Thayer Overseas Finance Limited, CHENNAI V. ACIT (OSD), CHENNAI

ITA 71/CHNY/2017

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7573 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 71/MDS/2017 / ASSESSMENT YEAR : 2007-2008. M/S. THAYER OVERSEAS FINANCE LTD, 3 RD FLOOR, E HOTEL, GATE NO.1, EXPRESS AVENUE MALL, PATTULLOS ROAD, CHENNAI 600 002. [PAN AAACT 5591J ] VS THE ASSISTANT COMMISSIONER OF INCOME TAX, (OSD) CORPORATE CIRCLE 3, CHENNAI. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. G. BASKAR, ADVOCATE /RESPONDENT BY : SHRI. R. CLEMENT RAMESH KUMAR, JCIT. /DATE OF HEARING : 28-02-2017 !' /DATE OF PRONOUNCEMENT : 03-03-2017 % / O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST AN ORDER DATED 17.11.2016 OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-11, CHENNAI. ITA NO. 71/MDS/2017 :- 2 -: 2. ASSESSEE HAS TAKEN ALTOGETHER FOURS GROUNDS. LD. CO UNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT, HE WAS NOT PRESSING GROUND NO.1. ACCORDINGLY GROUND NO. 1 IS DISMISSE D AS NOT PRESSED. 3. VIDE ITS GROUND NO.2, ASSESSEE ASSAILS A DISALLOWAN CE ON LOSS IN DIMINUTION OF VALUE OF SHARES WHILE COMPUTING IT S BOOK PROFIT, TAXED U/S.115JB OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. ASSESSI NG OFFICER HAD ERRONEOUSLY CONSIDERED A SUM OF C20,00,000/- WHICH WAS LOSS ON REVALUATION OF INVESTMENT AS PROVISION FOR DIMINUT ION IN VALUE OF ITS ASSETS. ACCORDING TO LD. AUTHORISED REPRESENTATIV E LOSS ON INVESTMENT WAS ACTUALLY WRITTEN OFF AND NOT A PROVISION. CONTE NTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT CLAUSE (I) TO E XPLANATION 1 TO SEC. 115JB(2) OF THE ACT WOULD NOT APPLY WHEN THERE WAS ACTUAL WRITE OFF. 4. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT LD. ASSESSING OFFICER HAD RIGHTLY APPLIED CLAUSE (I ) TO EXPLANATION 1 TO SEC. 115JB(2) OF THE ACT. WHAT WAS CLAIMED BY THE ASSESSEE AS LOSS ON INVESTMENT WAS ONLY A PROVISION FOR DIMINUTION IN VALUE OF ASSETS. ITA NO. 71/MDS/2017 :- 3 -: 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS OF THE AUTHORITIES BELOW. LD. AUTHORISED REPRESENTA TIVE HAS PLACED ON RECORD AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET PREPARED UNDER COMPANIES ACT, 1956, WHICH IS THE BASIS FOR COMPUTING THE INCOME U/S. 115JB OF THE ACT. THE EXPENDITURE DEBI TED INCLUDES ADMINISTRATIVE AND OTHER EXPENSES OF C48,96,973/-. SCHEDULE L GIVES THE BREAK UP OF ADMINISTRATIVE AND OTHER EXPENDITUR E. THIS IS REPRODUCED HEREUNDER:- (AMOUNT IN C) 31.03.2007 31.03.2009 SCHEDULE L- ADMINSTRATIVE AND OTHER EXPENSES ADVERTISEMENT -- 360 AUDITORS REMUNERATION STATUTORY AUDIT TAX AUDIT & CERTIFICATION 33672 11224 33672 11224 BOOKS & PERIODICALS 3397 1837 BROKERAGE & COMMISSION -- 8750 ELECTRICITY CHARGES 78633 108286 FRINGE BENEFIT TAX -- 80721 GENERAL EXPENSES -- 6511 MANAGERIAL REMUNERATION 673500 519675 INSURANCE 58310 36077 LEGAL & PROFESSIONAL FEE 64516 63570 LEASE RENT PAID 46400 139200 LOSS ON SALE OF CAR 97074 25026 MEMBERSHIP &SUBSCRIPTION 10000 15000 MISCELLANEOUS EXPENSES 13500 97390 OFFICE MAINTANCE 218227 270652 POSTAGE & TELEPHONES 158504 226240 PRINTING & STATIONERY 23906 21773 ITA NO. 71/MDS/2017 :- 4 -: RENT & TAXES 107854 50234 RENT 210000 110000 REPAIRS & MAINTENANCE 17088 44541 SALES PROMOTION 8313 7391 SOFTWARE EXPENSES 5700 7050 TRAVELLING & CONVEYANCE 985945 749868 VEHICLE MAINTENANCE 41522 63569 LOSS DUE TO DIMINUTION IN VALUE OF FIXED ASSETS 29715 384425 LOSS ON INVESTMENT 2000000 2000000 --------------- 4896973 --------------- -------------- 5083042 -------------- LOSS ON INVESTMENT OF C20,00,000/- IS NOT CHARGED A S PROVISION, BUT IS AN ACTUAL WRITE-OFF. ASSESSEE HAD REDUCED THE VA LUE OF INVESTMENT BY THE SAID AMOUNT. WHAT CAN BE ADDED UNDER CLAUSE (I ) TO EXPLANATION 1 TO SEC. 115JB(2) IS REPRODUCED HEREUNDER:- THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET. IN MY OPINION, THE ABOVE CLAUSE CANNOT BE APPLIED WHEN THERE WAS AN ACTUAL WRITE OFF. I HAVE NO HESITATION IN DELETING THE ADDITION OF C20,00,000/- MADE BY THE LD. ASSESSING OFFICER WHIL E COMPUTING PROFITS OF THE ASSESSEE U/S.115JB OF THE ACT. GROUND NO. 2 OF THE ASSESSEE STANDS ALLOWED. 6. VIDE ITS GROUND NO.3, GRIEVANCE OF THE ASSESSEE IS THAT WRITE- OFF OF THE VALUE OF CELL PHONES C24,458/- AND GLASS TABLES C5,257/- WERE ADDED BACK WHILE COMPUTING PROFIT U/S.115JB OF THE ACT. ITA NO. 71/MDS/2017 :- 5 -: 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. ASS ESSING OFFICER HAD AGAIN APPLIED CLAUSE (I) TO EXPLANATIO N 1 TO SEC. 115JB(2) OF THE ACT. ACCORDING TO HIM, THERE WAS AN ACTUAL WRITE OFF AND THE NOT PROVISION. THUS, ACCORDING TO HIM, THE SAID EXPLAN ATION COULD NOT HAVE BEEN APPLIED. 8. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. TABLE OF ADMINISTR ATIVE AND OTHER EXPENDITURE HAS BEEN REPRODUCED BY ME PARA 5 ABOVE . ONE OF THE ITEMS THEREIN IS LOSS DUE TO DIMINUTION IN VALUAT ION OF FIXED ASSETS C29,715/-. IT APPEARS NOT TO BE PROVISION BUT A DIRECT CHARGE TO THE PROFIT AND LOSS ACCOUNT. HOWEVER, DEPRECIATION S CHEDULE AS PER BOOKS OF ACCOUNTS FILED BY THE ASSESSEE REFLECTED A DELETION OF C29,673/- AGAINST OFFICE EQUIPMENT OF C5,625/- AGAI NST FURNITURE AND FITTING. WHETHER THE SUM WRITTEN OFF REPRESENT THE SE AMOUNTS IS NOT CLEAR FROM THE AVAILABLE RECORDS. THEREFORE, A FRES H LOOK HAS TO BE MADE BY THE LD. ASSESSING OFFICER IN SO FAR AS IT R ELATES TO COMPUTATION OF INCOME U/S.115JB OF THE ACT. ORDERED ACCORDINGLY . GROUND NO.3 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 71/MDS/2017 :- 6 -: 10. VIDE ITS GROUND NO.4, ASSESSEE ITS AGGRIEVED ON LE VY OF INTEREST U/S.234B OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE NEEDING NO SPECIFIC ADJUDICATION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED PR O-TANTO ORDER PRONOUNCED ON FRIDAY, THE 3 RD DAY OF MARCH , 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 3RD MARCH, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /1 / GF