ACIT 2(3), MUMBAI V. TATA MOTORS LTD (FORMERLY KNOWNA S TELCO LTD), MUMBAI

ITA 725/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54893 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 26-07-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH VYAS
• Keywords: Retrospective amendment; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI. P.M. JAGTAP (A.M.) AND SHRI VIJAY PAL RAO (J.M.) ITA NO.725/MUM/2010 ASSESSMENT YEAR : 1998-1999 ASST.COMMISSIONER OF INCOME-TAX, RANGE 2(3), R. NO.555, AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. VS. TATA MOTORS LTD. [FORMERLY KNOWN AS TELCO LTD.] BOMBAY HOUSE, 24, HOMI MODY STREET, FORT, MUMBAI. PAN : AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.1083/MUM/2010 ASSESSMENT YEAR : 1998-1999 TATA MOTORS LTD. [FORMERLY KNOWN AS TELCO LTD.] BOMBAY HOUSE, 24, HOMI MODY STREET, FORT, MUMBAI 400 001. PAN : AAACT2727Q VS. D.C.I.T. 2(1) AAAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL KUMAR SINGH (DR) RESPONDENT BY : SHRI DINESH VYAS (AR) DATE OF HEARING : 28.07.2011 DATE OF PRONOUNCEMENT : O R D E R PER P.M. JAGTAP THESE TWO APPEALS, ONE FILED BY THE REVENUE BEING I TA NO.725/MUM/10 AND OTHER FILED BY THE ASSESSEE BEING ITA NO.1083/MUM/10, ARE CROSS APPEALS WHICH ARE DIRECTE D AGAINST THE ORDER OF THE LEARNED CIT(A) VI, MUMBAI DATED 06.11.2009 WH EREBY HE DISPOSED OF THE APPEAL FILED BY THE ASSESSEE AGAINST THE RECTIF ICATION ORDER PASSED BY THE AO U/S.154. ITA NO.725/MUM/2010 ITA NO.1083/MUM/2010 2 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE REVENUE , GROUND NO.1 OF WHICH IS GENERAL SEEKING NO SPECIFIC DECISION FROM US. 3. GROUND NO.2 RAISED BY THE REVENUE IN ITS APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION ON ACC OUNT OF BAD AND DOUBTFUL DEBTS U/S.115JA BY IGNORING THE FACT T HAT AN AMENDMENT HAS BEEN MADE IN SEC.115JA BY INTRODUCING CLAUSE G TO EXPLANATION TO SECOND PROVISO TO SUB-SECTION 2 OF SEC.115JA WITH RETROSPECTIVE EFFECT FROM AY.1998-99 WHICH PROVIDES THAT THE AMOUNT SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET HAS TO BE ADDED TO THE NE T PROFIT FOR DETERMINING THE BOOK PROFIT FOR PURPOSE OF SEC.115J A. 4. IN THIS CASE, ASSESSMENT WAS INITIALLY COMPLETED BY THE AO FOR THE YEAR UNDER CONSIDERATION U/S.143(3) VIDE ORDER DATED 20. 03.2002. SUBSEQUENLTY, HE NOTICED THAT THE PROVISION FOR DOU BTFUL DEBTS AMOUNTING TO RS.1,41,18,438/- DEBITED BY THE ASSESSEE TO ITS P & L A/C. WAS NOT ADDED BACK WHILE COMPUTING BOOK PROFIT U/S.115JA. ACCO RDING TO THE AO, THERE WAS THUS A MISTAKE IN THE ORDER PASSED BY HIM U/S.1 43(3) AND THE SAME WAS RECTIFIED BY HIM BY PASSING ORDER U/S.154 ON 14 .03.2005 WHEREIN THE PROVISION FOR DOUBTFUL DEBTS WAS ADDED BY HIM WHILE COMPUTING BOOK PROFIT U/S.115JA. ON APPEAL, THE LD CIT(A) DELETED THE S AID ADDITION ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE ISSUE RELATING TO ADDITION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS WHILE COMPUTIN G BOOK PROFIT U/S.115JA WAS DEBATABLE ISSUE AND RECTIFICATION ON SUCH ISSUE U/S.154 WAS NOT PERMISSIBLE. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSE ES OWN CASE FOR AY 1999- 2000 WHEREIN A SIMILAR ADDITION MADE ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFIT BY WAY O F RECTIFICATION U/S.154 WAS DELETED BY THE TRIBUNAL VIDE PARA 4 OF ITS ORDE R DATED 24.06.2011 PASSED IN ITA NO.2997/MUM/10. THE SAID PARA READS AS UND ER: ITA NO.725/MUM/2010 ITA NO.1083/MUM/2010 3 4. WE FIND THAT WHEN THE AO EXERCISED THE POWER U/S.154, THE ISSUE WAS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE USHA MARTINE INDUSTRIES LTD. VS . CIT 81 TTJ 518 (KOL). ADMITTEDLY THE ISSUE WAS OBVIOUS MISTA KE WHEREBY THE AO CAN EXERCISE HIS POWERS U/S.154(1) TO RECTIF Y; THE SAME. NOW, THE LAW IS WELL SETTLED THAT FOR EXERCISING TH E POWER U/S.154(1), THE MISTAKE SHOULD BE PATENT AND OBVIOU S AS HELD IN THE CASE OF VOLKART BROTHERS (SUPRA). THE ARGU MENT OF THE LD DR IS THAT, SUBSEQUENTLY, THERE IS AN AMENDMENT TO THE ACT AND HENCE, AS THE ISSUE IS COVERED IN THE LEGISLATIVE A MENDMENT WHICH IS A RETROSPECTIVE, HENCE, THE ACTION OF THE AO IS REGULARIZED. IN OUR OPINION, THERE IS A DIFFERENCE BETWEEN ILLEGALITY AND IRREGULARITY. WHEN THE AO PASS ED THE ORDER, HE HAS NO AUTHORITY TO PASS THE SAME, HENCE, THE OR DER CANNOT BE SAID TO BE IRREGULAR BUT ILLEGAL. IN OUR CONSID ERED VIEW, THE EXERCISE OF POWER U/S.154(1) IS WITHOUT DUE AUTHORI TY OF LAW ON THE DATE ON WHICH THE SAID ORDER WAS PASSED. AS AD MITTEDLY THE ISSUE WAS DEBATABLE ON THE DATE ON WHICH THE AO EXERCISES THE POWER U/S.154(1). 6. SINCE THE ISSUE INVOLVED IN THE YEAR UNDER CONSI DERATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF AY 1999-2000 AND THE ISSUE RELATING TO ADDITION MADE ON ACCOUNT OF P ROVISION FOR BAD AND DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFIT WAS A DE BATABLE ONE ON 14.03.2005 WHEN THE ORDER U/S.154 WAS PASSED BY THE AO, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUBAL FOR AY 1999-2000 ( SUPRA) AND UPHOLD THE IMPUGNED ORDER OF THE LD CIT(A) GIVING RELIEF TO TH E ASSESSEE ON THIS ISSUE. GROUND NO.2 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 7. AS REGARDS GROUND NO.3 OF THE REVENUES APPEAL, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE ADDITION ON ACCOUNT OF PROVISION FOR WEALTH TAX MADE WHILE COMPUTING BOOK PROFIT U/S.115 JA IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. EC HJAY FORGINGS PVT. LTD. 251 ITR 15 (BOM) WHEREIN IT WAS HELD THAT PROVISION FOR WEALTH TAX CANNOT BE ADDED FOR COMPUTING BOOK PROFIT U/S.115JA. RES PECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE IMPUGNED ORDER OF THE LD CIT(A) GIVING RELIEF TO THE ASSESSE E ON THIS ISSUE AND DISMISS GROUND NO.3 OF THE REVENUES APPEAL. ITA NO.725/MUM/2010 ITA NO.1083/MUM/2010 4 8. NOW WE SHALL TAKE THE APPEAL OF THE ASSESSEE IN ITA NO.1083/MUM/10 WHICH INVOLVES A SOLITARY ISSUE RELATING TO ASSESSE ES CLAIM FOR GRANTING OF INTEREST ON DELAYED PAYMENT OF INTEREST U/S.244A. 9. IN THE APPEAL FILE AGAINST THE ORDER PASSED BY T HE AO U/S.154, A SPECIFIC GROUND WAS RAISED BY THE ASSESSEE AS GROUN D NO.5 CLAIMING INTEREST ON DELAYED PAYMENT OF INTEREST U/S.244A. THE LD C IT(A) HOWEVER, DISMISSED THE SAID GROUND OBSERVING THAT IN THE ABSENCE OF AN Y PROVISION IN THE STATUE FOR GIVING INTEREST ON INTEREST OR COMPOUND INTERES T, THE CLAIM OF THE ASSESSEE FOR INTEREST ON INTEREST WAS NOT ACCEPTABL E. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS STATED BY THE ASSE SSEE IN THE STATEMENTS OF FACTS FILED BEFORE THE LD CIT(A), WHILE GIVING CRED IT IN RESPECT OF ADVANCE TAX PAID OF RS.31 CRORES AND GRANTING REFUND VIDE INTIM ATION ISSUE U/S.143(1)(A) ON 28.03.1999, NO INTEREST U/S.244A WAS GRANTED BY THE AO. WHILE PASSING ORDER U/S.154 ON 14.03.2005, THE AO HOWEVER QUANTIF IED THE REVISED INTEREST PAYABLE U/S.244A TAKING INTO CONSIDERATION THE ADVA NCE TAX PAYMENT AND GRANTED SUCH INTEREST TO THE ASSESSEE. AS SUBMITTE D BY THE LD COUNSEL OF THE ASSESSEE BEFORE US, INTEREST SO GRANTED WAS FINALLY PAID BY THE AO TO THE ASSESSEE ON 29.10.2006. ACCORDING TO HIM, THERE WAS THUS A DELAY IN PAYMENT OF INTEREST U/S.244A WHICH HAD ACTUALLY BEC OME DUE TO THE ASSESSEE AS A RESULT OF INTIMATION PASSED U/S.143(1 )(A) ON 28.03.1999. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF SA NDVIK ASIA LTD. VS. CIT [2006] 280 ITR 643 (SC) , IF INTEREST HAD BECOME DU E TO THE ASSESSEE BUT THE SAME WAS WITHHELD BY THE DEPARTMENT AND PAID BELATE DLY, INTEREST ON SUCH INTEREST SHOULD BE PAID FOR THE PERIOD OF DELAY. H OWEVER, AS NOTED FROM THE ORDERS OF THE AUTHORITIES BELOW, THE RELEVANT FACTS OF THE CASE AS STATED BY THE ASSESSEE WHILE CLAIMING INTEREST ON INTEREST HA VE NOT BEEN VERIFIED OR ATLEAST THERE IS NO FINDING GIVEN EVEN BY THE LD CI T(A) IN HIS IMPUGNED ORDER ON THIS ASPECT. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ALLOW THE CLAIM OF THE ASSESSEE FOR IN TEREST ON INTEREST AS PER THE ITA NO.725/MUM/2010 ITA NO.1083/MUM/2010 5 DECISION OF HONBLE SUPREME COURT IN THE CASE OF SA NDVIK ASIA LTD. (SUPRA) AFTER VERIFYING RELEVANT FACTS FROM THE RECORD. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHERE AS APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2011. SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI, DATED 12.08.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMBA I. 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI. 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUMBA I TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI