INCOME TAX OFFICER-11(1)(3), MUMBAI V. SAVANNAH REAL ESTATE PRIVATE LIMITED, MUMBAI

ITA 6310/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0585 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 18-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJOO GARADIA
• Assessee Lawyers: B V JHAVERI
• Keywords: Question of law; Cost of acquisition
• Section: 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.6310/M/2017 ASSESSMENT YEAR: 2013-14 INCOME TAX OFFICER-11(1)(3), ROOM NO.201, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020 VS. M/S. SAVANNAH REAL ESTATE PVT. LTD., 401/B, WEST VIEW, BAJAJ ROAD, VILE PARLE, MUMBAI-400 057 PAN: AAICS6458B (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI B.V. JHAVERI, A.R. REVENUE BY : MS. AARJOO GARADIA, D.R. DATE OF HEARING : 16.01.2018 DATE OF PRONOUNCEMENT : 07.02.2018 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 01.06.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE COMPANY HAS FILED THE APPEAL ON 17. 02.17 WHEREAS THE DATE FOR FILING THE APPEAL UNDER SECTION 250 AS PER FORM NO.35 WAS 13.04.16. THUS, THERE WAS DELAY OF 10 MONTHS I N PREFERRING THE APPEAL. THE LD. CIT(A) HAS CONDONED THE DELAY AND ADMIT THE APPEAL BY OBSERVING AS UNDER: 16.THE APPELLANT COMPANY ALSO RELIED ON THE DECISI ON OF THE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS . MST. KATIJI & ORS. (167 ITR 471) WHEREIN THE SUPREME COURT HAD OB SERVED THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIO NS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTIC E DESERVES TO BE ITA NO.6310/M/2017 M/S. SAVANNAH REAL ESTATE PVT. LTD. 2 PREFERRED, FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON-DELIBERATE DE LAY. AFTER CONSIDERING THE APPLICATION FOR CONDONATION O F DELAY AND THE AFFIDAVIT OF MR. MOHAMED HUSAIN PATEL, I AM SATISFI ED THAT THERE IS NO MALA FIDE IN NOT FILING THE APPEAL WITHIN THE PRESC RIBED TIME PROVIDED UNDER THE ACT. IN FACT, THE APPELLANT COMPANY HAD A CTED AS PER THE ADVICE OF THE ADVOCATE WHO IS SUPPOSED TO KNOW THE LAW. IN THESE CIRCUMSTANCES, I CONDONE THE DELAY IN PREFERRING TH E PRESENT APPEAL AND ADMIT THE APPEAL. 3. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. I FIND THAT THE LD. CIT(A) HAS CONDONED THE DELAY ON THE GROUND THAT ONE MR. HUSAIN PATEL, ADVOCATE FROM M/S. CG KAKA AND CO. WH O WAS THE AUTHORISED REPRESENTATIVE OF THE COMPANY ATTENDED B EFORE THE AO ADVISED THE COMPANY NOT TO FILE APPEAL IN THIS CASE . THEREAFTER, HE HAS ALSO FILED THE AFFIDAVIT THAT HE HAS ADVISED TH E ASSESSEE NOT TO FILE AN APPEAL AND DUE TO HIS ADVICE ASSESSEE COULD NOT FILE AN APPEAL WITHIN TIME. THEREFORE, THERE WAS DELAY. THE LD. C IT(A) HAS CONDONED THE DELAY BY FOLLOWING THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS. 167 ITR 471. 4. THE SHORT FACTS OF THE CASE ARE AS UNDER: ON PERUSAL OF THE P&L ACCOUNT, IT IS SEEN THAT THE NET PROFIT OF THE ASSESSEE COMPANY IS RS.82,98,960/-. HOWEVER, ON PERUSAL OF THE STATEMENT OF COMPUTATION OF INCOME, IT IS SEEN THAT WHILE COMPUTING THE NORMAL INCOME, THE ASSESSEE COMPANY HAS DEDUCTE D RS.82,86,067/- BEING PROFIT ON SALE OF OFFICE AND T AXABLE PROFIT WAS SHOWN AT RS.12,893/-. FURTHER, IT IS ALSO SEEN THAT , WHILE COMPUTING THE BOOK PROFIT U/S 115JB, THE ASSESSEE HAS TAKEN B OOK PROFIT AT RS.12,893/- INSTEAD OF NET PROFIT OF RS. 82,98,960/ -. THEREFORE, VIDE ITA NO.6310/M/2017 M/S. SAVANNAH REAL ESTATE PVT. LTD. 3 ORDER SHEET NOTING DATED 29.10.2015, THE LD. AR OF THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE BOOK PROFIT SHOULD N OT BE TAKEN AT RS.82,98,960/- (I.E. NET PROFIT AS PER P&L ACCOUNT) WITHOUT REDUCING THE PROFIT ON SALE OF OFFICE WHICH IS CONSIDERED UN DER LONG TERM CAPITAL GAIN. IN RESPONSE TO THE SAME, THE LD. AR O F THE ASSESSEE VIDE LETTER DT. 25.02.2016 HAS SUBMITTED ITS SUBMIS SION WHICH IS REPRODUCED AS UNDER: 'DURING THE YEAR OUR CLIENT HAS SHOWN BOOK PROFIT R S. 82,98,9601- WHICH INCLUDES LONG TERM CAPITAL GAIN OF RS. 82,86,0671- ON SALE O F THE OFFICE PREMISES. THEREFORE, THE SAID CAPITAL GAIN WAS EXCLUDED FROM THE BOOK PR OFIT AS CAPITAL GAIN ON THE SAME WAS SHOWN UNDER THE HEAD CAPITAL GAIN ON SALE OF TH E OFFICE PREMISES AND THE NECESSARY TAX THEREON WAS PAID. SINCE CAPITAL GAIN IS TAXED SEPARATELY THE PROVISION OF MAT U/S 11 5JB DOES NOT APPLY. HOWEVER, AS REQUI RED BY YOUR GOODSEIF WE ENCLOSE A WORKING U/S 11 5JB TAKING ALSO THE CAPITA L GAIN AS BOOK PROFIT.' 5. THE AO HAS CONSIDERED THE EXPLANATION AND HELD T HAT THERE IS NO PROVISION UNDER SECTION 115JB OF THE ACT THAT TH E PROFIT ON LONG TERM CAPITAL GAIN SHOULD BE REDUCED FROM NET PROFIT WHILE CALCULATING THE BOOK PROFIT AND HE DISALLOWED THE SAME. 6. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 7. IN THIS RESPECT THE ASSESSEE RELIES ON THE DECIS ION OF THE HON'BLE TRIBUNAL, BANGALORE BENCH, IN THE CASE OF KARNATAKA STATE IND USTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION LTD. VS DCIT (76 TAXMANN.CO M 360) WHEREIN THE HON'BLE TRIBUNAL HELD AS UNDER: 'THEREFORE FOLLOWING THE SAME RATIO, WE HOLD THAT T HE AMOUNT OF PROFIT ELIGIBLE U/S 10(38) SHOULD ALONE BE CONSIDERED FOR THE PURPOSE OF TAX LIABILITY U/S 115JB OF THE ACT. THE CO-ORDINATE BENCH IN THE CASE OF M.S.R & SONS INVESTMENTS LTD. V. DY. CIT [IT APPEAL NO.769 (BANG .) OF 2000, DATED 20-05- 2005] HELD WHILE COMPUTING CAPITAL GAINS, BENEFIT O F INDEXED COST OF ACQUISITION IS TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING TAX LIABILITY U/S 115JB. THIS DECISION WAS APPEALED BY THE REVENUE BE FORE THE HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO.3189 OF 2005 AN D THE HONBLE JURISDICTIONAL HIGH COURT BY ITS JUDGMENT DATED 14T H SEPTEMBER 2011 HAD UPHELD THE ORDER OF THE TRIBUNAL. THE SAME RATIO IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THEREFORE, THE ASSESSEE-COMP ANY IS ENTITLED TO THE ITA NO.6310/M/2017 M/S. SAVANNAH REAL ESTATE PVT. LTD. 4 BENEFIT OF INDEXATION WHILE CALCULATING LONG-TERM C APITAL GAINS WHICH ARE TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING TAX LIAB ILITY U/S 1 15JB OF THE ACT. THIS GROUND OF APPEAL VIZ. 2(B)IS ALLOWED.' 8.IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITS THAT T HE BENEFIT OF INDEXATION U/S.48 OF THE ACT, I.E., THE INDEXED COST OF ACQUIS ITION, IS TO BE ALLOWED TO THE ASSESSEE WHILE COMPUTING THE CAPITAL GAIN TO BE ADD ED TO THE BOOK PROFIT TO BE COMPUTED U/S. 11 5JB OF THE ACT. 9. THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE I S ALSO ENTITLED TO EXEMPTION OF RS.50,00,000/- CLAIMED BY THE ASSESSEE U/S. 54EC OF THE ACT FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN TO BE ADDED T O THE BOOK PROFIT U/ S. 11 5JB OF THE ACT. 10.IN THIS RESPECT, THE ASSESSEE RELIES ON THE DECI SION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. METAL & CHROMIUM PLATER P. L TD. (76 TAXMAN N.COM 229) WHEREIN THE HIGH COURT HELD AS UNDER: THE ALLOWANCE OR OTHERWISE OF THE CLAIM UNDER SECTI ON 54EC HAS TO BE SEEN IN THE CONTEXT OF THE PROVISIONS OF SECTION 1 15JB WHI CH IS A SELF CONTAINED CODE OF ASSESSMENT. THE LEVY OF TAX IS ON THE BOOK PROFITS AFTER EFFECTING VARIOUS UPWARD AND DOWNWARD ADJUSTMENTS AS SET OUT IN TERMS OF THE EXPLANATION THERETO. THE PROVISIONS OF SUB-SECTION (5) OF S. 1 15JB OPEN THE ASSESSMENT TO THE APPLICATION OF ALL OTHER PROVISIONS CONTAINED IN THE INCOME TAX ACT EXCEPT IF SPECIFICALLY BARRED BY THAT SECTION ITSELF. S. 1 15JB (5) READS AS FOLLOWS: '(5) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, AL L OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN THIS SECTION.' 7. THUS, THE ADJUSTED BOOK PROFITS WOULD BE FURTHE R ELIGIBLE TO THE BENEFITS SET OUT IN THE OTHER PROVISIONS OF THE ACT AND THE PLAIN LANGUAGE OF SECTION 115JB THUS ADMITS OF THE GRANT OF RELIEF UNDER SECTION 54EC IN AN ASSESSMENT THERE UNDER. WE NOW DEAL WITH THE CAS E LAW RELIED UPON BY THE ASSESSING OFFICER IN DENYING RELIEF TO THE ASSE SSEE. THE SUPREME COURT, IN THE CASE OF APOLLO TYRES LTD. (SUPRA) IS TO THE EFFECT THAT THE ASSESSING OFFICER IS NOT EMPOWERED TO EMBARK ON AN ENQUIRY WI TH REGARD TO THE ENTRIES IN THE PROFIT AND LOSS ACCOUNT MAINTAINED I N ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT 1956 AND APPROVED I N THE AGM EXCEPT TO THE EXTENT OF EFFECTING MODIFICATIONS IN ACCORDANCE WITH THE EXPLANATION TO SECTION 11 5J. THE BOMBAY HIGH COURT IN THE CAS E OF VEEKAYLAL INVESTMENTS (SUPRA) CONSIDERS THE INCLUSION OF CAPI TAL GAIN FOR THE PURPOSES OF ASSESSMENT UNDER SECTION 115J. BOTH JUD GEMENTS ARE RENDERED IN THE CONTEXT OF SECTION 115J WHICH DOES NOT CONTAIN A PROVISION ANALOGOUS TO SUBSECTIONS (4) OF SECTION 1 15JA OR (5) OF SECTION 1 15JB OF THE ACT. THUS WHILE AN ASSESSMENT U/S 115J WOULD BE CONCLUDED EXCLUSIVELY ON THE BASIS OF THE BOOK PROFITS AS ADJ USTED BY THE ITEMS SET OUT IN THE EXPLANATION THERE UNDER, IN AN ASSESSMEN T IN TERMS OF SECTIONS 115JA OR JB, THE ADJUSTED BOOK PROFITS WOULD BE FUR THER SUBJECTED TO THE EFFECT OF OTHER PROVISIONS OF THE ACT THAT ARE SPEC IFICALLY BROUGHT INTO PLAY ITA NO.6310/M/2017 M/S. SAVANNAH REAL ESTATE PVT. LTD. 5 BY VIRTUE OF SUB-SECTIONS (4) OF SECTION 1 15JA AND (5) OF SECTION 115JB. 8. RELIANCE OF THE LEARNED STANDING COUNSEL ON THE DECISION OF THE DIVISION BENCH OF THE KERALA HIGH COURT IN THE CASE OF N.J. JOSE AND CO. (P.) LTD. V. ASSTT. CIT [2010] 321 ITR 132/[2008] 174 TA XMAN 141 IS ALSO DISTINGUISHABLE FOR THE SAME REASON AS AFORESAID. 11. IN VIEW OF THE ABOVE DISCUSSION, THE SUBSTANTIA L QUESTION OF LAW IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. THE DEPARTMENTAL APPEAL IS DISMISSED WITHOUT COSTS.' 12. THEREFORE, THE ASSESSEE IS ALSO ENTITLED TO EXE MPTION OF RS.50,00,000/- CLAIMED BY THE ASSESSEE U/S. 54EC OF THE ACT FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN TO BE ADDED TO THE BOOK PROFIT U/S. 115JB OF THE ACT. 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF HONBLE M ADRAS HIGH COURT IN THE CASE OF CIT VS. METAL & CHROMIUM PLATE R P. LTD. 726 ITR 29. RESPECTFULLY FOLLOWING THE SAME, WE DISMIS S THE DEPARTMENTAL APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.2018. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 07.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.