M/s. Bhushan Steels Ltd., New Delhi V. DCIT, New Delhi

ITA 706/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52751 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS GEETMALA MOHNANY
• Keywords: Depreciation; Earning of tax free income; Retrospective amendment; Bad and doubtful debts
• Section: 43B; 80HHC; 115JB; 10B; 12; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.706/DEL/2010 ASSESSMENT YEAR : 2007-08 BHUSHAN STEEL LTD., F-BLOCK, 1 ST FLOOR, INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI. PAN : AAACB1247M VS. DCIT, CIRCLE-2(1), ROOM NO.398D, CR BUILDING, NEW DELHI. ITA NO.901/DEL/2010 ASSESSMENT YEAR : 2004-05 DCIT, CIRCLE-2(1), ROOM NO.398D, CR BUILDING, NEW DELHI. VS. BHUSHAN STEEL LTD., F-BLOCK, 1 ST FLOOR, INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI. PAN : AAACB1247M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI KUMAR, CA REVENUE BY : MRS. GEETMALA MOHNANY, CIT, DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER ITA NO.706/DEL/2010 IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 4 TH JANUARY, 2010 IN RESPECT OF ASSESSMENT YEAR 2007-08. ITA NO.901/ DEL/2010 IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AG AINST THE CONSOLIDATED ORDER PASSED BY THE CIT (A) DATED 11 TH DECEMBER, 2009 IN ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 2 RESPECT OF ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 AND THE YEAR UNDER APPEAL IS ASSESSMENT YEAR 2004-05. 2. THESE APPEALS RELATE TO THE SAME ASSESSEE. THOUGH THEY ARE NOT CROSS APPEALS, THESE APPEALS WERE ARGUED TOGETHER BY BOT H THE PARTIES, HENCE, FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.706/DEL/2010 3. GROUNDS OF APPEAL READ AS UNDER:- (1) THAT THE ORDER U/S 250 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) V, NEW DELHI I S AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUS TIFIED TO UPHOLD THE ACTION OF THE LEARNED DCIT, CIRCLE -2(1), N EW DELHI IN COMPUTING THE DEDUCTION U/S 80-IA AFTER REDUCING A SUM OF RS. 1,72,82,880/- ON ACCOUNT OF SYNCHRONIZATION CHARGES E VEN THOUGH THE LIABILITY FOR THE SAME HAD YET NOT BEEN FRUCTIF IED AND THAT THE SAME HAS NOT BEEN DEBITED TO PROFIT AND LOSS ACCO UNT. (2) THAT THE ORDER U/S 250 PASSED BY THE LEARNED COMMI SSIONER OF INCOME- TAX (APPEALS) V, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOL D THE ACTION OF THE LEARNED DCIT, CIRCLE -2(1), NEW DELHI I N ADDING BACK A SUM OF RS. 8,00,000/- UNDER SECTION 14-A OF TH E INCOME TAX ACT, 1961 ON ACCOUNT OF EXPENDITURE INCURRED IN RE LATION TO EXEMPT INCOME WHILE COMPUTING INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT,1961. (3) THAT THE ORDER U/S 250 PASSED BY THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) V, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD TH E ACTION OF THE LEARNED DCIT, CIRCLE -2(1), NEW DELHI IN ADDING ADD BACK A SUM OF RS. 8,00,000/- UNDER SECTION 14-A OF THE INCOM E TAX ACT, 1961 ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WHILE COMPUTING THE BOOK PROFITS U/S 115 JB OF THE INCOME -TAX ACT, 1961. (4) THAT THE ORDER U/S 250 PASSED BY THE LEARNED COMMI SSIONER OF INCOME- TAX (APPEALS) V, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOL D THE ACTION OF THE LEARNED DCIT, CIRCLE -2(1), NEW DELHI I N REJECTING ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 3 THE CLAIM OF DEDUCTION OF A SUM OF RS. 21,55,44,187/- BEING THE AMOUNT OF PROFIT DERIVED FROM THE EXPORT BUSINESS UNDER CLAUSE S. 80 HHC OF THE INCOME-TAX ACT, 1961 AND RS 1,17,68, 617 ON ACCOUNT OF PROVISION FOR FRINGE BENEFIT TAX FROM THE B OOK PROFIT FOR THE PURPOSES OF CALCULATING OF 'MINIMUM ALTERNATE T AX' (MAT) U/S 115JB OF THE INCOME-TAX ACT,1961 . (5) THAT THE ORDER U/S 250 PASSED BY THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) V, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD TH E ACTION OF THE LEARNED DCIT, CIRCLE -2(1), NEW DELHI IN INCREAS ING THE BOOK PROFITS FOR THE PURPOSES OF CALCULATING OF 'MINIMUM AL TERNATE TAX' (MAT) U/S 115JB OF THE INCOME-TAX ACT,1961 BY ADD ING THERETO A SUM OF RS.1,27,68,043/- UNDER THE HEAD PROV ISION FOR DOUBTFUL DEBTS. 4. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED BEFORE US A GROUND-WISE CHART CONTENDING THEREIN THAT THE ISSUES RA ISED IN THE PRESENT APPEAL ARE COVERED. THE SAID CHART WAS PLACED ON RECORD AND A COPY WAS ALSO GIVEN TO THE LEARNED DR. 5. APROPOS GROUND NO.1, IT WAS SUBMITTED THAT GROUND N O.1 HAS TO BE DECIDED AGAINST THE ASSESSEE AND REFERENCE IN THIS REG ARD HAS BEEN MADE TO THE ITAT ORDERS DATED 28 TH AUGUST, 2009 IN ITA NO.2104/DEL/2008 FOR ASSESSMENT YEAR 2005-06 VIDE PARA 6.4 AND ALSO ORDER DATED 13 TH NOVEMBER 2009 IN ITA NO.807/DEL/2009 IN RESPECT OF ASSESSMENT YEAR 2006-07 VIDE PARA NO.5.4. THE GROUNDS R ELATE TO COMPUTATION OF DEDUCTION U/S 80IA AFTER REDUCTION OF A SUM OF ` 1,72,82,880/- ON ACCOUNT OF SYNCHRONIZATION CHARGES. COPIES OF THE AFOREMENTIONED ORDERS OF THE TRIBUNAL ARE ALSO FILED ALONG WITH THE CHART. FOR THE SAKE OF CONVENIENCE FROM THE AFOREME NTIONED DECISION DATED 28 TH AUGUST, 2009 THE RELEVANT PORTION WHEREBY THE DISALL OWANCE WAS UPHELD IS REPRODUCED:- 6.4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE AS SESSEES MAIN CONTENTION THAT THE ASSESSING OFFICER WAS NOT RIGHT I N REDUCING SYNCHRONIZATION CHARGES FROM THE PROFITS OF TH E ELIGIBLE UNITS FOR COMPUTATION OF EXEMPTION U/S 80-IA, CANNOT BE ACCEPTED. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 4 ACCOUNTING. THE SYNCHRONIZATION CHARGES THAT WERE LEVI ED BY THE U.P. POWER CORPORATION WERE NOT CRYSTALLIZED AND CONSEQUENTLY THE ACCRUAL OF LIABILITY HAS TAKEN PLACE D URING THE RELEVANT PREVIOUS YEAR. ALTHOUGH THE ASSESSEE HAS NOT DEBITED THE SAME TO THE P&L A/C THE ASSESSING OFFICER IS DUTY BO UND TO REDUCE THE SAID SUM FROM THE PROFITS OF THE ELIGIBLE UN IT FOR PROPER COMPUTATION OF DEDUCTION U/S 80-IA OF THE ACT. T HE PAYABILITY OF THESE LIABILITIES MAY DEPEND UPON THE DEC ISION OF THE HIGH COURT BUT THE LIABILITY ITSELF HAS CRYSTALISED DU RING THE YEAR IN QUESTION. IN OUR VIEW THE LEARNED CIT (A) WA S RIGHT IN REJECTING THE MAIN CONTENTION OF THE ASSESSEE. WE SEE N O REASON TO INTERFERE. 6.5 AS REGARDS THE ALTERNATIVE CONTENTION OF THE ASSESSEE ON THE AFOREMENTIONED ISSUE, IT WAS CLAIMED THAT THE ASSESSI NG OFFICER WAS NOT CORRECT IN REDUCING THE AMOUNT OF SYNCHRONIZATION CHARGES FROM THE PROFITS OF THE ELIGIBL E UNITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IA OF THE ACT W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT DEBITED SYNCHRONIZATION CHARGES TO THE P&L A/C ON THE GROUND THA T IT WAS NOT ASCERTAINED LIABILITY. IT WAS SUBMITTED THAT IN CASE SYNCHRONIZATION CHARGES WERE TO BE REDUCED FROM THE PR OFITS OF THE ELIGIBLE UNIT, THE SAME WOULD HAVE BEEN DEBITED TO TH E P&L A/C AND SUCH WOULD HAVE TO BE REWORKED ACCORDINGLY. THIS ASPECT HAS BEEN CORRECTLY APPRECIATED BY THE CIT (A) AN D THE A.O. WAS DIRECTED TO VERIFY THE FACTUM OF DEBIT TO THE P&L A/C. IN OUR VIEW THE DIRECTION GIVEN BY THE LEARNED CIT (A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. 6. THE AFOREMENTIONED ORDER WAS FOLLOWED IN SUBSEQUENT YEAR I.E., FOR ASSESSMENT YEAR 2006-07. THEREFORE, AFTER HEARING BOTH THE PARTIES, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DE CISION OF THE TRIBUNAL, IN THE CASE OF THE ASSESSEE ITSELF, WE DECIDE T HIS ISSUE AGAINST THE ASSESSEE AND GROUND NO.1 IS DISMISSED. 7. APROPOS GROUND NO.2 AND 3, THE LEARNED AR DID NOT PRESS THESE GROUNDS, HENCE, THESE GROUNDS ARE DISMISSED BEING NOT PRE SSED. 8. APROPOS GROUND NO.4, IT WAS SUBMITTED BY THE LEARNE D AR THAT THIS GROUND HAS TWO LIMBS; THE FIRST IS REGARDING NON-RE JECTION OF BOOK PROFIT FOR THE PURPOSE OF CALCULATING MAT U/S 115JB B Y AN AMOUNT OF ` 21,55,44,187/- BEING THE AMOUNT OF PROFIT FROM EXPO RT BUSINESS UNDER ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 5 CLAUSE (A), (B) AND (C) OF SUB-SECTION (3) OF SECTION 80HHC. IT WAS SUBMITTED BY THE LEARNED AR THAT FOR SUCH AMOUNT, THE CLAIM OF THE ASSESSEE HAS TO BE DECIDED AGAINST IT BY VIRTUE OF RETROSP ECTIVE AMENDMENT BROUGHT W.E.F. 1.4.2005 BY THE OMISSION OF CLAUSE (IV) OF EXPLANATION 1 TO SECTION 115JB. THE AFOREMENTIONED CLAUSE WAS OMITTED BY THE FINANCE ACT 2011 WITH RETROSPECTIVE E FFECT FROM 1.4.2005. PRIOR TO ITS OMISSION CLAUSE (IV) READ AS UND ER:- (IV) THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UND ER SECTION 80HHC, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CL AUSE(C) OF SUB-SECTION (3) OR SUB-SECTION (3A), AS THE CASE MAY B E, OF THAT SECTION, AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT S ECTION ; OR 9. EARLIER, ACCORDING TO THE PROVISIONS OF EXPLANATIO N 1, THE AMOUNT STATED IN CLAUSE (IV) WAS TO BE REDUCED FOR COMPUTATIO N OF THE PROFIT U/S 115JB AND SINCE THE AFOREMENTIONED CLAUSE HAS BEEN OMI TTED W.E.F. 1.4.2005, THEREFORE, BOOK PROFIT CANNOT BE REDUCED BY PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC AS COMPUTED UNDER CLAUSE (A), (B) AND (C) OF SUB- SECTION (3) OR SUB-SECTION (3A), AS THE CASE MAY BE OF THAT SECTION AND SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECTION. T HEREFORE, PROFITS FROM EXPORT BUSINESS UNDER CLAUSE (A), (B) AND (C) OF SU B-SECTION (3) OF 80HHC CANNOT BE REDUCED FOR THE PURPOSE OF COMPUTATI ON OF BOOK PROFIT U/S 115JB. THEREFORE, SUCH CLAIM OF THE ASSESSEE IS DECIDED AGAINST THE ASSESSEE. 10. NOW, COMING TO THE SECOND LIMB OF THE GROUND NO. 4, WHICH IS WITH RESPECT TO REDUCTION OF BOOK PROFIT FOR THE PURPOSE O F CALCULATING MAT U/S 115JB BY AN AMOUNT OF ` 1,17,68,617/- BEING THE AMOUNT OF PROVISION FOR FRINGE BENEFIT TAX, IT IS THE SUBMISSION O F THE LEARNED AR THAT THIS PORTION OF THE GROUND NO.4 IS COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF ITAT DELHI BENCH IN THE CASE OF ITO VS. VITAGE DISTILLERS LTD. (2010) 130 TTJ 79 (DEL) AND HE HAS PRODUCED ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 6 BEFORE US COPY OF THE SAID DECISION. FOR THE SAKE OF C ONVENIENCE, THE FINDINGS RECORDED IN THE SAID DECISION FOR HOLDING THI S ISSUE IN FAVOUR OF THE ASSESSEE ARE REPRODUCED BELOW:- 9. NOW, WE DECIDE THE ISSUE ON MERIT. FOR THIS PURPOSE TH E PROVISIONS OF EXPLANATION TO S. 115JB ARE RELEVANT AND HENCE WE REPRODUCE THE SAME HEREINBELOW: 'EXPLANATION : FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE P&L A/C FOR THE REL EVANT PREVIOUS YEAR PREPARED UNDER SUB-S. (2), AS INCREAS ED BY ( A ) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE PR OVISION THEREFOR; OR ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAM E CALLED **OTHER THAN A RESERVE SPECIFIED UNDER S. 33AC ; OR ( C )THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBSI DIARY COMPANIES; OR ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOSED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY I NCOME TO WHICH S. 10 (OTHER THAN THE PROVISIONS CONTAINED IN C L. (23G) THEREOF) OR S. 10A-OR S. 10B OR S. 11 OR S. 12 APPLY , ( G ) THE AMOUNT OF DEPRECIATION, IF ANY AMOUNT REFERRED TO IN CLS. ( A ) TO ( G ) IS DEBITED TO THE P&L A/C AND AS REDUCED BY-' 10. FROM THE ABOVE WE FIND THAT AS PER CL. (A) OF THE E XPLANATION, PROVISION FOR INCOME-TAX HAS TO BE ADDED BACK IF IT WA S DEBITED TO THE P&L A/C. NOW, THE QUESTION IS WHETHER THE TERM INCOME -TAX INCLUDES FBT ALSO. IN THIS REGARD, WE FIND THAT THE TERM TAX IS DEFINED IN S. 2(43) WHICH READS AS UNDER: '(43) TAX IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT YEAR MEANS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF TH IS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT P RIOR TO THE AFORESAID DATE AND IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUB SEQUENT ASSESSMENT YEAR INCLUDES THE FBT PAYABLE UNDER S. 115 WA.' 11. FROM THE DEFINITION OF THE TERM 'TAX', WE FIND THAT THE TERM 'TAX' IS A WIDER TERM THAN THE TERM 'INCOME-TAX'. THE TERM 'TAX' ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 7 INCLUDES 'INCOME- TAX' AS WELL AS 'FBT'. BY THE FINAN CE ACT, 2005 W.E.F. 1ST APRIL, 2006, THERE IS AN AMENDMENT IN S. 2( 43) AND IN THE DEFINITION OF 'TAX', IN ADDITION TO 'INCOME-TAX' AND 'SUPER TAX' CHARGEABLE UNDER THE PROVISIONS OF IT ACT, 1961 'FBT' WAS ALSO ADDED PAYABLE UNDER S. 115WA OF THE IT ACT, 1961. THI S DEFINITION OF THE TERM 'TAX' PROVES BEYOND DOUBT THAT THE TERM 'TAX' INCLUDES BOTH 'INCOME-TAX' AS WELL AS 'FBT' AND HENCE THE TERM 'INCOME-TAX' CANNOT INCLUDE THE TERM 'FBT'. WHEN THERE W AS AMENDMENT MADE IN S. 2(43) BY THE FINANCE ACT, 2005 W. E.F. 1ST APRIL, 2006, NO AMENDMENT WAS MADE IN CL. ( A ) OF EXPLANATION TO S. 115JB BY EITHER INCLUDING THE TERM 'FBT' IN ADDITION TO THE TERM 'INCOME-TAX' OR BY SUBSTITUTING THE WORDS 'INCOME-TAX' BY THE TERM 'TAX' AND THEREBY BRINGING 'FBT' ALSO WITHIN THE PU RVIEW OF CL. ( A ) OF EXPLANATION TO S. 115JB. THE ABOVE DISCUSSION C LEARLY PROVES THAT AS PER CL. ( A ) OF EXPLANATION TO S. 115JB, PAYMENT OR PROVISION FOR 'FBT' IS NOT REQUIRED TO BE ADDED BACK FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER S. 115JB OF THE IT ACT, 1961. THIS IS ALSO IMPORTANT TO NOTE THAT THERE WAS CONTROV ERSY AS TO WHETHER PROVISION FOR 'DEFERRED INCOME-TAX' IS REQU IRED TO BE ADDED BACK FOR COMPUTING BOOK PROFIT UNDER S. 115JB. AS PER RETROSPECTIVE AMENDMENT W.E.F. 1ST APRIL, 2001 BY THE FI NANCE ACT, 2008, A NEW CL. ( H ) WAS ADDED IN EXPLN. 1 TO S. 115JB TO THE EFFECT THAT IF PROVISION FOR DEFERRED TAX IS DEBITED TO TH E P&L A/C, THE SAME IS TO BE ADDED BACK FOR COMPUTING BOOK PROFIT. AT THIS TIME ALSO, THERE IS NO SUCH PROVISION TO ADD BACK PROV ISION FOR 'FBT'. IT IS ALSO WORTH NOTING THAT AS PER S. 40( A )( IC ), IT WAS PROVIDED THAT FBT IS NOT ALLOWABLE AS DEDUCTION FOR COM PUTING TAXABLE INCOME. HENCE IT IS SEEN THAT THIS IS AN EXPENDI TURE FOR THE ASSESSEE COMPANY, WHICH IS SPECIFICALLY DISALLOWED AS PER S. 40(A)(IC) BUT THERE IS NO SUCH PROVISION FOR ADDING B ACK THE SAME IN EXPLANATION TO S. 115JB. HENCE, WE DO NOT FIND ANY REASON TO ADD BACK 'FBT' FOR COMPUTING BOOK PROFIT UNDER S. 115 JI3. BOARD'S CIRCULAR RELIED UPON AND FOLLOWED BY THE LEARNED CIT (A) IS IN LINE WITH THIS DECISION OF US WITHOUT TAKING ANY HELP FROM BO ARD CIRCULAR. 12. IN THE LIGHT OF ABOVE DISCUSSION REGARDING STATUTORY PROVISION ON THIS ISSUE, NOW WE EXAMINE THE CONTENTIONS RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE OF THE REVENUE THAT WH EN THE LANGUAGE OF THE SECTION IS CLEAR, NO REFERENCE IS REQUIRED TO EXPLANATORY NOTE OR BOARD'S CIRCULAR. WE ARE OF THE CO NSIDERED OPINION THAT THIS CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE OF THE REVENUE DOES NOT HAVE ANY RELEVAN CE IN THE PRESENT CASE BECAUSE WE HAVE SEEN THAT IN THE PRESEN T CASE, THE PROVISIONS OF EXPLN. 1 TO S. 115JB ARE CLEAR AND AS PER THESE PROVISIONS, PAYMENT OR PROVISION FOR 'FBT' IS NOT REQ UIRED TO BE ADDED BACK FOR THE PURPOSE OF COMPUTING BOOK PROFIT UN DER S. 115JB OF THE ACT BECAUSE WE HAVE SEEN THAT THE TERM USED IN THIS CLAUSE OF EXPLANATION IS 'INCOME-TAX', WHICH DOES NOT INCLUDE 'FBT' AND IN SPITE OF THIS FACT THAT THERE IS A TERM 'TAX' ALREADY ON ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 8 THE STATUTE BOOK, WHICH INCLUDES 'FBT' ALSO, THE LEGISLA TURE HAS NOT USED THAT TERM AND HAS USED THE TERM 'INCOME-TAX' IN EXPLANATION TO S. 115JB. HENCE, FOR THIS DECISION, HEL P OF ANY BOARD'S CIRCULAR OR EXPLANATORY NOTE IS NOT REQUIRED A ND THEREFORE, THIS CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE OF THE REVENUE HAS NO RELEVANCE IN THE PRESENT CASE BECAUSE IN THE PRESENT CASE, THE ASSESSEE DESERVES TO SUCCEED ON THE B ASIS OF THE PROVISIONS OF S. 115JB OF THE ACT WITHOUT ANY HELP F ROM THE BOARD'S CIRCULAR OR EXPLANATORY NOTE. WE, THEREFORE, D ECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DECLINE TO INTERFE RE IN THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. 13. . . . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED 11. HOWEVER, THE LEARNED DR RELIED UPON THE ORDER O F ASSESSING OFFICER AND CIT (A). 12. AFTER HEARING BOTH THE PARTIES, SO AS IT RELATES TO THE AMOUNT OF ` 21,55,44,187/-, WE DECIDE THE ISSUE AGAINST THE ASSESSEE I N VIEW OF AFOREMENTIONED RETROSPECTIVE AMENDMENT IN THE PROVISI ONS OF SECTION 115JB. FOR THE REMAINING AMOUNT OF ` 1,17,68,617, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE RESPECTFULLY FOLLOWING THE AFO REMENTIONED DECISION OF COORDINATE BENCH IN THE CASE OF ITO VS. VI NTAGE DISTILLERS LTD. (SUPRA). IT MAY BE MENTIONED HERE THAT NO CON TRARY DECISION WAS BROUGHT TO OUR NOTICE. THEREFORE, GROUND NO.4 IS PA RTLY ALLOWED IN THE MANNER AFORESAID. 13. APROPOS GROUND NO.5, IT WAS THE SUBMISSION OF THE LE ARNED AR THAT IN VIEW OF AMENDMENT BROUGHT IN EXPLANATION 1 TO SECTION 115JB IN CLAUSE (I), THE ISSUE WITH REGARD TO PROVISION FOR D OUBTFUL DEBT FOR THE PURPOSE OF COMPUTING BOOK PROFIT HAS TO BE DECIDED AG AINST THE ASSESSEE. CLAUSE (I) IN EXPLANATION 1 TO SECTION 115JB PRIOR TO ITS SUBSTITUTION BY THE FINANCE (NO.2) ACT, 2009 WITH RET ROSPECTIVE EFFECT FROM 1.4.2001 READ AS UNDER:- ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 9 IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (H) IS DE BITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY 13.1 SUBSTITUTED CLAUSE WITH RETROSPECTIVE EFFECT FROM 1.4.2001 READ AS UNDER:- (I) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR D IMINUTION IN THE VALUE OF ANY ASSET. 14. LEARNED CIT (A) HAS DECIDED THIS ISSUE VIDE PARA NO .7.2 WHICH READ AS UNDER:- 7.2 THE ISSUE IS DISALLOWANCE OF PROVISION FOR BAD DEBTS U/S 115JB OF THE IT ACT. THE ACT HAS BEEN AMENDED IN RESP ECT OF PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSETS BY CLAUSE (I) IN EXPLN.1 TO SEC.115JB W.E.F. 1.4.2001 (I.E., A.Y. 2001-02) BY THE FINANCE ACT, 2009. THE DEBT IS AN ASSET AND PROVISION FOR BAD DEBTS IS PROVISION FOR DIMINUTION OF THE VALUE OF ASSE TS (I.E. DEBT). THEREFORE, ANY PROVISION MADE FOR BAD DEBTS I N THE PROFIT & LOSS A/C SHALL BE ADDED BACK FOR COMPUTATION OF BOO K PROFITS U/S 115JB. THEREFORE, THE ASSESSEES GROUND OF APPE AL ON THIS ISSUE IS DISMISSED. 15. IN VIEW OF THE AFOREMENTIONED LEGAL POSITION AND RETROSPECTIVE AMENDMENT, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) VIDE WHICH THE CLAIM OF THE ASSESSEE WITH REGARD TO GROUND NO.5 H AS BEEN REJECTED. WE DECLINE TO INTERFERE, THEREFORE, GROU ND NO.5 FILED BY THE ASSESSEE IS DISMISSED. ITA NO.901/DEL/2010 16. THE GROUNDS OF APPEAL READ AS UNDER:- 1. (A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING PENALTY U/S 271(1)(C) OF THE ACT, LEVIED ON ADDITION OF RS.13,02,257/- MADE BY THE AO ON ACCOUNT OF EMPLOYEES CONTRIBUTIONS TO ESI AND PF BY APP LYING PROVISIONS OF SECTION 43-B OF THE ACT BY HOLDING THAT THE ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 10 CONTRIBUTIONS ARE DEPOSITED BEFORE THE 'DUE DATE' OF FIL ING OF RETURN. 1. (B) THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT EMP LOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUN D ARE COVERED BY THE PROVISIONS OF SECTION 36(1)(VA) AND NO T BY THE PROVISIONS OF SECTION 43-B AND THE 'DUE DATE' AS PER S ECTION 36(1)(VA) MEANS - THE DATE BY WHICH THE ASSESSEE IS RE QUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND WHICH IS MUCH BEFORE THE DATE OF FILING OF RETURN. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGH T TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT AND TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 17. THE IMPUGNED PENALTY ORDER IS DATED 29 TH JUNE, 2009 IN WHICH A TOTAL CONCEALMENT PENALTY WAS IMPOSED ON THE ASSESSEE OF AN AMOUNT OF ` 14,20,593/- ON THE ADDITION INTER ALIA INCLUDI NG AN AMOUNT OF ` 13,02,257/- DISALLOWED ON ACCOUNT OF EPF/ESI. THE A MOUNT RELATE TO EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI, TH E CHART OF WHICH HAS EVEN BEEN GIVEN IN THE IMPUGNED PENALTY ORDER AN D, FOR THE SAKE OF CONVENIENCE, THE SAME IS REPRODUCED BELOW:- NATURE OF PAYMENT DUE DATE ACTUAL DATE OF PAYMENT AMOUNT (IN RUPEES) EPF 15.05.2003 23.05.2003 3,70,020 EPF 15.10.2003 23.10.2003 3,85,049 EPF 15.01.2004 22.01.2004 4,04,200 EPF 21.05.2003 23.05.2003 40,305 EPF 21.05.2003 23.05.2003 5,816 EPF 21.10.2003 23.10.2003 48,546 EPF 21.01.2004 22.01.2004 48,321 TOTAL 13,02,257 18. AS IT CAN BE SEEN FROM THE ABOVE CHART, AS THE ASSESSM ENT YEAR IS 2004-05, IT CAN BE SEEN THAT ALL THE PAYMENTS WERE MADE WITHIN THE ACCOUNTING YEAR ITSELF. ON ACCOUNT OF THERE BEING B ELATED DEPOSIT UNDER THE RESPECTIVE ACTS, THE DISALLOWANCE WAS MADE ON WHICH THE CONCEALMENT PENALTY WAS LEVIED. LEARNED CIT (A) HAS DELETED SUCH PENALTY WITH THE FOLLOWING OBSERVATIONS:- ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 11 THERE IS ANOTHER ISSUE OF LATE PAYMENT OF ESI AND EPF OF RS.13,02,257/- IN THE A.Y. 2004-05. HOWEVER, FROM TH E PENALTY ORDER IN PAGE NO.2 OF THE A.O. DATED 29.06.09 IT IS FO UND THAT THE PAYMENTS ARE MADE WITH A MAXIMUM DELAY OF 8 DAYS FOR THE MONTH OF MAY, 2003 & OCT., 2003 AND OTHER PAYMENTS ARE MADE IN LESS THAN 8 DAYS. SINCE, THERE IS AMENDMENT IN THE A CT U/S 43B CLAUSE C W.E.F. 01.04.2004, ANY PAYMENT OF PF/ESI B EFORE DUE DATE OF FILING OF RETURN IS ALLOWED AS EXPENDITURE FOR THAT A.Y. IF THE ASSESSEE PAYS ANY DELAYED PAYMENT OF ESI/EPF BEFORE THE DUE DATE OF FILING OF RETURN, THE SECTION 43B ALLOWS SUCH P AYMENTS TO BE ALLOWED AS DEDUCTION UNDER THE IT ACT. THEREFORE, THIS DISALLOWANCE OF RS.13,02,257/- ON ACCOUNT OF DELAYED PAYMENT OF EPF/ESI IS ALLOWED EXPENDITURE FOR A.Y. 2004-05, AND DOES NOT ATTRACT ANY PENALTY U/S 271 (1)(C) OF THE IT ACT, 1961. THE PENALTY IMPOSED OF RS.13,02,257/- IS DELETED. 19. AFTER HEARING BOTH THE PARTIES, WE DO NOT SEE ANY REASON TO INTERFERE IN THE DELETION OF PENALTY RELATING TO TH E ISSUE RAISED BY THE REVENUE FOR THE REASON THAT NOT ONLY THE SECOND PROVI SO TO SECTION 43- B HAS BEEN DELETED W.E.F. 1.4.2004 AND THE PRESENT ASSE SSMENT YEAR BEING 2004-05, THE AMENDMENT OTHERWISE WAS APPLICABLE , BUT FOR THE REASON THAT THE SAID AMENDMENT HAS ALSO BEEN HELD TO BE RETROSPECTIVE IN NATURE W.E.F. 1.4.1988 BY THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOME EXTRUSIONS L TD. 319 ITR 306 (SC). THERE BEING NO INFIRMITY IN THE DELETION MAD E BY THE CIT (A), WE DECLINE TO INTERFERE IN THE RELIEF GIVEN BY HIM. W E, THEREFORE, DISMISS THE DEPARTMENTAL APPEAL. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.09.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 22.09.2011. ITA NO.706/DEL/2010 ITA NO.901/DEL/2010 12 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES