LAHARI PRODUCTIONS P.LTD, MUMBAI V. ACIT CC-22, MUMBAI

ITA 8562/MUM/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0656 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3); 234B; 115JB

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A - BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 8562 /MUM/201 0 , / ASSESSMENT YEAR - 200 7 - 08 M/S. LAHARI PRODUCTIONS PVT. LTD. 161, STAR CITY,, 2 ND FLOOR MANMALA TANK ROAD, MAHIM(W) MUMBAI - 400 016. PAN: AABCN 1401 D VS ACIT - CC - 22 AAYAKAR BH AVAN, M.K. ROAD MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /. ITA NO. 198 /MUM/201 1 , / ASSESSMENT YEAR - 200 7 - 08 ACIT - CC - 22 AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. V S M/S. LAHARI PRODUCTIONS PVT. LTD. MUMBAI - 400 016. PAN: AABCN 1401 D ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI HIRO RAI / REVENUE BY : MS. S. PADMAJA / DATE OF HEARING : 27 - 05 - 2015 / DATE OF PRONOUNCEMENT : 27 - 05 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. OF CIT(A) - 3 9 ,MUMBAI THE ASSESSEE AND THE ASSESSI NG OFFICER(AO), HA VE FILED CROSS APPEALS FOR THE YEAR UNDER APPEAL.ASSESSEE - COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: THE LD. COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT AN AMOUNT OF RS.8,00,00,000/ - REPRESENTING THE DIMIN UTION IN VALUE OF INVESTMENT WAS TO BE ADDED WHILE COMPUTING THE BOOK PROFIT U/S.115JB. THE REASONS GIVEN BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS) WHILE TAKING THE ABOVE VIEW ARE INCORRECT, UNJUSTIFIED AND UNWARRANTED. GROUNDS OF APPEAL FILED BY THE AO, READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE INTEREST U/S. 234B OF THE IT ACT AMOUNTING TO RS.21,30,907/ - BY WRONGLY RELYING ON THE DECISION OF THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. S NOWCEM INDIA LTD. AS THE DECISION IS INAPPLICABLE IN THE ASSESSEES CASE IN SO FAR AS THE DECISION DEALS WITH SEC.115JA OF THE ACT, WHILE THE PRESENT CASE DEALS WITH SEC. 115JB OF THE ACT ON WHICH THE EXTANT LEG AL POSITION IS IN FAVOUR OF REVENUE . 8562 & 198 /M UM / 2010 & 2011AY07 - 08 - LPPL 2 ASSESSEE IS ENGAGED IN THE BUSINESS OF FILM PRODUCTION AND DISTRIBUTION AND IT FILED ITS RETURN ON 26/10/07 DE CLARING TOTAL INCOME AT RS.NIL. THE AO COMPLETED THE ASSESSMENT ON 24/12/2009, U/S. 143(3) OF THE ACT DETE RMINING THE INCOME OF THE ASSESSEE AT RS. NIL HE ALSO CALCULATED THE BOOK PROFIT AS PER S.115JB AND DETERMINED THE MINIMUM TAX PAYABLE AT 57.55 LACS. ITA NO.8562/MUM/2010: 2. EFFE CTIVE GROUND OF APPEAL IS RAISED BY THE ASSESSEE IS ABOUT DIMINUTION IN VALUE OF INVESTMENT, AMOUNTING TO RS.8.00 CRORES. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT I N THE COMPUTATION OF INCOME THE ASSESSEE HAD DECLARED INCOME FROM OPERATIONS OF RS.6.45 CR ORES AND OTHER INCOME OF RS.1.16CR., THAT IT HAD CLAIMED EXPENDITURE OF RS. 9.87 CR ORES , THAT IT ARRIVED AT A LOSS OF RS. 2.24CR ORES . HE FURTHER FOUND THAT THE ASSESSEE HAD ADDED BACK PROVISION MADE FOR DIM INU TION OF INVESTMENT OF RS. 8.00 CR ORES A ND WORKED OUT PROFIT OF RS. 5.57CR ORES. IT WAS FOUND THAT AFTER SETTIN G OFF BROUGHT FORWARD LOSS OF EARLIER AY .,A MOUNTING TO RS.5,75,51,639/ - , IT HAD D ECLARED TOTAL INCOME OF RS.NIL. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD FAILED TO CONSIDER THE PROVISION MADE FOR DIM INU TION IN VALUE OF INVESTMENT WHILE WORKING OUT PR OFIT U/S. 115JB OF THE ACT.R EFERRING TO THE PROVISIONS OF EXPLANATION TO S UB - SECTION 2 OF THE SEC.115JB , THE AO HELD THAT THE AMOUNT OF PTOVISION MADE IN THE P/L ACCOUNT OF RS.8.00 CR ORES FOR DIMINU TION IN VALUE OF INVESTMENT WAS IN THE NATURE OF PROVISIONS MADE FOR OTHE R THAN ASCERTAINED LIABILITIES. TH E REF ORE, HE ADDED SUM OF RS.8.00 CRORES TO THE BOOK PROFIT, COMPUTED U/S. 115JB OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE FIRST APPELLATE AUTHORITY (FAA).BEFORE HI M IT WAS SUBMITTED THAT CLAUSE (C) OF EXPLANATION 1 TO S.115JB(2) REFERRED TO T HE PROVISIONS MADE FOR MEETING LIABILITY, THAT THERE WAS NO PROVISION MADE FOR LIABILITIES, THAT ONLY VALUE OF CERTAIN HAD BEEN REDUCED, THAT THERE WAS NOTHING WHICH HAD BEEN SE T ASIDE AS REQUIRED BY PROVISIONS OF S.115JB THAT THE ADJUSTMENT MADE BY AO WAS NOT VALID.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE FAA HELD THAT THE A SSESSEE HAD ANTICIPATED CERTAIN DIMINUTION IN VALUE OF INVESTMENT MADE IN THE SUBSIDIARY CO MPA NY , THAT PROVISION WAS MADE IN P&L ACCOUNT BY DEBITING IT AND CREDITING TO THE INVESTMENT ACCOUNT, THAT THE A SSESSEE HAD SET ASIDE CERTAIN FUNDS FROM THE PROFIT TO MEET OUT THE LOSS ANTICIPATED, THAT EVENTHOUGH THE A SSESSEE HAD NOT USED THE WORD PROVISION IN THE BOOKS OF ACCOUNT YET THE EFFECT WAS NOTHING BUT IT WAS SETTING ASIDE OF CERTAIN FUNDS FOR MEETING OUT THE EXPECTED LOSS. HE HELD THAT RS.8.00 CR. HAD TO BE ADDED TO THE BOOK PROFIT IN VIEW OF EXPL ANATION 1 (1) TO S.115JB OF THE ACT. FINALLY HE UPHEL D THE ORDER OF THE AO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR) REITERATED THE SAME ARGUMENTS THAT WERE ADVANCED BEFORE THE FAA.DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA AND ARGUED THAT THE TRIBUNAL HAD DECIDED THE IDENTICAL ISSUE AGAINST ONE OF THE SISTER CONCERNS.IN THAT REGARD , HE RELIED UPON THE CASE OF I DREAM PRODUCTIONS PVT. LTD.(27 ITR - TRIB 169) . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF I DREAM PRODUCTIONS PVT. L TD. (SUPRA),THE TRIBUNAL HAS DEALT WITH THE ISSUE OF DIMINUTION IN VALUE OF INVESTMENT .IN THAT MATTER, D URING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007 - 08, THE ASSESSEE CLAIMED AN AMOUNT UNDER THE HEAD PROVISION FOR DOUBTFUL ADVANCES IN THE PROFIT AND LOSS ACCOUNT. THE A O ADDED BACK THAT AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE AND IN THE BOOK PROFIT FOR THE PURPOSE OFSECTION 115JB OF THE ACT. THE FAA REJECTED THE CONTENTION OF THE ASSESSEE THAT ONLY THE VALUE OF CERTAIN ASSETS HAD BEEN RED UCED AND THE 8562 & 198 /M UM / 2010 & 2011AY07 - 08 - LPPL 3 PROVISION WAS MADE FOR THAT REDUCTION AND CONFIRMED THE DECISION OF THE AO. ASSESSING OFFIC ER. ON APPEAL BY THE ASSESSEE,THE TRIBUNAL HELD AS UNDER: THE WORD SET ASIDE IN CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB OF THE INCOME - TAX ACT, 196 1IS FOLLOWED BY THE WORD AS AND NOT BY THE WORD TO AS IN CLAUSE (C). WHEN THE AMOUNT IS CLAIMED OR EARMARKED FOR MEETING ACERTAIN FUTURE LIABILITY, THEN THE WORD SET ASIDE IN THAT CONTEXT WILL MEAN THAT THE AMOUNT EARMARKED TO THE PROVISION MADE FO R FUTURE LIABILITY. THE WORDING OF CLAUSE (I) REFERS TO THE AMOUNTS APPROPRIATED AS A PROVISION FOR THE DIMINUTION OF THE VALUE OF THE ASSET. THE AMOUNT IS CALCULATED ON CERTAIN PERCENTAGE BASIS AND ACCORDING TO THE AGE OF THE ASSET IN QUESTION. IT IS AS IMPLE PROCESS OF CALCULATING THE PRESENT VALUE OF THE ASSET IN COMPARISON TO ITS PURCHASE VALUE, TAKING INTO CONSIDERATION THE DEPRECIATION IN ITS VALUE WITH THE USE AND PASSAGE OF TIME THE APPEAL, THAT THE SIMPLE AND PLAIN MEANING OF CLAUSE (I) IS TO ME AN THAT THE AMOUNTS APPROPRIATED AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET ARE TO BE INCLUDED INTO THE BOOK PROFIT. WHILE INTERPRETING A LEGAL PROVISION, A SINGLE WORD CANNOT BE TAKEN OUT TO INTERPRET THE PROVISION, RATHER THE WHOLE OF THE PROV ISION AS WELL THE INTER CORRELATION OF WORDS USED THEREIN IS TO BE SEEN. WHILE READING THE ENTIRE CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB , THE SIMPLE MEANING OF THE WORD SET ASIDE USED THEREIN COMES OUT WITH REFERENCE TO THE AMOUNTS AS REDUCED, ON ACCOUNT OF DIMINUTION IN THE VALUE OF THE ASSET. IF THE INTERPRETATION AS PUT FORWARD BY THE ASSESSEE WAS TO BE GIVEN EFFECT THEN THE PURPOSE OF INSERTING CLAUSE (I) IN EXPLANATION 1 WOULD BE DEFEATED AND THE CLAUSE WOULD BECOME REDUNDANT AS THERE WOULD BE NO OCCASION, WHICH WOULD REQUIRE CREATING A FUND WHICH COULD BE USED IN FUTURE AT THE TIME OF NEED, TOWARDS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET. LITERALLY AND PRACTICALLY, SUCH AN OCCASION WOULD NEVER ARISE. RESPECTFULLY,FOLLOWING THE ABOVE ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE . ITA NO. 19 8/MUM/201 1 : 6. THE EFFECTIVE GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S.234B OF THE A CT AMOUNTING TO RS.21,30,907/ - . WHILE COMPLETING THE ASSESSMENT ORDER THE AO LEVIED INTE REST U/S. 234 OF THE ACT. AGGRIEVED BY THE LEVY OF INTEREST, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FAA. BEFO RE HIM, IT WAS STATED THAT THE AA HAD BEEN ASSESSED U/S. 11JB ON ITS BOOK PROFIT, THAT INTEREST U/S.234B WAS NOT LEVIABLE, THAT AT THE TIME OF P AYMENT OF ADVANCE TAX IT COULD NOT HAVE ANTICIPATED THAT THE AMENDMENT WOULD BE MADE RETROSPECTIVE FROM AY 2001 - 02, THAT INTEREST WAS PAYABLE U/S. 234B IF IT WAS LIABLE TO PAY ADVANCE TAX,THAT THE ASSESSEE WAS NOT LIABLE TO PAY ANY ADVANCE TAX AT ALL DURING THE YEAR UNDER CONSIDERATION. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT THE CONTENTION OF THE ASSESSEE THAT IF THE TOTAL WAS DETERMINED AS PER MAT PROVISION 234B INTEREST WOULD NOT BE CHARGED WAS SUPPORTED BY JUDICIAL PRONOUNCEME NT. HE REFERRED TO THE ORDER OF THE H ONBLE B OMBAY H IGH C OURT, DELIVERED IN THE CASE OF SNOWCEM INDIA LTD.(313 ITR170). HE FURTHER HELD THAT RETROSPECTIVE AMENDMENT TO THE PROVISIONS OF S ECTION 115JB OF THE ACT WAS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERA TION. HE ALSO REFER R ED TO THE CASE OF REVATHI EQUIPMENT LTD.(298 ITR 68). 7. DURING THE COURSE OF HEARING BEFORE US THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. THE AR STATED THAT AMENDMENT TO THE MAT PROVISIONS WAS NOT APPLICABLE T O THE YEAR UNDER CONSIDERA - TION. HE REFERRE D TO THE JUDGMENT OF EMAMI LTD.(337 I TR470) AND JUPITER BIOSCIENCE LTD.(352 ITR 113) 8562 & 198 /M UM / 2010 & 2011AY07 - 08 - LPPL 4 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATT ER.W E FIND THAT THE AR HAD ADVANCED TWO ARGUMENTS: (I) THAT IF THE TOTAL INCOME WAS DETERM INED U/S. 115JB OF THE ACT THEN INTEREST U/S.234B COULD NOT BE CHARGED AND (II) THAT THE ADJUSTMENT MADE TO BOOK PROFIT WAS VALID IN VIEW OF RETROSPECTIVE AMENDMENT AND IN VIEW OF THAT THERE WAS NO LIABILITY TO PAY AD V AN CE TAX ON SUCH ADJUSTMENTS. WE FIND T HAT THE JUDGMENT OF SNOWCEM (SUPRA) OF H ONBLE BOMBAY HIGH COURT HAS BEEN REVERSED BY THE H ONBLE S UPREME C OURT IN THE DECISION OF ROLTA INDIA LTD. (330 ITR 470). THEREFOR E, THE FIRST LIMB OF THE ARGUME NT HAS TO BE REJECTED. AS FAR AS THE SECOND LIMB OF THE ARGUMENT IS CONCERNED , WE FIND THAT THE H ONBLE CAL CUTTA AND KARNATAKA H IGH C OURTS IN THE CASE OF EMAMI INDIA AND JUPITER BIOSCIENCE LTD.(SUPRA) H AVE CLEARLY STATED THAT THE AME NDED PROVISIONS WOULD NOT B E APPLICABLE TO EARLIER YEARS. WE WOULD L IKE TO REPRO DUCE THE JUDG MENT OF EMAMI INDIA THAT READS AS UNDER: THE PROVISIONS OF SECTIONS 234B AND 234C OF THE INCOME - TAX ACT, 1961, ARE MANDATORY IN NATURE. HOWEVER, IN ORDE R TO ATTRACT THESE PROVISIONS , IT MUST BE ESTABLISHED THAT THE ASSESSEE HAD THE LIABILITY TO PAY ADVANCE TAX AS PROVIDED IN SECTIONS 207 AND 208 WITHIN THE TIME PRESCRIBED UNDER SECTION 211 . IN ORDER TO HOLD AN ASSESSEE LIABLE FOR PAYMENT OF ADVANCE TAX, THE LIABILITY TO PAY SUCH TAX MUST EXIST ON THE LAST DATE FOR PAYMENT OF ADVANCE TAX AS P ROVIDED UNDER THE ACT OR AT LEAST ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE ASSESSMENT YEAR IN QUESTION. IF SUCH LIABILITY ARISES SUBSEQUENTLY WHEN THE LAST DATE FOR PAYMENT OF ADVANCE TAX OR EVEN THE LAST DATE OF THE FINANCIAL YEAR PRECEDING TH E ASSESSMENT YEAR IS OVER, THE ASSESSEE HAD NO LIABILITY TO PAY ADVANCE TAX . BY THE FINANCE ACT, 2002, SECTION 115JB WAS AMENDED WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2001THE ASSESSEE COULD NOT BE HELD A DEFAULTER WITH RESPECT TO PAYMENT OF ADVANCE TAX. .. SIMILARLY,IN THE MATTER OF JUPITER BIOSCIENCE LTD.(SUPRA) THE HONBLE KARNATAK A HIGH COURT HAS HELD AS UNDER: THE SUPREME COURT HAS LAID DOWN THAT THE PAYMENT OF INTEREST FOR DELAYED PAYMENT OF TAX IS COMPENSATORY IN NATURE. THOUGH SUCH A LIABILITY CO ULD BE CREATED RETROSPECTIVELY, WHEN SUCH A LIABILITY IS RETROSPECTIVELY CREATED, THE ASSESSEE CANNOT BE ACCUSED OF COMMITTING DEFAULT AND HE CANNOT BE CHARGED INTEREST FOR SUCH DEFAULT. SECTION 115JB OF THE INCOME - TAX ACT, 1961, WAS INTRODUCED BY THE FINA NCE ACT, 2000, WHICH CAME INTO EFFECT FROM APRIL 1, 2001. SUBSEQUENTLY, SECTION 115JB WAS AMENDED BY THE FINANCE ACT, 2002, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2001. PRIOR TO THE AMENDMENT, ADVANCE TAX WAS PAYABLE ON THE TOTAL INCOME WHEREAS AFTER THIS AMENDMENT ADVANCE TAX IS PAYABLE ON BOOK PROFIT WHICH IS DEEMED TO BE THE TOTAL INCOME. R ESPECTFULLY FOLLOWING THE ABOVE, WE DISMISS THE GROUND RAISED BY THE AO. AS A RESULT APPEALS FILED BY THE ASSESSEE AND THE AO STAND DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH ,MAY,2015. 27 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 27.05.2015 8562 & 198 /M UM / 2010 & 2011AY07 - 08 - LPPL 5 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.