ON THE POST OF VICE PRESIDENT, MANA GING DIRECTOR, CHIEF OPERATING OFFICER AND SENIOR MANAGEMENT WAS PAID A T RS.3,46,13,572/-. AS PER THE LD. A.O THIS AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT OF YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 9 THE NON SEZ UNIT. HE ACCORDINGLY CALCULATED THE PR OPORTIONATE AMOUNT OUT OF THE SALARY AT RS.3,46,13,572/- ON THE BASIS OF T OTAL TURNOVER OF THE NON SEZ UNITS VIS-A-VIS THE TURNOVER OF SEZ UNITS AND D ISALLOWED THE EXEMPTION U/S 10AA OF THE ACT CLAIMED ON THE SALARY OF RS.2,0 7,68,143/- TREATING THEM TO BE THE PART OF THE EXPENDITURE OF SEZ UNITS . WHEN THE MATTER CAME UP THE LD. CIT(A) DELETED THE IMPUGNED ADDITION. 15. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNA L. 16. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING THE ORDERS OF LD. A.O. 17. LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FO LLOWING WRITTEN SUBMISSIONS; (A) (I) THAT THE AO HAS ACTED BEYOND HIS POWER UND ER THE INCOME TAX ACT, 1961 AND ADDED NON SEZ UNIT EXPENSES TO SEZ UNIT EX PENSES WHICH WAS CLEARLY A SPECIFIED DOMESTIC TRANSACTION AND SUBJEC T MATTER OF TRANSFER PRICING. (II) THE A.O. VIOLATED THE INCOME TAX PROVISIONS AN D MADE ADDITION WHICH WERE NOT IN HIS POWER. ADJUSTMENT IN SALARY BETWEEN NON SEZ AND SEZ IS A SPECIFIED DOMESTIC TRANSACTION U/S 92BA CLAUSE (V) OF THE INCOME TAX ACT, 1961, AND A SUBJECT MATTER OF TRANSFER PRICING ASSESSMENT, HENCE A.O. DOES NOT HAVE POWER TO MAKE SUCH ADJUSTMENT. SO ACC ORDING TO SECTION 92CA AND PARA 3.7 OF CBDT INSTRUCTION NO. 3 OF 2016 ON 10 TH MARCH 2016 YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 10 FOR IMPLEMENTATION OF TRANSFER PRICING (TP) PROVISI ONS, A.O. HAS TO REFER SUCH TRANSACTION TO THE TRANSFER PRICING OFFICER. (III) SECTION 10AA(9) (CORRESPONDING SECTION 80IA(1 0)), CLAUSE (V) OF SECTION 92BA, OF THE INCOME TAX ACT, 1961, PARA 3.7 OF CBDT INSTRUCTION NO. 3 OF 2016 ARE FURNISHED BELOW FOR YOUR READY REFERENCE. PARA 3.7 OF CBDT INSTRUCTIONS NO 3 OF 2016 'FOR ADMINISTRATING THE TRANSFER PRICING REGIME IN AN EFFICIENT MANNER, IT IS CLARIFIED THAT THOUGH A.O POWER UNDER SECTION 92C T O DETERMINE THE ALP OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TR ANSACTIONS, DETERMINATION OF ALP SHOULD NOT BE CARRIED OUT AT A LL BY THE AO I N A CASE WHERE REFERENCE IS NOT MADE TO TPO. HOWEVER, IN SUC H CASES, THE AO MUST RECORD IN THE BODY OF THE ASSESSMENT ORDER THAT DUE TO THE BOARD'S INSTRUCTION ON THIS MATTER, THE TRANSFER PRICING IS SUE HAS NOT BEEN EXAMINED AT ALL.' (IV) THAT AS PER PROVISIONS OF SECTION 92BA DOMESTI C TRANSFER PRICING APPLIES WHERE AGGREGATE OF SUCH TRANSACTIONS ENTERE D INTO BY THE ASSESSEE IN THE PREVIOUS YEAR EXCEEDS A SUM OF RS. 5 CRORES. IN CASE OF THE ASSESSEE, ACCORDING TO THE AO THE SPECIFIED DOMESTI C TRANSFER PRICING FIGURE IS RS.3,46,13,572/- WHICH IS LESS THAN 5 CRORES HENCE THE PROVISIONS OF SPECIFIED DOMESTIC TRANSACTION AS PER SECTION 92BA DOES NOT APPLY. (B )(I) THAT EVEN OTHERWISE THE AO WAS FACTUALLY IN CORRECT IN MENTIONING THAT 8 EMPLOYEES MENTIONED ARE IN NON SEZ WHEREAS O UT OF 8 EMPLOYEES, 5 EMPLOYEES' SALARY IS DEBITED IN SEZ. THE SALARY DEB ITED TO SEZ UNIT COMES TO RS. 2,12,90,074/- WHEREAS EVEN ACCORDING TO THE AO, THE ATTRIBUTABLE SALARY COMES TO RS. 2,07,68,143/- ONLY. THE ASSESSEE HAS, THEREFORE, ATTRIBUTED MORE SALARY TO SEZ AS CALCULATED BY THE AO. (II) THE ADDITION MADE OF RS. 2,07,68,143/- IS ILLEGAL AND WRONG FOR THE YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 11 FOLLOWING REASONS:- (A) THAT THE AO HAS NO POWER TO DECIDE THE MATTER R EGARDING SPECIFIED DOMESTIC PRICING. ~REFER THE MATTER TO TPO. (B) THAT IF THE VALUE OF SPECIFIED DOMESTIC PRICING DOES NOT EXCEED RS.5 CRORES, THE PROVISIONS OF SECTION 92BA ARE NOT APPL ICABLE. HERE THE VALUE IS BELOW RS.5 CRORES. (C) THAT EVEN OTHERWISE, THE AO WAS FACTUALLY INCOR RECT IN HIS FINDINGS. IF CORRECT FINDINGS ARE REPLACED, THERE WILL BE NO ADD ITION. (III) ON FACTUAL MATRIX ALSO, EVEN IF THE THEORY OF AO IS APPLIED THERE REMAINS NO DISALLOWANCE. 18. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH GROUND NO. 2 & 3 REVENUE HAS C HALLENGED THE ADDITION OF PROPORTIONATE DISALLOWANCE OF RS.2,07,6 8,143/- MADE BY THE LD. A.O ON ACCOUNT OF ATTRIBUTION OF SALARY OF STAFF TO THE SEZ UNITS. WE FIND THAT LD. CIT(A) DELETED THE IMPUGNE D ADDITION OBSERVING AS FOLLOWS; 7.0 THIS GROUND OF APPEAL IS WITH REGARD TO MAKIN G ADDITIONS OF RS.2.07.68.143/- ON ACCOUNT OF ATTRIBUTION OF STAFF SALARY TO NON SEZ UNITS. I NAVE CAREFULLY GONE THROUGH THE ASSESS MENT ORDER AS WCLL AS SUBMISSION OF THE APPELLANT IN THIS REGARD. 7.1 THE APPELLANT HAS STATED THAT THE A.O. HAS ACTE D BEYOND HIS POWER OF A TRANSACTION WHICH IS CLEARLY A SPECIFIED DOMESTIC TRANSACTION AND SUBJECT MATTER OF TRANSFER PRICING. IN SUPPORT OF ITS YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 12 CONTENTION CBDT INSTRUCTION NO. 3 OF 2016 WAS REFER RED WHICH SPEAKS OF DETERMINATION OF ALP IN SPECIFIED DOMESTI C TRANSACTION. 7.2 THE APPELLANT FURTHER STATED THAT EVEN OTHERWIS E THE AO WAS FACTUALLY INCORRECT THAT THE SALARIES OF EIGHT EMPL OYEES MENTIONED BY HIM ARE DEBITED IN NON SEZ. THE FACT IS THAT OUT OF EIGHT EMPLOYEES MENTIONED BY THE AO, SALARY OF FIVE EMPLO YEES HAS BEEN DEBITED M SEZ UNIT. ON THIS COUNT ALSO, THE ADDITIO N IS NOT SUSTAINABLE. 7.3 I HAVE VERIFIED FROM THE RECORDS SUBMITTED BY T HE APPELLANT THAT THE CONTENTION OF THE APPELLANT REGARDING ADDI TION MADE BY THE AO ON WRONG APPRECIATION OF FACTS IS CORRECT. THE ADDITION OF RS. 2,07,68,143/- MADE ON WRONG HYPOTHESIS IS THERE FORE DELETED. AS A RESULT, THIS GROUND OF APPEAL IS ALLOWED. 19. ON GOING THROUGH THE FINDING OF LD. CIT(A) AS W ELL AS EXAMINING THE RECORDS PLACED IN THE PAPER BOOK WE FIND FORCE IN THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE THAT THE LD. A.O GR OSSLY ERRED IN GIVING THE CORRECT FINDING IN ITS ASSESSMENT ORDER BY TREATING THE SALARY PAID TO 5 OUT OF 8 EMPLOYEES BEING DEBITED T O NON SEZ UNITS. THE CORRECT FACT IS THAT OUT OF THE 8 EMPLOYEES MEN TIONED BY THE LD. A.O, SALARY OF 5 EMPLOYEES ALREADY STANDS DEBITED TO THE SEZ UNITS AND THE EXEMPTION HAS BEEN CLAIMED ON THE PROFITS A RRIVED AFTER DEDUCTING THE EXPENSES OF SALARY OF THE 5 EMPLOYEES TO WHOM THE TOTAL AMOUNT OF RS.2,12,90,074/- WAS PAID. FURTHER THE LD. A.O HAS YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 13 MADE THE IMPUGNED DISALLOWANCE WITHOUT BRINGING ANY DETAIL ON RECORD SO AS TO PROVE THAT THE ALLEGED SALARY WAS P AYABLE IN THE NON SEZ UNITS. THE ASSESSEES BOOKS OF ACCOUNTS ARE DU LY AUDITED AND IT HAS BIFURCATED THE SALARY EXPENSES CORRECTLY UNDER NON SEZ UNITS AND SEZ UNITS. 20. FURTHER IN THE CASE OF THE ASSESSEE FOR THE DET ERMINATION OF ALP IN SPECIFIED DOMESTIC TRANSACTIONS REFERENCE COULD HAVE BEEN MADE TO THE TPO BUT CERTAINLY THE LD. A.O HAS NO POWER TO M AKE SUCH DISALLOWANCE. AS PER THE PROVISION OF SECTION 92BA OF THE ACT FOR THE YEAR UNDER APPEAL THE DOMESTIC PRICING TRANSFER PRO VISIONS COULD APPLY IF THE AGGREGATE OF SUCH TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN THE PREVIOUS YEAR EXCEEDS A SUM OF RS.5 CRORES. BUT IN THE INSTANT CASE THE SPECIFIED DOMESTIC PRICING FIG URE IS RS.3,46,13,572/- WHICH IS LESS THAN RS.5 CRORES HEN CE THE PROVISION OF SECTION 92BA OF THE ACT DOES NOT APPLY. 21. WE, THEREFORE IN VIEW OF THE DISCUSSIONS ABOVE AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN THE LD. A.O ADOPTED WRONG FACTS TREATING THE SALARY DEBITED TO SEZ UNI TS AT RS. 2,12,90,094/- AS SALARY DEBITED TO NON SEZ UNITS WH ICH MAKES THE YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 14 VERY BASIS OF ALLEGED DISALLOWANCE INCORRECT. THUS THE LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTS AND DELETED THE PROPO RTIONATE DISALLOWANCE OF SALARY EXPENDITURE OF RS.2,07,68,14 3/-. WE THUS FIND NO INFIRMITY IN THE FINDING OF LD. CIT(A). GRO UND NO. 2 & 3 OF THE REVENUES APPEAL STANDS DISMISSED. 22. THROUGH GROUND NO.4, REVENUE HAS CHALLENGED THE FINDING OF LD. CIT(A) HOLDING THE CALCULATION OF BOOK PROFIT M ADE BY THE LD. A.O AS INCORRECT. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE LD. A.O AFTER MAKING ADDITION FOR PROPORTIONATE DISALLOWANCE OF S ALARY, FLUCTUATION IN FOREIGN EXCHANGE AS INCOME FROM OTHER SOURCES AN D DISALLOWANCE U/S 40A(IA) OF THE ACT, ADDED THESE AMOUNT TO THE B OOK PROFITS OF THE ASSESSEE AND RECOMPUTED THE BOOK PROFIT. LD. CIT(A ) DELETED THIS ADDITION TO THE BOOK PROFITS. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 23. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING THE ORDERS OF LD. A.O. 24. LD. COUNSEL FOR THE ASSESSEE SUBMITTED AS UNDER ; 5.2 THAT THE AO MADE SIMILAR ADDITION IN BOOK PROF IT U/S 115 JB WHICH WERE MADE WHILE COMPUTING INCOME U/S 28 TO 44D. THA T THE PURPOSE OF YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 15 INSERTION OF SECTION 115JB IS VERY SPECIFIC AND FOR THAT AS EXHAUSTIVE SET OF ADDITION AND DELETION CLAUSE HAS BEEN GIVEN. THE AO IS NOT ENTITLED TO GO BEYOND THESE SPECIFIC CLAUSES. HOWEVER, AS DONE THR OUGHOUT THE ASSESSMENT, THE AO DID NOT BOTHER TO RESTRICT HIMSE LF TO THE PROVISIONS OF THE ACT AND TRIED TO DO SOMETHING WHICH ACCORDING T O THE ACT, HE WAS NOT EMPOWERED TO DO. 5.3 THAT AS PER EXPLANATION 1 TO SUB SECTION 2 OF SECTION 115JB, ONLY ADDITIONS DESCRIBED IN CLAUSES A TO K AND REDUCTION S DESCRIBED IN CLAUSES (I) TO (VIII) ONLY CAN BE MADE. THERE ARE SPECIFIC ADDITION AND REDUCTIONS IN BOOK PROFITS WHICH ARE ALLOWED IN CALCULATION OF BO OK PROFIT. 5.4 THE ADDITION MADE BY AO IN ABOVE BOOK PROFIT AR E NOT IN THE LIST OF ADDITIONS AND REDUCTIONS IN THAT PARTICULAR SECTION . THE BOOK PROFIT SHOULD BE PROFIT DERIVED FROM PROFIT & LOSS ACCOUNT PREPAR ED IN ACCORDANCE WITH THE COMPANIES ACT AND AO CANNOT MAKE ANY ADJUSTMENT APART FROM WHATEVER SPECIFICALLY MENTIONED IN SECTION 115JB IT SELF. 5.5 VERY INTERESTINGLY, THE AO HAS ADDED RS.3,86,54,573/- WHILE PASSING ORDER U/S 28 TO 44D & 115JB BOTH, BUT NOW HE IS COMING IN APPEAL BEFORE YOUR HONOUR WITH ONE ADDITION ONLY I.E. DISALLOWANC E OF SALARY EXPENSES. 5.6 NOW THE AO HAS COME OUT BEFORE HON'BLE TRIBUNA L WITH THE ISSUE OF SALARY ONLY. THE ADDITION MADE BY THE OF RS.1,52,82,274/- OF FOREIGN EXCHANGE FLUCTUATION HAS BEEN LEFT BY HIM. THIS SHO WS HOW CONFUSED THE AO WAS WHILE PASSING THE ORDER AND WHILE FILING THE APPEAL BEFORE YOUR HONOUR. 5.7 NOW COMING TO SECTION 115JB(F) REFERRED BY THE AO, THIS CLAUSE FHAS BEEN INTRODUCED TO ADD ANY AMOUNT OF EXPENDITURE RE LATABLE TO SECTION 10, SECTION 11 & 12. CORRESPONDINGLY CLAUSE (II) HAS BEEN INTRODUCED TO REDUCE THE INCOME RELATABLE TO SECTION 10, SECTION 11 & 12. HENCE BOTH YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 16 THERE CLAUSES ARE INSERTED IN SECTION 115JB TO GIVE EXEMPTION FROM MAT PROVISIONS RELATED TO SECTION 10, SECTION 11 & SECTION 12. IT IS WORTHWHILE TO NOTE THAT SECTION 10AA IS NOT INCLUDED HERE. 5.8 THAT MAT IS ALREADY APPLICABLE ON ASSESSEE AND MAT HAS ALREADY BEEN CONSIDERED ON WHOLE AMOUNT. 5.9 CLAUSE F IS NOT THE CLAUSE WHICH PERMITS THE AO TO MAKE ANY ADDITION AND TO ADD UNDER THIS CLAUSE. THE GROUND RAISED BY THE AO IS THEREFORE PATENTLY WRONG. 25. LD. COUNSEL FOR THE ASSESSEE RELIED ON FOLLOWIN G JUDGMENTS; (I) APOLLO TYRES LTD. VS. COMMISSIONER OF INCOME TAX REPORTED IN 255 ITR 273. (II) COMMISSIONER OF INCOME TAX VS. BINANI CEMENT LTD. REPORTED IN 95 CCH 0186. (III) COMMISSIONER OF INCOME TAX VS. HCL COMNET SYSTEMS & SERVICES LTD. REPORTED IN 76 CCH 1111 ISCC (IV) COMMISSIONER OF INCOME TAX VS. ADBHUT TRADING CO. ( P) LTD. REPORTED IN 79 CCH 0553 MUMHC (V) MALAYALA MANORAMA CO. LTD. VS. COMMISSIONER OF INCO ME TAX REPORTED IN 76 CCH 0536 ISCC (VI) TATA REALTY & INFRASTRUCTURE LTD. VS. PRINCIPAL COMMISSIONER OF INCOME TAX REPORTED IN ITA NO. 7135 , 7136 /MUM/2017 & 7137/MUM/2018. YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 17 26. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORDS PLACED BEFORE US. REVENUE HAS CHALLENGED THE DELETION OF ADDITION MADE TO THE BOOK PROFITS MADE BY THE LD. A.O. LD. CIT(A) D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE BOOK PROFIT SHOWN BY THE ASSESSEE U/S 115JB OF THE ACT WAS CONSIDERED CORRECT OBSERVING A S FOLLOWS; 8.0 THIS GROUND OF APPEAL IS WITH REGARD TO MAKING SIMILAR ADDITION IN RETURNED BOOK PROFIT U/S 115JB WHICH WERE MADE I N SECTION 28 TO 44D. I HAVE CAREFULLY GONE THROUGH ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT THIS REGARD. 8.1 THE APPELLANT HAS STATED THAT SECTION 1 15JB IS REGARDING SPECIAL PROVISION FOR PAYMENT OF TAX. AS PER EXPLANATION 1 TO SECTION 115JB, ONLY ITEM GIVEN IN (A) TO (K) CAN BE ADDED. NO OTHE R ADDIT.ION OTHER THAN GIVEN IN (A) TO (K) OF EXPLANATION 1 CAN BE MA DE. FOR COMPUTING SECTION 28 TO 44D INCOME, THE PROVISIONS ARE DIFFER ENT. THE AO CONFUSED HIMSELF AND ADDED THE SAME AMOUNT AS HE A DDED IN SECTION 28 TO 44D. ' 8.2 THE CONTENTION OF THE APPELLANT IS CORRECT AND NO ADDITION U/S 115JB CAN BE MADE IN RETURNED INCOME OTHER THAN SPECIFIED IN EXPLANATION 1 OF SECTION 115JB. THE ENTIRE ADDITIONS MADE UNDER SECTION 115 JB IS DIRECTED TO BE DELETED. AS A RESULT, THIS GROUND OF APPEAL IS ALL OWED . 27. THIS ISSUE HAS CONSISTENTLY HAS BEEN DEALT BY H ONBLE COURTS AND TRIBUNALS. OBSERVATION OF FEW OF SUCH JUDGMENT S ARE MENTIONED BELOW:- YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 18 (I) HON'BLE SUPREME COURT OF INDIA IN THE CASE OF APOLL O TYRES LTD. VS. COMMISSIONER OF INCOME TAX REPORTED IN 255 ITR 273 SC HELD AS UNDER:- THE REFORE, WE ARE OF THE OPINION, THE ASSESSING OFFICE R WHILE COMMUTING THE INCOME UNDER SECTION 115-J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIES BY THE AUTHORITIES UNDER THE COMPANIES AC T AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES ANA REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION . TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE TH E JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN T HE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN T HE EXPLANATION TO SECTION 115-J .' (II) HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BINANI CEMENT LTD. REPORTED IN 95 CCH 0186 KOLHC HELD AS UNDER :- 'DISCLOSURE MADE IN FINANCIAL STATEMENTS WHICH IS N OT TO BE CONSTRUED AS ANY QUALIFICATION INDICATING ANY INACC URACY IN THE ACCOUNTS. THERE WAS, THUS NO MISTAKE ON THE PAR T OF THE ASSESSEE IN DEBITING THE LOSS TO THE PROFIT AND LOS S ACCOUNT. APEX COURT IN APOLLO TYRES (SUPRA) HELD THAT ASSESS ING OFFICER WHILE COMPUTING THE INCOME UNDER 115-J HAS ONLY YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 19 THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES AC T AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION . TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE TH E JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN T HE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN T HE EXPLANATION TO SECTION 115-J.' (III) HON'BLE SUPREME COURT INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HCL COMNET SYSTEMS & SERVICES LTD. REPORTED IN 76 CCH 1111 ISCC HELD AS UNDER:- 'FOR THE PURPOSES OF S. 115JA, THE AO CAN INCREASE THE NET PROFIT DETERMINED AS PER THE P&L A/C PREPARED AS PE R PARTS 11 AND III OF SCH. VI TO THE COMPANIES ACT ONLY TO THE EXTENT PERMISSIBLE UNDER THE EXPLANATION THERETO. THE SAID EXPLANATION HAS PROVIDED SIX ITEMS, I.E., ITEM NOS. (A) TO (F) WHICH IF DEBITED TO THE P&L A/C CAN BE ADDED BACK T O THE NET PROFIT FOR COMPUTING THE BOOK PROFIT. THE PROVI SION FOR BAD AND DOUBTFUL DEBT CAN BE ADDED BACK TO THE NET PROFIT ONLY IF ITEM (C) STANDS ATTRACTED. ITEM (C) DEALS W ITH AMOUNT(S) SET ASIDE AS PROVISION MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES. TH E ASSESSEE'S CASE WOULD, THEREFORE, FALL WITHIN THE AMBIT OF ITE M (C) ONLY IF YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 20 THE AMOUNT IS SET ASIDE AS PROVISION; THE PROVISION IS MADE FOR MEETING A LIABILITY; AND THE PROVISION SHOULD B E FOR OTHER THAN ASCERTAINED LIABILITY, I.E., IT SHOULD BE FOR AN UNASCERTAINED LIABILITY. IN OTHER WORDS, ALL THE IN GREDIENTS SHOULD BE SATISFIED TO ATTRACT ITEM (C) OF THE EXPL ANATION TO S. 115JA. ITEM (C) IS HOWEVER NOT ATTRACTED IN THIS CA SE. THE PROVISION FOR BAD AND DOUBTFUL DEBT IS MADE TO COVE R UP THE PROBABLE DIMINUTION IN THE VALUE OF ASSET, I.E., DE BT WHICH IS AN AMOUNT RECEIVABLE BY THE ASSESSEE. THEREFORE, SU CH A PROVISION CANNOT BE SAID TO BE A PROVISION FOR LIAB ILITY, BECAUSE EVEN IF A DEBT IS NOT RECOVERABLE, NO LIABI LITY COULD BE FASTENED UPON THE ASSESSEE. IN THE PRESENT CASE, THE DEBT IS THE AMOUNT RECEIVABLE BY THE ASSESSEE AND N OT ANY LIABILITY PAYABLE BY THE ASSESSEE AND, THEREFORE, A NY PROVISION MADE TOWARDS IRRECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE, ITEM ( C) OF THE EXPLANATION IS NOT ATTRACTED TO THE FACTS OF TH E PRESENT CASE. IN THE CIRCUMSTANCES, THE AO WAS NOT JUSTIFIE D IN ADDING BACK THE PROVISION FOR DOUBTFUL DEBTS UNDER CL. (C) OF THE EXPLANATION TO S. 115JA.-CIT VS. HCL COMNET SYS TEMS & SERVICES LTD. (2008) 219 CTR (DEL) 226 AFFIRMED.' (IV) HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ADBHUT TRADING CO. ( P) LTD. REPORTED IN 79 CCH 0553 MUMHC HELD AS UNDER:- YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 21 'ONCE TILE ACCOUNTS INCLUDING THE P&L A/C ARE CERTI FIED BY THE AUTHORITIES UNDER THE COMPANIES ACT IT IS NOT O PEN TO THE AO TO CONTEND THAT THE P&L A/C HAS NOT BEEN PREPARE D IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT , 1956 AND MAKE ADDITION TOWARDS BOOK PROFITS UNDER S. 115 JB.' (V) HON'BLE SUPREME COURT OF INDIA IN THE CASE OF MALAY ALA MANORAMA CO. LTD. VS. COMMISSIONER OF INCOME TAX REPORTED IN 76 CCH 0536 ISCC HELD AS UNDER:- 'WE HAVE HEARD TILE LEARNED COUNSEL FOR THE PARTIES AT LENGTH AND CAREFULLY PERUSED THE WRITTEN SUBMISSIONS FILED BY THEM. IN OUR CONSIDERED OPINION, THE CONTROVERSY IN VOLVED IN THIS CASE IS NO LONGER RES INTEGRA. A THREE JUDGE B ENCH OF THIS COURT IN APOLLO TYRES (SUPRA) HAS CLEARLY INTE RPRETED S. 115J OF THE 1961 ACT. THERE IS NO SCOPE FOR ANY FUR THER DISCUSSION.' (VI) HON'BLE ITAT MUMBAI BENCH IN THE CASE OF TATA REALT Y & INFRASTRUCTURE LTD. VS. PRINCIPAL COMMISSIONER OF I NCOME TAX REPORTED IN ITA NO. 7135, 7136 / MUM / 2017 & 7137 / MUM / 2018 HELD AS UNDER :- 'MOREOVER THE ID. CIT(A)'S OPINION THAT THE BOOK PR OFIT NEEDS TO BE REWORKED AND THE IMPUGNED AMOUNT ADDED TO BOO K PROFIT IS NOT SUSTAINABLE. IN THIS REGARD WE NOTE O N THIS VERY ISSUE, THE HON'BLE APEX COURT HAS GIVEN A DECISION IN APOLLO TYRES LTD. SUPRA), IN THIS CASE, IT WAS HELD AS UNDER: YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 22 IT HAS BEEN SUBMITTED THAT IN THIS DECISION, AT PAG E 280, IT HAS BEEN HELD THAT 'WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 11 5J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF AC COUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIE S ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER H T HE LIMITED POWER OF MAKING INCREASE AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION . TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE TH E JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN T HE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN T HE EXPLANATION TO SECTION 1151.' IN THIS REGARD, IT OB SERVED THAT THE AFORESAID JUDGMENT IS NOT APPLICABLE IN THE CAS E OF THE ASSESSEE AS IT HAS BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS (PARA 5) THAT THE ACCOUNTS OF THE ASSESS EE HAS NOT BEEN PREPARED IN ACCORDANCE WITH PROVISIONS OF PART 11 TO SCHEDULE VI TO THE COMPANIES ACT. FROM THE ABOVE , IT IS AMPLY EVIDENT THAT THE HON'BLE APEX COURT HAS EXPOU NDED THAT ONCE THE ACCOUNTS HAVE BEEN CERTIFIED BY THE A UDITORS AND ADOPTED IN THE ANNUAL GENERAL MEETING, THE A.O. HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF AC COUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE ACT AS H AVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIE S ACT. THE A.O. THEREAFTER HAS A LIMITED POWER TO MAKE ADJUSTMENTS AS PROVIDED FOR IN THE EXPLANATION OF T HE SAID YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 23 SECTION. FROM THE ABOVE EXPOSITION, IT IS AMPLY CLE AR THAT THE HON'BLE APEX COURT HAS DULY HELD THAT THE A.O. DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT S HOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTEND PROVID ED IN THE EXPLANATION TO SECTION 1151. WE FIND THAT THE EXPOS ITION BY THE HON'BLE APEX COURT IS THE LAW OF THE LAND AND I F THE A.O. HAD DULY FOLLOWED THE SAME, HE DID NOT NEED TO DECL ARE SO IN HIS ASSESSMENT ORDER. IN FACT, WHAT THE ID. CIT( A) HAS DONE IS NOT AT ALL SUSTAINABLE IN LAW. HE HAS DISTI NGUISHED THE ABOVE HON'BLE APEX COURT DECISION ON THE PREMIS E THAT THE ACCOUNTS HAVE NOT BEEN PREPARED AS PER PART II OF SCHEDULE VI OF THE COMPANIES ACT. IT IS NOT THE CAS E OF THE ID. CIT(A) THAT THE ACCOUNTS ARE NOT CERTIFIED BY T HE AUTHORITIES UNDER THE COMPANIES ACT. IN THIS VIEW O F THE MATTER, THE DISTINCTION BROUGHT ON RECORD BY THE ID . CIT (A) IS TOTALLY UNSUSTAINABLE IN LAW.' 28. WE OBSERVE THAT IT IS AN ESTABLISHED PROPOSITIO N THAT FOR COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT LIMI TED SCOPE IS AVAILABLE WITH LD. A.O TO JUST REFER TO EXPLANATION NO.1 OF SECTION 115JB OF THE ACT AND MAKE THE ADJUSTMENTS OF ITEMS MENTIONED THEREIN IF NOT MADE BY THE ASSESSEE. IN THE INSTAN T CASE LD. A.O SEEMS TO HAVE ACTED BEYOND THE PROVISIONS LAID DOWN IN SECTION 115JB OF THE ACT AND HAS MADE THE ADJUSTMENT TO THE BOOK PROFITS YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 24 COMPUTED AS PER COMPANIES ACT, OF THE ITEMS NOT APP EARING IN THE EXPLANATION 1 OF SECTION 115JB OF THE ACT. 29. WE THEREFORE IN LIGHT OF ABOVE JUDGMENTS OF H ONBLE COURTS REFERRED ABOVE AND ON EXAMINING THE FACTS OF THE IN STANT APPEAL, FIND THAT THE LD. A.O GROSSLY ERRED IN MAKING THE ADDITI ONS TO THE BOOK PROFITS WITHOUT PROPERLY APPLYING THE PROVISIONS OF SECTION 115JB OF THE ACT. THUS NO ADDITION OF THE ALLEGED AMOUNTS O UGHT TO HAVE BEEN MADE TO THE BOOK PROFITS FOR THE PURPOSE OF COMPUTI NG TAX LIABILITY U/S 115JB OF THE ACT. NO INTERFERENCE IS THUS CALL ED FOR IN THE FINDING OF LD. CIT(A). GROUND NO.4 OF THE REVENUE S TANDS DISMISSED. 30. GROUND NO.5 IS GENERAL IN NATURE WHICH REQUIRES NO ADJUDICATION. 31. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.201 9. SD/ - (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 31 OCTOBER, 2019 /DEV YASH TECHNOLOGIES PVT. LTD ITA NO.616/IND/2018 25 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE