PATEL ENGINEERING LTD, MUMBAI V. DCIT CEN CIR 24 & 26, MUMBAI

ITA 9090/MUM/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0213 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-03-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 28-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Deemed to accrue or arise in india; Question of law
• Section: 143(3); 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 9090/MUM/2010 ASSESSMENT YEAR: 2002 - 03 PATEL ENGINEERING LTD. VS. DCIT 8 (2) PATEL ESTATE ROAD., MUMBAI - 400020 JOGESWHWARI (W), MUMBAI 400102 PAN NO. AAACP2567L (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. MAYUR KISNADWALA, AR REVENUE BY: MR. RAJAT MITTAL, DR DATE OF HEARING : 23/05/2017 DATE OF PRONOUNCEMENT: 18/08/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2002 - 03. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 39 MUMBAI AND ARISES OUT OF ORDER U/S 143(3) R.W.S. 250 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ASSESSMENT ON THE ASSESSEE OF A SUM OF RS.1,98,01,451/ - BE ING THE AMOUNT ASSESSED AS INCOME OF THE AOP STYLED AND NAMED AS LGE & C PATEL JV WHEREAS AS PER SECTION 86, THE ITA NO. 9090/MUM/2010 2 AMOUNT NEEDS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE FOR COMPUTATION OF BOOK PROFITS FOR MAT PURPOSES U/S 115 JB OF THE ACT. 3. BRIEFLY STATED , THE FACTS OF THE CASE ARE THAT THE ASSESSEE TOOK AN ADDITIONAL GROUND BEFORE THE LD. CIT(A) THAT ITS SHARE OF INCOME FROM THE JOINT VENTURE (JV) VIZ. LGE & C PATEL JV, AN ASSOCIATION OF PERSONS (AOP) WAS NOT TAXABLE AS THE ASSESSING OFFI CER (AO) OF THE SAID JV HAD ALREADY ASSESSED THE SAID INCOME AS INCOME OF THE JV. THE ASSESSEE ALSO SUBMITTED BEFORE THE LD. CIT(A) THAT THE AO BE DIRECTED NOT TO LEVY MAT U/S 115JB ON THE RECEIPT OF RS.1,98,01,451/ - FROM LGE & C PATEL JV. IT WAS FURTHER S UBMITTED THAT THE ITAT VIDE ORDER DATED 16.04.2010 IN THE APPEALS FILED BY THE LGE & C PATEL JV HELD THAT THE ABOVE J V SHOULD BE TAXED AS AOP. 4 . HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WITH THE ABOVE SUBMISSION OF THE ASSESSEE AND HELD THAT (I) SECTIO N 115JB IS A SEPARATE AND SELF - CONTAINED CODE IN ITSELF AND THE DEEMED TOTAL INCOME AND TAXABLE INCOME SHOULD BE COMPUTED IN ACCORDANCE WITH SECTION 115JB OF THE ACT, (II) THERE IS NO PROVISION IN SECTION 115JB TO DEDUCT THE PROFIT EARNED FROM THE AOP (JV) WHICH WAS INCLUDED IN THE P&L ACCOUNT OF THE ASSESSEE - COMPANY WHILE DETERMINING THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. THEREFORE, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5 . BEFORE US, THE LD. COUNSEL OF THE ASSE SSEE RELIE S ON THE ORDER OF THE TRIBUNAL IN THE CASE OF GOLDGERG FINANCE (P.) LTD. VS. ACIT (ITA NO. 7496/MUM/2013) FOR THE A.Y. 2009 - 10. THE LD. COUNSEL ALSO REFERS TO THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE AY 2002 - 03. THE ITA NO. 9090/MUM/2010 3 ISSUE THEREIN RELA TES TO THE LIABILITY TO TAX U/S 115JB OF THE PROFITS FROM LGE & C PATEL JV (AOP). WE FIND THAT AT PARA 27 , THE ITAT HAS HELD THAT THE SUBJECT MATTER WITH REGARD TO GROUND NO. 2 WAS NOT BEFORE THE TRIBUNAL AND HENCE THEY HAD NO JURISDICTION TO GIVE ANY DIRE CTION. 6. ON THE OTHER HAND, THE LD. DR RELIE S ON THE ORDER OF THE TRIBUNAL IN THE CASE OF GOLDGERG FINANCE (P.) LTD. VS. ACIT (2015) 53 TAXMANN.COM 40 (MUM - TRIB). 7 . WE BEGIN WITH THE DECISION RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN THE CASE OF GOLDGERG FINANCE PVT. LTD. (SUPRA) FOR THE A.Y. 2009 - 10, THE ASSESSEE HAD RECEIVED SHARE OF INCOME AMOUNTING TO RS.54,58,717/ - FROM AOP M/S COSMOS PROPERTIES WHICH WAS CLAIMED AS EXEMPT U/S 86. THE AO HELD THAT THIS SHARE OF PROFIT WAS TO BE TAXED IN THE ASSESSEES HAND ON THE GROUND THAT THE TOTAL INCOME OF M/S COSMOS PROPERTIES AFTER CLAIMING DEDUCTION U/S 80IB (10) WAS SHOWN AT NIL AND THE TOTAL INCOME OF OTHER AOP M/S COSMOS ESTATE WAS ALSO SHOWN AT RS. NIL. IN THE ABOVE CASE FOR THE A Y 2009 - 10, THE ITAT G BENCH, MUMBAI VIDE ORDER DATED 19.01.2017 HAS HELD THAT CLAUSE (IIC) INSERTED IN EXPLANATION 1 TO SECTION 115JB BY THE FINANCE ACT 2015 IS REMEDIAL AND CURATIVE IN NATURE AS IT WAS BROUGHT IN THE STATUTE TO PROVIDE SIMILAR BENEFIT T O THE MEMBER OF AOP WHICH WAS EARLIER APPLICABLE TO THE PARTNER OF THE FIRM, THEREFORE, IT IS TO BE RECKONED AS RETROSPECTIVE. WE ARE NOT CONVINCED WITH THE ABOVE ORDER REFERRED BY THE LD. COUNSEL AS PER OUR DISCUSSION INFRA . ITA NO. 9090/MUM/2010 4 7.1 WE THEN TURN TO THE DECI SION RELIED ON BY THE LD. DR. IN GOLDGERG FINANCE (P) LTD. (SUPRA) FOR THE AY 2008 - 09, THE ASSESSEE - COMPANY WAS A MEMBER OF TWO AOPS AND IT CLAIMED EXEMPTION U/S 86 IN RESPECT OF SHARE INCOME RECEIVED FROM THE TWO AOPS. THE ITAT G BENCH, MUMBAI IN THE ABOVE CASE VIDE ORDER DATED 5.9.2014 HAS HELD THAT WHERE ASSESSEE - COMPANY HAD CREDITED ITS SHARE OF INCOME FROM AOP IN ITS PROFIT AND LOSS ACCOUNT AND BOOK PROFIT WAS WORKED OUT AFTER TAKING INTO ACCOUNT SUCH SHARE OF INCOME AND SAID PROFIT AND LOSS ACCOUN T HAD BEEN APPROVED BY BOARD OF DIRECTOR OF ASSESSEE - COMPANY, THERE WAS NO REASON TO EXCLUDE SAID PROFIT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. WE FOLLOW THE ABOVE ORDER OF THE TRIBUNAL AS PER OUR DISCUSSION IN THE FOLLOWING PARAGRAPHS. 7.2 WE BEGIN WITH THE FOLLOWING NEW CLAUSE IN EXPLANATION 1 INSERTED BY THE FINANCE ACT, 2015 W.E.F. 01.04.2016: - (IIC) THE AMOUNT OF INCOME, BEING THE SHARE OF THE ASSESSEE IN THE INCOME OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS, ON WHICH NO INCOME TA X IS PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 86 IF ANY, SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT; OR 7 .3 AT THIS JUNCTURE W E REFER TO THE RELEVANT CLAUSE OF MEMORANDUM TO FINANCE BILL 2015 AND MENTION IT OVERLEAF : - RATIONALISING THE PROVISIONS OF SECTION 115JB THE EXISTING PROVISIONS CONTAINED IN SECTION 115JB OF THE ACT PROVIDE THAT IN THE CASE OF A COMPANY, IF THE TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2012, IS LESS THAN EIGHTEEN AND ONE - HALF PERCENT OF ITA NO. 9090/MUM/2010 5 ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE FOR THE RELEVANT PREVIOUS YEA R SHALL BE EIGHTEEN AND ONE - HALF PERCENT OF ITS BOOK PROFIT. THIS TAX IS TERMED AS MINIMUM ALTERNATE TAX (MAT). EXPLANATION BELOW SUB - SECTION (2) OF SECTION 115JB PROVIDES THAT THE EXPRESSION 'BOOK PROFIT' MEANS NET PROFIT AS SHOWN IN THE PROFIT AND LOSS A CCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT, OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING A COMPANY AS INCREASED OR REDUCED BY CERTAIN ADJUSTMENTS, AS SPECIFIED IN THE SECTION. SECTION 86 OF THE ACT PROVIDES THAT NO INCOME - TAX IS PAYABLE ON THE SHARE OF A MEMBER OF AN AOP, IN THE INCOME OF THE AOP IN CERTAIN CIRCUMSTANCES. HOWEVER, UNDER THE PRESENT PROVISIONS, A COMPANY WHICH IS A MEMBER OF AN AOP IS LIABLE TO MAT ON SUCH SHARE ALSO SINCE SUCH INCOME IS NOT EXCLUDED FROM THE BOOK PROFIT WHILE COMPUTING THE MAT LIABILITY OF THE MEMBER. IN THE CASE OF A PARTNER OF A FIRM, THE SHARE IN THE PROFITS OF THE FIRM IS EXEMPT IN THE HANDS OF THE PARTNER AS PER SECTION 10(2A) OF THE ACT AND NO MAT IS PAYABLE BY THE PARTNER ON S UCH PROFITS. IN VIEW OF THE ABOVE, IT IS PROPOSED TO AMEND THE SECTION 115JB SO AS TO PROVIDE THAT THE SHARE OF A MEMBER OF AN AOP, IN THE INCOME OF THE AOP, ON WHICH NO INCOME TAX IS PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 86 OF THE ACT, SHO ULD BE EXCLUDED WHILE COMPUTING THE MAT LIABILITY OF THE MEMBER UNDER 115JB OF THE ACT. THE EXPENDITURES, IF ANY, DEBITED TO THE PROFIT LOSS ACCOUNT, CORRESPONDING TO SUCH INCOME (WHICH IS BEING PROPOSED TO BE EXCLUDED FROM THE MAT LIABILITY) ARE ALSO PROP OSED TO BE ADDED BACK TO THE BOOK PROFIT FOR THE PURPOSE OF COMPUTATION OF MAT. IN VIEW OF THE ABOVE, A NEW CLAUSE (IIC) IS PROPOSED TO BE INSERTED IN EXPLANATION 1 SO AS TO PROVIDE THAT THE AMOUNT OF INCOME, BEING THE SHARE OF INCOME OF AN ASSESSEE ON WH ICH NO INCOME - TAX IS PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 86, IF ITA NO. 9090/MUM/2010 6 ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT, SHALL BE REDUCED FROM THE BOOK PROFIT FOR THE PURPOSES OF CALCULATION OF INCOME - TAX PAYABLE UNDER THE SECTION. FURT HER BY INSERTING A NEW CLAUSE (FA) IN EXPLANATION 1 IT IS PROPOSED THAT THE BOOK PROFIT SHALL BE INCREASED BY THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO THE ABOVE INCOME. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2016 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2016 - 17 AND SUBSEQUENT ASSESSMENT YEARS. [CLAUSE 29] 7 .4 SECTION 115JB IS A SELF - CONTAINED CODE. IT TAXES DEEMED INCOME. IT BEGINS WITH A NON - OBSTANTE CLAUSE. SECTION 115JB REFER S TO COMPUTATION OF BOOK PROFITS WHICH HAVE TO BE COMPUTED BY MAKING UPWARD AND DOWNWARD ADJUSTMENTS. SECTION 115JB IS A SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. IT CREATES A LEGAL FICTION REGARDING THE TOT AL INCOME OF ASSESSEE WHICH A RE COMPANIES. THE BOOK PROFIT OF THE COMPANY IS DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE IN THE CIRCUMSTANCES SPECIFIED IN THE SECTION. THE PURPOSE OF SECTION 115JB IS TO PROVIDE AN ALTERNATIVE METHOD OF COMPUTATION OF TAX BY ACCEPTING THE BOOK PROFIT S AS SHOWN BY THE ASSESSEE, ALBEIT WITH CERTAIN ADJUSTMENTS AS SPECIFIED IN EXPLANATION 1 TO SECTION 115JB (2) AND LEVYING TAX THEREON AS ALTERNATIVE TO THE TAX COMPUTED UNDER THE OTHER PROVISIONS OF THE 1961 ACT . 7.5 IT IS A CARDINAL PRINCIPLE OF CONSTRUCTION THAT EVERY STATUTE IS PRIMA - FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. IT HAS BEEN HELD SO IN GOVINDDAS VS. ITO 103 ITR 123 (SC) ; CED VS. MERCHANT 17 7 ITR 490 (SC) ; SHARMA VS. ITO 254 ITR 722 (SC) ; NATIONAL AGRICULTURAL VS. UO I 260 ITA NO. 9090/MUM/2010 7 ITR 548 (SC) ; KESHVAN VS. STATE OF BOMBAY AIR 1951 SC 128; JANARDAN REDDY VS. STATE AIR 1951 SC 124 . UNLESS THERE ARE WORDS IN THE STATUTE SUFFICIENT TO SHOW THE INTENTION O F THE LEGISLATURE TO AFFECT EXISTING RIGHTS, IT IS DEEMED TO BE PROSPECTIVE ONLY. 7.6 WE FEEL IT IS ALWAYS SALUTARY TO KEEP IN SIGHT THE ENUNCIATION OF LAW. WE MAY REFER A CASE WHICH DEALS WITH CLAIM OF U/S 80IB(10) OF THE ACT. IN CIT VS. M/S BRAHMA ASSOCIATES (ITA NO. 1194 OF 2010) THE QUESTION OF LAW BEFORE THE HONBLE BOMBAY HIGH COURT WAS THE BELOW ONE: - WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE LIMIT ON COM MERCIAL USE OF BUILT UP AREA AS PRESCRIBED BY CLAUSE (D) OF SECTION 80IB(10) HAS NO RETROSPECTIVE APPLICATION AND IT APPLIES ONLY W.E.F. THE ASSESSMENT YEAR 2005 - 06 ? THE HONBLE HIGH COURT HELD AS UNDER: - LASTLY, THE ARGUMENT OF THE REVENUE THAT SECTION 80IB(10) AS AMENDED BY INSERTING CLAUSE (D) WITH EFFECT FROM 1/4/2005 SHOULD BE APPLIED RETROSPECTIVELY IS ALSO WITHOUT ANY MERIT, BECAUSE, FIRSTLY, CLAUSE (D) IS SPECIFICALLY INSERTED WITH EFFECT FROM 1/4/2005 AND, THEREFORE, THAT CLAUSE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1/4/2005. SECONDLY, CLAUSE (D) SEEKS DENY SECTION 80IB(10) DEDUCTION TO PROJECTS HAVING COMMERCIAL USER BEYOND THE LIMIT PRESCRIBED UNDER CLAUSE (D), EVEN THOUGH SUCH COMMERCIAL USER IS APPROVED BY THE LOCAL AUTHORITY. THER EFORE, THE RESTRICTION IMPOSED UNDER THE ACT FOR THE FIRST TIME WITH EFFECT FROM 1/4/2005 CANNOT BE APPLIED RETROSPECTIVELY. THIRDLY, IT IS NOT OPEN TO THE REVENUE TO CONTEND ON THE ONE HAND THAT SECTION 80IB(10) AS IT STOOD PRIOR TO 1/4/2005 DID NOT PERMI T COMMERCIAL USER IN HOUSING PROJECTS AND ON THE OTHER HAND CONTEND THAT THE RESTRICTION ON COMMERCIAL USER INTRODUCED WITH EFFECT FROM 1/4/2005 SHOULD BE APPLIED ITA NO. 9090/MUM/2010 8 RETROSPECTIVELY . THE ARGUMENT OF THE REVENUE IS MUTUALLY CONTRADICTORY AND HENCE LIABLE TO BE REJECTED. THUS, IN OUR OPINION, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFFECT FROM 1/4/2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED TO THE PERIOD PRIOR TO 1/4/2005. 7. 7 THE LEGAL NODUS CONFRONTING US HAS BEEN CONSIDERED BY THE HONBLE MADRAS HIGH COURT I N CIT VS. TIDEL PARK LTD ., (2011) 334 ITR 126, 128 (MAD), SLP DISMISSE D : (2010) 325 ITR (ST.) 3 (SC). THEREIN THE FOLLOWING WAS ONE SUBSTANTIAL QUESTION OF LAW: 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, EXPLANATION (IIA) TO SECTION 115JB HAS RETROSPECTIVE EFFEC T BEING CLARIFICATORY IN NATURE ?' THEIR LORDSHIPS HELD : - IN SO FAR AS THE ISSUE RAISED BASED ON THE EXPLANATION (IIA) TO SECTION 115JB IS CONCERNED, THE SAME W ILL HAVE NO APPLICATION INASMUCH AS THE INSERTION OF THE SAID PROVISION ITSELF WAS BY WAY OF AN AMENDMENT, WHICH WAS INTRODUCED BY THE FINANCE ACT, 2006 WITH EFFECT FROM APRIL 1, 2007, WHILE WE ARE CONCERNED WITH THE PREVIOUS YEAR CORRESPONDING TO THE ASSE SSMENT YEAR 2002 - 03, WITH REFERENCE TO WHICH THE SAID AMENDED PROVISION WILL HAVE NO APPLICATION. 7. 8 FROM THE AFORESAID, IT IS GRAPHIC THAT CLAUSE (IIC) INSERTED BY THE FINANCE ACT 2015 W.E.F. 1.4.2016 IS NOT APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR 20 02 - 03. ACCORDINGLY , WE UPHOLD THE ORDER OF THE LD. CIT(A). ITA NO. 9090/MUM/2010 9 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/08/2017 SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 18/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI