ACIT, Circle- 19(1), New Delhi V. Orient Bell Ltd., New Delhi

ITA 7534/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8037 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2016-2017
• Appeal Filed On: 15-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR
• Keywords: Tax effect
• Section: 2; 115JB; 143(1); 201; 72

Judgement Text

1 ITA NO. 7534/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL ME MBER AND SH. PRASHANT MAHARISHI, ACCOUN TANT MEMBER I.T.A. NO. 7534/DEL/20 17 (A.Y 2016-17) (THROUGH VIDEO CON FERENCING) ACIT CIRCLE-19(1) ROOM NO. 199C, 1 ST FLOOR, C. R. BUILDING, NEW DELHI (APPELLANT) VS ORIENT BELL LTD. IRIS HOUSE, BUSINESS CENTRE, NANGAL RAYA, NEW DELHI AAACO0305P (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 22/09/2017 PASSED BY CIT(A)-38, DELHI FOR ASSESSMENT YEAR 201 6-17. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN ALLOWING MAT CREDIT ON THE DIFFERENCE BETW EEN GROSS TAX LIABILITY AS PER NORMAL PROVISIONS AND MAT PROVISIONS VIZ RS 3,9 3,29,587/- AS CLAIMED BY ASSESSEE IN ITR INSTEAD OF BASE TAX AS PER NORMAL I NCOME AND BOOK PROFIT U/S 115JB VIZ. RS 3,40,92,915/- IGNORING THE DIRECT DEC ISION OF ITAT DELHI IN THE CASE OF M/S RICHA GLOBAL EXPORTS PVT LTD, ITA NO 23 03/DEL/2012 WHEREIN IT HAS BEEN HELD THAT EXPLANATION 2 TO SECTION 115JB W AS INSERTED TO DEFINE THE APPELLANT BY SH. GAURAV PUNDIR, SR. DR RESPONDENT BY SH. R. K. KAPOOR, CA DATE OF HEARING 26.07.2021 DATE OF PRONOUNCEMENT 25.08.2021 2 ITA NO. 7534/DEL/2017 MEANING OF TAX FOR THE PURPOSE OF CALCULATING BOOK PROFIT LIABLE TO TAX U/S 115JB AND IT CANNOT BE EXTENDED TO SECTION 115JAA O R SECTION 115JB OF THE ACT. 3. THE ASSESSES IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND SELLING OF REPUTED BRAND OF CERAMIC AND FLOOR TILES . THE ASSESSEE FILED ITS RETURN OF INCOME (ROI) ON I2,10.2016 DECLARING INCOME OF R S, 19,82,36,800/. THE ROI WAS PROCESSED AND ASSESSEE RECEIVED AN INTIMATION U /S 143(1} DATED 27.12.2016 STATING DEMAND OF RS. 60,77,110/-, WHICH WAS DUE TO THE DIFFERENCE IN MAT CREDIT ALLOWED TO THE ASSESSEE AS AGAINST WHAT WAS CLAIMED BY THE ASSESSEE IN RETURN OF INCOME. THE MAT CREDIT CLAIMED BY THE ASSESSEE WAS RS. 3,93,29,587/- WHICH IS THE DIFFERENCE BETWE EN THE GROSS LAX LIABILITY AS PER NORMAL PROVISIONS AND MAT PROVISIONS. THE ASSES SEE CLAIMED THE MAT CREDIT AS PER THE FORMULA EMBEDDED IN THE STATUTORY INCOME TAX RETURN FORM. WHEREAS THE MAT CREDIT ALLOWED TO THE ASSESSES AS P ER ORDER U/S 143(1) IS RS,3,40,92,9I5/- WHICH IS THE DIFFERENCE BETWEEN TH E BASE TAX AS PER NORMAL AND MAT PROVISIONS, DUE TO WHICH THE TAX PAYABLE ALONG WITH INTEREST HAS BEEN DETERMINED FOR RS.60,77,110/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, TH E ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) ERRE D IN ALLOWING MAT CREDIT ON DIFFERENCE BETWEEN GROSS TAX LIABILITY AS PER NORMA L PROVISIONS VIZ RS. 3,93,29,587/- AS CLAIMED BY THE ASSESSEE IN INCOME TAX RETURN INSTEAD OF BASE TAX AS PER NORMAL INCOME AND BOOK PROFIT U/ 115JB V IZ RS. 3,40,92,915/- IGNORING THE DIRECT DECISION OF ITAT DELHI IN THE C ASE OF RICHA GLOBAL EXPORT PVT. LTD. ITA NO. 2303/DEL/2012 WHERE IN IT HAS BEE N HELD THAT EXPLANATION 2 TO SECTION 115JB WAS INSERTED TO DEFINE THE MEANING OF TAX FOR THE PURPOSE OF CALCULATING BOOK PROFIT LIABLE TO TAX U/S 115JB AND IT CANNOT BE EXTENDED TO SECTION 115JAA OR SECTION 115JB OF THE ACT. THUS, THE LD. DR RELIED UPON THE 3 ITA NO. 7534/DEL/2017 ASSESSMENT ORDER. 6. THE LD. AR SUBMITTED THAT THE ONLY ISSU E INVOLVED IN THIS APPEAL IS AS TO WHETHER WHILE ALLOWING THE TAX CREDIT UNDER THE MAT PROVISIONS, IT IS ONLY INCOME TAX OR IT IS INCOME TAX + SURCHARGE + EDUCAT ION CESS WHICH ARE REQUIRED TO BE TAKEN INTO CONSIDERATION. THE FACTS IN BRIEF ARE THAT WHILE PROCESSING THE INCOME TAX RETURN BY THE CPC, BENGAL URU U/S 143(1) OF THE INCOME TAX ACT, TAX CREDIT FOR MAT PROVISIONS U/S 1 15JAA WERE ALLOWED ONLY TOWARDS THE INCOME TAX ACT EXCLUDING THE AMOUNT OF SURCHARGE AND EDUCATION CESS AND RAISED DEMANDS ON ASSESSEE. AGAINST SUCH D EMAND, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO HAD ALLOWED RELIEF TO THE ASSESSEE AND HAS HELD THAT WHILE ALLOWING THE MAT CREDIT, IT IS GROSS INCOME TAX INCLUDING SURCHARGE AND EDUCATION CESS WHICH IS REQUIRED TO B E CONSIDERED. THE CIT(A) HAS, WHILE ALLOWING RELIEF RELIED UPON THE FOLLOWIN G JUDGMENTS: 1. SREI INFRASTRUCTURE FINANCE LTD. VS. DCIT 72 TAXMAN 239 (CALCUTTA), WHICH IN TURN RELIED UP CIT VS. TULSYAN NEC LTD. 33 0 ITR 226 TAXMAN (SUPREME COURT) 2. AMQ AGRO INDIA PVT. LTD. VS. ASSISTANT COMMISSIONE R OF INCOME TAX- CPC, BANGALORE TIOL 723 ITAT (DELHI) - COPY ENCLOSE D AT (PB 1-4).. THE CIT(A) HAS ALSO RELIED UPON THE STATUTORY ITR F ORM NO. 6 WHICH ALSO WHEN APPROPRIATELY AND CORRECTLY FILLED UP, CALCULATES T HE MAT CREDIT ON GROSS BASIS INCLUDING SURCHARGE AND EDUCATION CESS AND LEAVES NO AMBIGUITY ON THE ISSUE. THE LD. AR FURTHER SUBMITTED THAT THE ORDER OF THE CIT(A) ON THIS ISSUE HAS TO BE UPHELD ON ACCOUNT OF FOLLOWING REASONS:- 1. ITR FORM NO. 6 OF FILLING UP THE ITR WHICH IS RELEV ANT FOR FILING AN ITR OF THE CORPORATE ASSESSEE HAS BEEN DEVISED AND APPROVE D BY THE CBDT. WHILE CALCULATING THE MAT CREDIT U/S 1 15JAA BY FILLING U P THE APPROPRIATE FIGURES IN THE SAID FORM, IT ' AUTOMATICALLY TAKES INTO CON SIDERATION THE AMOUNT OF 4 ITA NO. 7534/DEL/2017 SURCHARGE AND EDUCATION CESS WHILE ALLOWING MAT CRE DIT. THEREFORE, ANY OTHER VIEW ON THE MATTER WOULD NOT BE IN ACCORDANCE WITH LAW, IT IS RESPECTFULLY SUBMITTED. IN FACT HYDERABAD BENCH OF ITAT IN THE CASE OF VIRTUSA (INDIA) PVT. LTD . IN ITS JUDGMENT DATED 04.03.2016 IN ITA NO. 146/EIYD/2015 HAD ALSO SIMILARLY HELD THAT WHILE ALLOWING MAT CRE DIT U/S 115JAA, THE AMOUNT OF SURCHARGE AND EDUCATION CESS IS REQUIRED TO BE CONSIDERED WHICH IS ALSO AS PER ITR FORM NO. 6 AND CREDIT IS REQUIRED TO BE ALLOWED FOR THE GROSS TAX AMOUNT. 2. THE DELHI ITAT IN THE CASE OF AMQ AGRO INDIA (P) L TD. V. ACIT IN ITS JUDGMENT DATED 29.04.2016 IN ITA NO. 666/DEL/2014 HAS SIMILARLY HELD AND HAS CONCLUDED THAT WHILE ALLOWING MAT CREDIT U/ S 1 15JAA, SURCHARGE AND EDUCATION CESS ARE ALSO REQUIRED TO BE CONSIDER ED. 3. ALL SUCH JUDGMENTS HAVE REFERRED TO AND RELIED UPO N THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF K. SRINIVASAN V. CIT (83 ITR 346) WHICH CLARIFIES THAT THE WORD INCOME TAX INCLUDES THE AMOUNT OF SURCHARGE AND CESS WHEREVER IT IS APPLICABLE. THE DEPARTMENT IN ITS GROUNDS OF APPEAL HAS REFERRE D JUDGMENT OF THE DELHI ITAT IN THE CASE OF RICHA GLOBAL EXPORTS (P) LTD. V . ACIT IN ITA NO. 2303/DEL/2012. THE LD. AR SUBMITTED THAT THE SAID JUDGMENT WAS REN DERED IN 2012 AND JUDGMENT OF HON'BLE SUPREME COURT IN THE C ASE OF K. SRINIVASAN (SUPRA) WHICH HAS BEEN REFERRED TO AND RELIED UPON BY THE L ATER JUDGMENTS OF THE ITATS INCLUDING DELHI ITAT, HAD NOT BEEN CITED OR REFERRED TO OR DISCUSSED IN THE SAID ORDER OF THE DELHI ITAT IN THE CASE OF RICHA GLOBAL EXPORTS (P) LTD. (SUPRA). HENCE, JUDGMENT OF THE DELHI TRIBUNAL IN RICHA GLOB AL EXPORTS (P) LTD. (SUPRA) IS PER INCURIAM AND DOES NOT INTERPRET THE LAW IN CORR ECT PERSPECTIVE. THE LD. AR FURTHER SUBMITTED THAT OTHERWISE ALSO, T HE LATER JUDGMENTS ON THIS ISSUE BY HONBLE DELHI ITAT IS IN FAVOR OF ASSESSEE AND ALSO THE JUDGMENT OF HONBLE HYDERABAD ITAT SHOULD BE CONSIDERED AND REL IED UPON. IN FACT THE JUDGMENT OF RICHA GLOBAL EXPORTS (P) LTD. (SUPRA) WAS ALSO REFERRED TO AND 5 ITA NO. 7534/DEL/2017 RELIED UPON BY THE LD. DR IN THE CASE OF VIRTUSA (I NDIA) PVT. LTD. (SUPRA). THE HYDERABAD ITAT HAS DISCUSSED THIS JUDGMENT IN PARA 9.5 OF ITS ORDER AS UNDER:- 9.5 LET US ALSO ANALYSE THE CASE LAW OF RICHA GLOB AL EXPORTS PVT. LTD. WHICH WAS APPLIED BY CIT(A), THE DELHI ITAT OPINED THAT S ECTION I 15JAA APPLIED ONLY TO INCOME TAX, NOT OF INCOME TAX AS INCREASED BY SURCHARGE AND EDUCATION CESS. WE ARE OF THE VIEW THAT THE APEX CO URT DECISION IN THE CASE OF K. SRINIVASAN (SUPRA)MAY NOT HAVE BEEN BROUGHT TO T HE KNOWLEDGE OF THE ITAT DELHI. MOREOVER, THE EXPLANATION 2 OF SECTION 115JB IS APPLICABLE TO CALCULATE TAX LIABILITY U/S 115JB AND THE SAME EXPLANATION SH OULD ALSO BE APPLIED FOR GIVING CREDIT U/S 1 15JAA. THE TAX LIABILITIES CALC ULATED U/S 115JB BY APPLYING THE EXPLANATION 2, THE TAX LIABILITY SO CO MPUTED ARE REMITTED BY THE ASSESSEE AND THEN THE SAME WAS CARRIED FORWARD FOR FUTURE MAT CREDIT. IN OUR VIEW, WHILE CALCULATING THE MAT CREDIT U/S 115JAA, THE SAME EXPLANATION 2 IN SECTION 1 15JB MUST BE APPLIED. SIMILARLY THE CIT(A) HAS ALSO RELIED UPON THE JUDGM ENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SREI INFRASTRUCTURE FINANCE LT D. (SUPRA), WHICH IN TURN REFERRED TO AND RELIED UPON A JUDGMENT OF HONBLE S UPREME COURT IN THE CASE OF CIT V. TULSYAN NEC LTD. (SUPRA). THE LD. AR FURTHER POINTED OUT THAT THE JUDGMENT OF CIT V. TULSYAN NEC LTD. (SUPRA) WAS ALSO REFERRED TO AND RELIED UPON BY THE AR IN THE CASE OF RICHA GLOBAL EXPORTS (P) LTD. (SUPRA). HOWEVER, THE DELHI ITAT IN THE CASE OF RICHA GLOBAL EXPORTS (P) LTD. (SUPRA) DIDNT COMMENT OR DISTINGUISH THAT JUDGMENT BEFORE ARRIVIN G AT THE CONCLUSION. MOREOVER, THE ONLY HIGH COURT JUDGMENT ON THIS ISSU E AVAILABLE IS OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SREI INFRASTRUCT URE FINANCE LTD. (SUPRA). , THIS JUDGMENT IS REQUIRED TO BE FOLLOWED AS THERE I S NO CONTRARY JUDGMENT SO FAR AS PER THE LD. AR. THE DATES ON WHICH VARIOUS J UDGMENTS WERE RENDERED IS AS UNDER:- 6 ITA NO. 7534/DEL/2017 UNDER THE CIRCUMSTANCES, THE LD. AR PRAYED THAT THE LATER JUDGMENTS OF THE DELHI ITAT OR THE JUDGMENT OF THE HYDERABAD ITAT AN D THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT WHICH HAVE BEEN RENDERE D AFTER THE JUDGMENT OF RICHA GLOBAL EXPORTS (P) LTD, (SUPRA.) BE FOLLOWED AND RELIEF, AS CLAIMED BY THE ASSESSEE AND ALLOWED BY THE CIT(A), BE UPHELD BY DI SMISSING THE DEPARTMENTAL APPEAL. 7. WITHOUT PREJUDICE, THE LD. AR SUBMITTED THAT IT IS A SETTLED PROPOSITION OF LAW THAT WHERE TWO VIEWS OR TWO POSSIBLE INTERPRETA TIONS OF AN ISSUE IS AVAILABLE, THEN A VIEW FAVORABLE TO THE ASSESSEE IS REQUIRED TO BE ADOPTED AND FOLLOWED. ONE OF THE PROMINENT JUDGMENTS ON THIS PR OPOSITION IS AVAILABLE IN THE CASE OF MANISH MAHESHWARI V/S ACIT (289 ITR 341 ), WHERE IT HAS BEEN HELD THAT WHERE TWO VIEWS ARE POSSIBLE, A VIEW IN F AVOR OF THE TAXPAYER SHOULD BE FOLLOWED. THUS, EVEN IF IT IS HELD THAT VIEW EXP RESSED BY THE ITAT IN RICHA GLOBAL EXPORTS (P) LTD. (SUPRA) IS A CORRECT VIEW, THEN ALSO THE ALTERNATE FAVORABLE VIEW OF HONBLE ITAT IN VIRTUSA (INDIA) P VT. LTD. (SUPRA) CASE, THE DELHI ITAT'S VIEW IN AMQ AGRO INDIA (P) LTD. (SUPRA ) CASE AND HONBLE CALCUTTAS HIGH COURT VIEW IN SREI INFRASTRUCTURE F INANCE LTD. (SUPRA) MAY BE ADOPTED AND RELIEF TO THE ASSESSEE BE ALLOWED. THE LD. AR FURTHER SUBMITTED THAT RECENTLY HONBLE MADRAS HIGH COURT IN CASE OF PCIT VS. SCOPE INTERNATIONAL PVT. LTD 429 ITR 500 (MAD) (2019) AND CIT VS. SAINT GLOBAIN GLASS INDIA 429 ITR 505 (2020) DISMISSED THE DEPART MENT APPEAL AND HELD THAT MAT CREDIT U/S 115JAA INCLUDES SURCHARGE AND E DUCATION CESS. THE HONBLE MADRAS HIGH COURT RELIED ON THE DECISION OF THE HONBLE SUPREME S. NO. CASE AND AUTHORITY NAME DATE 1. RICHA GLOBAL EXPORTS (P) LTD. - DELHI ITAT 31.08.2012 2. AMQ AGRO INDIA (P) LTD. DELHI ITAT 29.04.2016 3. VIRTUSA (INDIA) PVT. LTD. HYDERABAD ITAT 04.03.2016 4. SREI INFRASTRUCTURE FINANCE LTD. CALCUTTA HIGH COURT. 12.08.2016 7 ITA NO. 7534/DEL/2017 COURT IN CASE OF CIT VS. K. SRINIVASAN (SUPRA). REL EVANT EXTRACT OF SAINT GLOBAIN INDIA (SUPRA) REPRODUCED BELOW: 'PARA 14- IN OUR CONSIDERED VIEW, THE DECISION OF T HE HON'HLE SUPREME COURT IN THE CASE OF K. SRINIVASAN WILL APPLY WITH FULL FORCE TO THE ASSESSEE'S CASE. FURTHERMORE, IF WE REFER TO THE CI RCULAR OF THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 3 OF 2018 DAT ED 11.7.2018, WHICH FIXED THE MONETARY LIMIT FOR FILING APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNALS, HIGH COURTS AND SUPREME COURT, ONE GETS A FAIR IDEA AS TO WHAT WAS THE UNDERSTANDING OF THE TERM 'TAX' BY THE BOAR D. IF WE HAVE A LOOK AT PARAGRAPH 4 OF THE SAID CIRCULAR , THE BOARD STATES THAT FOR THE PURPOSES OF THE SAID CIRCULAR , TAX EFFECT SHALL BE TAX INCLUDING APPLICABLE SURCHA RGE AND CESS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING THE LD. DR SUBMITTE D THAT THE BOOK PROFIT U/S 115JB DEEM TO BE AN INCOME, BUT THIS ARGUMENT DOES NOT SUSTAIN AS THE DIFFERENCE BETWEEN GROSS TAX LIABILITY AS PER NORMA L PROVISION OF MAT PROVISION VIZ. RS. 3,93,29,587/- AS CLAIMED IN THE ITR. BUT T HE CPC HAS ALLOWED MAT CREDIT UPTO DIFFERENCE BETWEEN THE BASE TAX AS PER NORMAL INCOME AND BOOK PROFIT U/S 115JB, INSTEAD OF DIFFERENCE BETWEEN GRO SS TAX LIABILITY AS PER THE NORMAL PROVISIONS AND MAT PROVISIONS. THIS ISSUE I S COVERED BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN CASE OF SREI INF RASTRUCTURE FINANCE LTD. VS. DCIT (2016) 72 TAXMAN.COM 239 THEREBY CONFIRMING TH E SET OFF OF MAT CREDIT U/S 115JAA BROUGHT FORWARD FROM EARLIER YEARS AGAIN ST TAX ON TOTAL INCOME INCLUDING SURCHARGE AND EDUCATION CESS INSTEAD OF A DJUSTING THE SAME FROM TAX ON TOTAL INCOME BEFORE SEARCHING SURCHARGE AND EDUC ATION CESS. THE HONBLE CALCUTTA HIGH COURT RELIED UPON THE DECISION OF THE HONBLE APEX COURT IN CASE OF CIT VS. TULSYAN NEC LTD. 336 ITR 226. THUS, THE RE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. 8 ITA NO. 7534/DEL/2017 9. IN RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25TH DAY OF AUGUST, 2021. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 25/08/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI