Webel Power Electronics Ltd., Kolkata V. DCIT, CIR-12, KOLKATA, Kolkata

ITA 881/KOL/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3788 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-07-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 07-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: SWAPAN DAS
• Keywords: Depreciation; Wholly owned subsidiary; Set aside
• Section: 143(3); 115JB; 250; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (B), KOLKATA [ BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) & SHRI A.T. VARKEY, JUDICIAL MEMBER ] I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD...........................................................APPELLANT WEBEL BHAVAN, BLOCK EP & GP, SECTOR-V, SALT LAKE, KOLKATA 700 091. [PAN: AAACW 2649 G] DCIT CIRCLE 12, KOLKATA..............................RESPONDENT AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI SWAPAN DAS, AR APPEARING ON BEHALF OF THE ASSESSEE. SHRI RADHEY SHYAM, CIT, DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 08, 2019 DATE OF PRONOUNCING THE ORDER : AUGUST 09, 2019 ORDER PER P.M. JAGTAP, VICE PRESIDENT (KZ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. PR. CIT XII, KOLKATA DATED 20.02.2014. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ELECTRONIC EQUIPMENTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 14.03.2018 DECLARING TOTAL INCOME AT NIL. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) VIDE AN ORDER DATED 18.12.2009, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE AO AT NIL. THE SAID ASSESSMENT WAS SUBSEQUENTLY REOPENED BY THE AO AFTER RECORDING THE REASON THAT THE DEDUCTION OF RS. 25,36,36,922/- COMPRISED OF UNSECURED LOAN WRITTEN BACK AMOUNTING TO RS. 2 I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD. 22,34,56,519/- AND INTEREST ON LOAN WRITTEN BACK AMOUNTING TO RS. 3,01,80,403/- AS CLAIMED BY THE ASSESSEE WHILE COMPUTING THE BOOK PROFIT U/S 115JB WAS WRONGLY ALLOWED IN THE ASSESSMENT COMPLETED U/S 143(3) AND THERE WAS AN ESCAPEMENT OF INCOME TO THAT EXTENT. HE ACCORDINGLY ISSUED THE NOTICE U/S 148 AND MADE AN ASSESSMENT U/S 147/143(3) OF THE ACT VIDE AN ORDER DATED 28.03.2013 COMPUTING THE BOOK PROFIT OF THE ASSESSEE COMPANY U/S 115JB OF THE ACT AT RS. 21,88,41,892/- AS UNDER: NET PROFIT AS PER P&L A/C RS. 22,63,85,601/- LESS: CAPITAL RESERVE WRITTEN BACK RS. 1,46,054/- RS. 22,62,39,547/- LESS: LESSER OF CONSOLIDATED UNABSORBED BOOK LOSS AND CONSOLIDATED UBABSORBED BOOK DEPRECIATION AS ON 31.03.2006 (A)CONSOLIDATED UNABSORBED BOOK DEPRECIATION RS. 73,97,655/- (B) CONSOLIDATED UNABSORBED BOOK LOSS (RS. 22,59,05,246/- (RS. 23,33,02,901/- RS. 73,97,655/-) RS. 73,97,655 ADJUSTED BOOK PROFIT: RS. 21,88,41,892/- 3. AGAINST THE ORDER PASSED BY THE AO U/S 147/143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND SINCE THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CASE WERE NOT FOUND ACCEPTABLE BY HIM, THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO 5.2.3 OF HIS IMPUGNED ORDER: 5.2.3: AFTER GOING THROUGH THE ABOVE, IT IS OBSERVED THAT AS THERE IS NO PROFITS FROM THE SICK INDUSTRIAL COMPANY AND INSTEAD THERE WAS LOSSES SO THERE IS NO QUESTION OF DEDUCTION OF ANY AMOUNT UNDER THIS HEAD WHILE CALCULATING THE BOOK PROFIT U/S 115JB AS CLAIMED BY THE APPELLANT. IN THE CASE OF INDO RAMA SYNTHETICS (I) LTD. CIT (2011) 196 TAXMAN 539 (SC), THE HONBLE APEX COURT HAS HELD THAT IN TERMS OF CLAUSE (I) OF EXPLANATION TO SECTION 115JB(2), IT IS ONLY IT RESERVES CREATED HAVE INCREASED BOOK PROFITS IN ANY YEAR THEN PROVISIONS OF SECTION 115JB WOULD BE APPLICABLE AND ASSESSEE WOULD BE ENTITLED TO REDUCE AMOUNT WITHDRAWN FROM SUCH 3 I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD. RESERVES IF SUCH WITHDRAWAL IS CREDITED TO PROFIT AND LOSS ACCOUNT. THE CONDITION LAID DOWN IN CLAUSE (VIII) OF THIRD PROVISO TO SECTION 115JB(2) THAT THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECAME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL (SPECIAL PROVISIONS) ACT, 1985 AND ENDING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES DOES NOT APPEAR TO HAVE BEEN FULFILLED IN THIS CASE. IN VIEW OF THE FACTS OF THE CASE AND THE PROVISIONS OF SECTION 115JB OF THE ACT, I AM OF THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY COMPUTED THE BOOK PROFIT AFTER REDUCING THE RESERVES AND REDUCING THE BOOK LOSSES. HENCE, THE ASSESSMENT ORDER OF THE AO IS CONFIRMED AND THESE GROUNDS OF APPEAL OF THE APPELLANT ARE REJECTED AND DISMISSED. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING REVISED GROUNDS: 1. FOR THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S 154 RECTIFYING THE ORDER PASSED BY THE PREVIOUS ASSESSING OFFICER U/S 147/143(3) DATED 28.03.2013 IS ILLEGAL AND OTHERWISE BAD IN LAW. ASSESSMENT ORDER WAS PASSED ON 18.12.2009 BY THE DCIT CIRCLE 12, KOLKATA SHOWING THE TOTAL INCOME NIL AND NOTICE US/ 148 WAS ISSUED ON 20.03.2012 AND ASSESSMENT WAS MADE U/S 147/143(3) OF THE ACT, CONSIDERING BOOK PROFIT U/S 115JB. ANNEXURE-A (PAGE 1 TO 4). 2. BUT AS A MATTER OF FACT THE SECTION 115JB OF THE SICK COMPANIES (SPECIAL PROVISION) ACT, 1985 APPLIES I.E. ENDING THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WORTH (PAID UP SHARE CAPITAL PLUS FREE RESERVE EXCEEDED THE ACCUMULATED LOSS. WE ARE PROVIDING HEREWITH THE STATEMENT ACCUMULATES LOSS ALONG WITH THE PAID UP AND RESERVE, RIGHT FROM THE FY YEAR 1999-2000 TO FY 2006-07, ANNEXURE B (PAGE -1) AND COMPUTATION OF OPERATION PROFIT AND NOTIONAL PROFIT FOR THE FY 2006-07 FOR YOUR CONSIDERATION. ANNEXURE C (PAGE -1). 3. THAT FOR THE ORDER PASSED TO THE DEPUTY COMMISSIONER OF INCOME TAX (APPEALS) XII, KOLKATA ON 28 TH MARCH, 2013 AND SUBSEQUENTLY, AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA U/S 250 DATED 20.02.2014 RECEIVED BY THE ASSESSEE ON 11.03.2014 4 I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD. AN APPEAL HAS BEEN FILED TO THE APPELLATE DECISION OF WHICH IS PENDING NOW. 4. ORDER REGARDING CLOSURE OF WEBEL POWER ELECTRONICS LTD. VIDE ORDER NO. 419/DS/(IT)/O/129/2004 (VOL-II) DATED 11.07.2005 AS WELL AS THE INSTRUCTION FOR DISPOSAL OF ASSETS AND LIABILITIES, ETC. BY THE GOVT. OF WEST BENGAL, DEPARTMENT OF INFORMATION AND TECHNOLOGY EFFECTIVE FROM 1 ST DECEMBER, 2006 VIDE ORDER NO. ESTT/IT/O/129/2004 (VOL. III) DATED 14.08.2007. ANNEXURE D (PAGE 1 & 2). 5. THAT THE ASSESSEE WAS NOT AT ALL LIABLE TO PAY ADVANCE TAX AS THE OPERATING PROFIT FOR THE ASSESSMENT YEAR 2007-08 WAS NIL. SO, THE QUESTION OF RECTIFICATION U/S 154 DOES NOT ARISE AT ALL. THE PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT WAS ONLY A NOTIONAL PROFIT WHICH AROSE DUE TO ADJUSTMENT ENTRIES PASSED, ESPECIALLY LOAN CAPITAL WAIVED BY GOVT. OF W.B. IN ORDER TO CLOSE THE BOOKS OF ACCOUNT FOR CLOSER OPERATION OF THE ASSESSEE COMPANY VIDE GOVT. OF WEST BENGAL ORDER. THE OPERATION WAS CLOSED W.E.F. 30 TH NOVEMBER, 2006 VIDE GOVT. OF WEST BENGAL ORDER NO. 987- JS(IT)/IT/O/129/2004 VOL.III DATED 15.09.2006. PLEASE REFER TO THE EXHIBIT-01. 6. THESE ARE ALSO 100% SUBSIDIARY OF WBEIDC (NODAL AGENCY OF GOVT. OF WEST BENGAL) WHICH ARE BEING CLOSED DUE TO STRUCTURAL NON-VIALIBILITY AND THE LD. ASSESSING AUTHORITY CONSIDERED AS DEDUCTION IN RELATION TO UNSECURED LOAN CAPITAL AND CARRY FORWARD LOSSES AND CLOSED THE ASSESSMENT, SUCH AS: (A) WEBEL CRYSTAL LIMITED ANNEXURE E (PAGE 1 TO 5) (B) WEBEL MEDIATRONICS LTD. 7. THAT THE LD. ASSESSING OFFICER HAS GROSSLY MISTAKEN THE NOTIONAL PROFIT WITHOUT CONSIDERING THE OPERATION PROFIT (THE RESULT OF THE WORKING OF THE COMPANY) AND AT THE SAME TIME THE AUDIT REPORT FOR THE FINANCIAL, RELEVANT TO AFORESAID ASSESSMENT YEAR, PROVIDES, INTER ALIA, THAT FINANCIAL STATEMENT IS NOT BEEN PREPARED ON A GOING CONCERN BASIS, BUT LD. ASSESSING AUTHORITY CONSIDERED SECTION 115JB TO ARRIVE AT THE BOOK PROFIT. (SCHEDULE 18, - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS) ALONG WITH THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT. ANNEXURE F (PAGE 1 TO 3) 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED 5 I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT A LIMITED ISSUE INVOLVED IN THIS APPEAL OF THE ASSESSEE IS THAT THE RELIEF SOUGHT BY THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION WAS DISALLOWED BY THE LD. CIT(A) ON THE GROUND THAT THE CONDITION LAID DOWN IN CLAUSE B (III) OF THIRD PROVISO TO SECTION 115JB(2) APPARENTLY WAS NOT SATISFIED BY THE ASSESSEE. HE HAS CONTENDED THAT THE RELEVANT WORKING TO SHOW THAT THE SAID CONDITION WAS SATISFIED COULD NOT BE FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). HE HAS CONTENDED THAT SUCH WORKING HOWEVER IS NOT NOW PREPARED BY THE ASSESSEE AND REQUESTED THAT THE MATTER MAY BE SENT BACK TO THE AO FOR VERIFYING THE SAID WORKING. KEEPING IN VIEW ALL THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE ARE INCLINED TO ACCEPT THIS REQUEST OF THE LEARNED COUNSEL FOR THE ASSESSEE. EVEN THE LEARNED DR HAS NOT RAISED ANY OBJECTION FOR SENDING THE MATTER BACK TO THE AO FOR VERIFICATION. THE IMPUGNED ORDER OF THE LD. CIT(A) IS ACCORDINGLY SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE WORKING PREPARED BY THE ASSESSEE TO SHOW THAT THE CONDITION LAID DOWN IN CLAUSE B (III) OF THIRD PROVISO TO SECTION 115JB(2) IS SATISFIED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2019. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER VICE PRESIDENT DATED: 09/08/2019 BISWAJIT, SR. PS 6 I.T.A. NO. 881/KOL/2014 ASSESSMENT YEAR: 2007-08 WEBEL POWER ELECTRONICS LTD. COPY OF ORDER FORWARDED TO: 1. WEBEL POWER ELECTRONICS LTD., WEBEL BHAWAN, BLOCK EP & GP, SECTOR V, SALT LAKE, KOLKATA 700 091. 2. DCIT, CIRCLE -12, KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA