RISHIROOP RUBBER INTERNATIONAL LTD, V. DCIT 3(3),

MA 118/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8798 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY MEHTAJAYESH DADIA
• Keywords: Depreciation; Question of law; Wrong claim; Difference of opinion
• Section: 115JB; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, JM MISCELLANEOUS APPLICATION NOS. 118 & 119/MUM/2012 ARISING OUT OF ITA NOS. 6689 &471/MUM/2010 (ASSESSMENT YEARS 2006-07 & 2007-08) RISHIROOP RUBBER INTERNATIONAL LTD 65 ATLANTA NARIMAN POINT MUMBAI 21 VS THE DY COMMR OF INCOME TAX CIR 3(3), MUMBAI (APPELLANT ) (RESPONDENT) PAN NO. AAACS5758E ASSESSEE BY SHRI VIJAY MEHTA/JAYESH DADIA REVENUE BY SH P C MAURYA DT.OF HEARING 18 TH MAY 2012 DT OF PRONOUNCEMENT 13 TH , JUNE 2012 ORDER PER VIJAY PAL RAO, JM THESE TWO MISCELLANEOUS APPLICATIONS BY THE ASSESSE E ARE DIRECTED AGAINST THE COMPOSITE ORDER DATED 20 TH JANUARY 2012 OF THIS TRIBUNAL WHEREBY THE APPEALS OF THE ASSESSEE IN ITA NO. 6689/MUM/ 2010 AND 471/MUM/ 2010, FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 RESPECTIVELY, WERE DISPOSED OFF. 2 FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS STATED IN THE MISCELLANEOUS APPLICATION THAT WHILE ADJUDICATING THE ISSUE OF DI SALLOWANCE OF DEPRECIATION IN RESPECT OF DISCARDED ASSETS, THIS TRIBUNAL HAS COMM ITTED A MISTAKE AS THE FINDINGS ARE BASED ON ERRONEOUS FACTUAL PREMISES. THIS GRIEVANCE IS COMMON IN BOTH THE ASSESSMENT YEARS; THEREFORE, THE IDENTICAL AVERMENT S HAVE BEEN MADE IN THE MISCELLANEOUS APPLICATION NO 119/MUM/2012 FOR THE A SSESSMENT YEAR 200708. RISHIROOP RUBBER INTERNATIONAL LTD 2 2.1 THE LEARNED A.R OF THE ASSESSEE HAS SUBMITTED T HAT THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS ON THE ASSETS OTHER THAN THE DI SCARDED ASSETS AND HENCE THE FACTUAL POSITION REMAINS THAT THE ASSESSEE HAD CLAI MED DEPRECIATION ON ASSETS OTHER THAN DISCARDED ASSETS AND ON WHICH THE DEPRECIATION HAS BEEN ALLOWED IN THE EARLIER YEARS. THE LEARNED A.R. HAS FURTHER SUBMI TTED THAT THE PLANT AND MACHINERY AND FACTORY BUILDING, AS APPEARING IN THE ACCOUNT S, ARE STILL IN EXISTENCE; THEREFORE, THESE ASSETS WERE NOT DISCARDED OR DEMOLISHED; BUT NO MANUFACTURING ACTIVITIES WERE CARRIED OUT. THE LEARNED A.R. HAS THUS SUBMITT ED THAT THESE ASSETS FORM PART OF BLOCK OF ASSETS AS GIVEN IN THE CHART FILED AND AVA ILABLE AT PAGE NUMBER 1 OF THE PAPER BOOK. 2.2 IN NUTSHELL, THE LEARNED A.R OF THE ASSESSEE HAS SUBMITTED THAT THIS TRIBUNAL HAS ERRED IN DISMISSING THE GROUND NO. 2 ON INCORRE CT FACTS AS BOTH THE ASSETS, I.E. PLANT AND MACHINERY AND FACTORY BUILDING HAVE NOT BEEN DISCARDED AS INCORRECTLY ASSUMED BY THE TRIBUNAL. 2.3 ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE RECEIVED THE GRANT FOR DISCARDING OF THE PLANT AND MACHINERY IN QUESTION. ONCE THE ASSESSEE HAS RECEIVED THE COMPENSATION FOR DISCARDING OF PLA NT AND MACHINERY AND STOPPED THE BUSINESS ACTIVITY, THAN THE DEPRECIATION CANNOT BE GRANTED. THE LEARNED DR HAS POINTED OUT THAT THE DEPRECIATION ON FACTORY BUILDI NG CLAIMED BY THE ASSESSEE IS ONLY OF RS. 2,10,929/- WHEREAS THE DEPRECIATION ON PLANT AND MACHINERY HAS BEEN CLAIMED AT RS. 1,50,40,497/- AS EVIDENT FROM THE DE TAILS OF DEPRECIATION FILED BY THE ASSESSEE AT PAGE NO. 1 OF THE PAPER BOOK. 2.4 THE LEARNED D.R HAS THUS SUBMITTED THAT THE PLA NT AND MACHINERY, IN ANY CASE HAS TO BE DISCARDED IN VIEW OF THE AGREEMENT AND CO MPENSATION RECEIVED BY THE ASSESSEE; THEN IRRESPECTIVE OF THE FACT THAT THE AS SESSEE HAS NOT DEMOLISHED THE RISHIROOP RUBBER INTERNATIONAL LTD 3 PLANT AND MACHINERY AND FACTORY BUILDING PHYSICALLY , THE DEPRECIATION IS NOT ALLOWABLE. HE HAS FURTHER SUBMITTED THAT WHEN THE D ISPUTE HAS BEEN DECIDED BY THE TRIBUNAL AFTER CONSIDERING ALL THE FACTS AND CONTEN TION OF THE PARTIES AND A FINDING HAS BEEN GIVEN ON MERITS, THAN IN THE PROCEEDINGS U NDER SECTION 254 (2) THE SAME CANNOT BE REVIEWED. 3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE RELEVANT RECORDS. THE CONTENTIONS RAISED BY THE ASSESSEE IN THE MISCELLANEOUS APPLICATION THAT THE TRIBUNAL HAS COMMITTED AN ERROR IN DISALLO WING THE CLAIM OF THE ASSESSEE WHEN THE PLANT AND MACHINERY AND FACTORY BUILDING W ERE VERY MUCH IN EXISTENCE AND THEREFORE, IN VIEW OF THE CONCEPT OF BLOCK OF A SSETS, THE DEPRECIATION CANNOT BE DISALLOWED. 3.1 IT IS TO BE NOTED THAT THESE CONTENTIONS WERE A LREADY RAISED BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS AS RECORDED BY THE TRIBUN AL IN PARA 7 OF THE IMPUGNED ORDER. ONCE ALL THESE FACTS AS WELL AS CONTENTIONS RAISED BY THE ASSESSEE WERE CONSIDERED BY THE TRIBUNAL WHILE DECIDING THE ISSUE , THAN IN THE PROCEEDINGS UNDER SECTION 254 (2), THE SAME CANNOT BE RE-APPRECIATED. THE TRIBUNAL HAS GIVEN THE FINDINGS ON THE MERITS OF THE ISSUE IN PARA 8 TO 9 OF THE IMPUGNED ORDER AS UNDER: 8 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE DISCARDED THE ASSETS IN QUESTION IN PURSUANCE TO THE INTERNATIONA L TREATY CALLED MONTREAL PROTOCOL AND RECEIVED THE COMPENSATION O F 15.60 CRORES. ONCE THE ASSETS HAVE BEEN DISCARDED AND THE ASSESSEE HAS RECEIVED THE COMPENSATION, THEN CLAUSE III OF SEC, 32(1) WOULD A PPLY. FOR READY REFERENCE, WE QUOTE CLAUSE III AS UNDER: 32. 32. 32. 32. (1) [IN RESPECT OF DEPRECIATION OF (III) IN THE CASE OF ANY BUILDING, MACHINERY, PLAN T OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWED UNDER CLA USE (I) AND WHICH IS SOLD, DISCARDED, DEMOLISHED OR DESTROYED IN THE PRE VIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHICH IT IS FIRST BROUGHT INTO USE), THE AMOUNT BY WHICH THE MONEYS PAYABLE IN RESPECT OF SUCH BUILDING, MAC HINERY, PLANT OR RISHIROOP RUBBER INTERNATIONAL LTD 4 FURNITURE, TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF ANY, FALL SHORT OF THE WRITTEN DOWN VALUE THEREOF : PROVIDED PROVIDED PROVIDED PROVIDED THAT SUCH DEFICIENCY IS ACTUALLY WRITTEN O FF IN THE BOOKS OF THE ASSESSEE. 8.1 IT IS CLEAR THAT THE PROVISIONS OF SEC. 32(1)(I II) STIPULATE THE DEPRECIATION IN CASE OF THE ASSETS WHICH IS SOLD, DISCARDED, DEMOLISHED OR DESTROYED IS THE AMOUNT, WHICH IS DIFFERENT BETWEE N THE WRITTEN DOWN VALUE OF THE ASSET AND SCRAP VALUE. 8.2 IN THE CASE IN HAND, THE ASSESSEE HAS NOT CLAIM ED THAT THE COMPENSATION RECEIVED BY THE ASSESSEE IN LIEU OF TH E DISCARDED ASSET IS SHORT OF ITS WRITTEN DOWN VALUE; THEREFORE, THE CLA IM OF THE ASSESSEE FOR DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE DISCA RDED ASSETS IS NOT PERMISSIBLE AS PER PROVISIONS OF SEC. 32 OF THE I T ACT. 8.3 THE DECISIONS RELIED UPON BY THE ASSESSEE ARE N OT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THEREFORE, IT WOULD N OT HELP THE CASE OF THE ASSESSEE. FURTHER, THE ASSESSEE HAS WITHDRAWN THE CLAIM OF DEPRECIATION BY FILING REVISED COMPUTATION OF INCOME AS RECORDED BY THE CIT(A) IN PARA 6 OF HIS ORDER AS UNDER: 6. ON THIS ISSUE ALSO, THE DISALLOWANCE HAS BEEN A CCEPTED BY THE APPELLANT BY FILING REVISED COMPUTATION OF INCO9ME. AN APPEAL DOES NOT LIE AGAINST AN ACCEPTED ADDITION UNLESS THE APP ELLANT CAN SHOW THAT THE ACCEPTANCE WAS ON THE BASIS OF WRONG INTER PRETATION OF LAW OF FACT. SUCH IS NOT THE CASE WITH THE APPELLANT. IN ITS WRITTEN SUBMISSION DT 20 TH MAY 2010, THE APPELLANT HAS ONLY DEALT ON THE MERITS OF THE DISALLOWANCE WITHOUT GIVING ANY EVIDE NCE OF THE ACCEPTANCE AT THE TIME OF ASSESSMENT PROCEEDINGS BE ING MADE OUT OF WRONG APPRECIATION OF THE FACTS OR LAW. IN VIEW OF THE ABOVE, THE GROUND OF APPEAL IS DISMISSED. 9 IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE CLAIM OF THE ASSESSEE; ACCORDINGLY THE GROUND RAISED BY THE ASSE SSEE IS DISMISSED. 3.2 IT IS CLEAR FROM THE FINDINGS OF THE TRIBUNAL T HAT AFTER CONSIDERING ALL RELEVANT FACTS AND THE CONTENTIONS OF THE ASSESSEE, IT HAS B EEN HELD THAT ONCE THE ASSETS WERE DISCARDED IN VIEW OF THE AGREEMENT OF INTERNAT IONAL TREATY CALLED MONTE PROTOCOL AND THE ASSESSEE RECEIVED THE COMPENSATI ON OF RS. 15.60 CRORES, THEN EVEN IF THE PHYSICAL EXISTENCE OF SOME OF THE ASSET S WERE STILL THERE, THE DEPRECIATION ON THE SAME CANNOT BE ALLOWED BECAUSE OF THE FACT T HAT THE ASSETS WERE ALREADY DISCARDED AND THE BUSINESS ITSELF FOR WHICH THE ASS ETS WERE BEING USED HAS BEEN RISHIROOP RUBBER INTERNATIONAL LTD 5 STOPPED BY THE ASSESSEE. THUS, WHEN THE ASSESSEE H AS RECEIVED THE COMPENSATION FOR DISCARDING OF THE ASSETS, THAN EVEN THE SAME HA S NOT BEEN PHYSICALLY DEMOLISHED OR DESTROYED FOR THE PURPOSE OF DEPRECIATION, THE S AME CANNOT FORM PART OF BLOCK OF ASSETS OF A NON EXISTING BUSINESS. 4 EVEN OTHERWISE THIS TRIBUNAL HAS NO JURISDICTION TO RE-APPRECIATE THE CONTENTIONS AS WELL AS EVIDENCE IN THE PROCEEDINGS UNDER SECTION 254(2). IT IS A SETTLED PROPOSITION OF LAW THAT THE SCOPE OF SEC. 2 54(2) IS VERY LIMITED AND CIRCUMSCRIBED. A MISTAKE APPARENT FROM RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING WHICH CAN BE RECTIFIED U/S. 254(2). FOR E XERCISING THE JURISDICTION U/S. 254(2), IT IS MANDATORY THAT A MISTAKE SHOULD BE WIDE APPAR ENT, MANIFEST AND PATENT AND NOT A POINT WHICH WOULD INVOLVE SERIOUS CIRCUMSTANC ES OF DISPUTE OF QUESTION OF FACT OR LAW WHICH REQUIRES INVESTIGATION AND VERIFICATIO N OF FACTS. THUS, A PATENT MISTAKE WHICH CAN BE RECTIFIED U/S. 254(2) DOES NOT REQUIRE AN ELABORATE DISCUSSION OF EVIDENCE OR ARGUMENTS. SEC. 254(2) DOES NOT CONFER POWER ON THE TRIBUNAL TO REVIEW EARLIER ORDER BY RE-APPRECIATING AND RE-EVALUATING THE EVIDENCE AND FACTS OF THE CASE. THEREFORE, IN THE GARB OF RECTIFICATION OF MI STAKE, NO ORDER CAN BE PASSED U/S. 254(2) WHICH AMOUNTS TO REVERSAL OF THE ORDER PASSE D AFTER DISCUSSING ALL FACTS AND STATUTORY PROVISIONS. 5 FOR THE ASSESSMENT YEAR 2007-08 THE ASSESSEE HAS AL SO RAISED AN GRIEVANCE AGAINST THE IMPUGNED ORDER AND SUBMITTED THAT THE D EPRECIATION ON THESE ASSETS CANNOT BE DISALLOWED WHILE COMPUTING BOOK PROFIT UN DER SECTION 115JB. THE ASSESSEE HAS RAISED AND REITERATED THE CONTENTIONS AS RAISED AT THE TIME OF HEARING OF THE APPEALS OF THE ASSESSEE. THE TRIBUNAL HAS G IVEN A DETAILED FINDING ON THE ISSUE IN PARA NUMBER 17 TO 17.6 AS UNDER: RISHIROOP RUBBER INTERNATIONAL LTD 6 17 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE MOOT QUESTION ARISES IS WH ETHER THE ASSESSING OFFICER WHILE COMPUTATION BOOK PROFIT U/S 115JB CAN LOOK INTO DEPRECIATION PROVIDED IN THE BOOKS OF ACCOUNT ON THE ASSETS WHIC H HAVE ALREADY BEEN DISCARDED AND NOT IN USE BECAUSE OF THE ACTIVITY PE RMANENTLY CLOSED, IS PERMITTED AS PER THE AS-6 AS WELL AS UNDER THE PRO VISIONS OF COMPANIES ACT. THE CIT(A) HAS DEALT WITH THE ISSUE IN PAGES 5 & 6 AS UNDER IN THE ASSESSMENT ORDER THE AO HAS CLEARLY MENTION ED THAT AS PER THE AGREEMENT DATED 14/07/2005 ENTERED BETWEEN THE ASSESSEE AND THE IDBI FOR IMPLEMENTATION OF MONTREAL PROTOCO L THE ASSESSEE IS UNDER OBLIGATION TO DESTROY THE ENTIRE SET UP BEFOR E 3 1/12/2005 OR BY THE EXTENDED DATE. HENCE THE ASSETS CANNOT BE US ED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND IN CASE TH E ASSETS ARE USED, THE ASSESSEE WOULD BE LIABLE TO BE PENALIZED. TO COMPENSATE THE ASSESSEE A COMPENSATION OF `. 15.60 CRORES HAVE BEEN PAID TO THE COMPANY. AS DISCUSSED IN THE GROUND NO.1 ABOVE THAT THE ASSETS HAVE BEEN PUT TO USE FOR THE PURPOSE OF BUSI NESS DURING THE YEAR UNDER CONSIDERATION, THEREFORE NO DEPRECIATION CLAIM OF FACTORY BUILDING AND PLANT D MACHINERY CAN BE ALLOWED TO TH E APPELLANT. SINCE, THE CLAIM OF DEPRECIATION WAS A WRONG CLAIM MADE BY THE APPELLANT HENCE, PROFITS WERE WRONGLY CALCULATED TO THAT EXTENT IN THE ACCOUNTS OF THE APPELLANT. AS THE PROFITS WERE NOT CORRECTLY COMPUTED AS PER LAW THEREFORE I HOLD THAT THE AC WA S JUSTIFIED IN MAKING ADJUSTMENTS TO THAT EXTENT IN THE NET PROFIT DECLARED BY THE APPELLANT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. AS REGARDING THE CLAIM OF THE APPELLANT THAT THE NE T PROFIT AS PER THE P&L ACCOUNT ONCE ADOPTED BY THE SHARE-HOLDERS CANNO T BE DISTURBED IN VIEW OF THE HONBLE APEX COURT DECISIO N GIVEN IN THE CASE OF APOLLO TYRES LTD. 255 ITR 273. IN THIS REGA RD I WOULD LIKE TO OBSERVE THAT IF THIS ANALOGY OF THE APPELLANT IS FO LLOWED IN EVERY CASE THEN IT WILL RENDER THE PROVISIONS OF THE I.T. ACT INFRUCTUOUS. FURTHER, I WOULD LIKE TO OBSERVE THAT THE DECISION OF THE HONBLE APEX COURT WAS BASED ON DIFFERENT FACTS WHERE THERE WAS NO SUCH ISSUE OF ANY PRIMA FADE WRONG CLAIM OF ANY DEDUCTIO N, MORE SO OF ANY SUCH WRONG CLAIM OF DEPRECIATION U/S. 32 WHERE THE COMPANY UNDER MANDATORY LAW WAS FORCED TO SHUT DOWN ITS MAN UFACTURING ESTABLISHMENT. FURTHER, WITH THE PASSAGE OF TIME TH ERE IS ALSO DIMINUTION IN THE VALUE OF THE SAID ASSETS EVEN THO UGH THEY ARE NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE DU RING THE YEAR AND AS SUCH THE SAID ADDITION WOULD ALSO BE COVERED BY CLAUSE (I) INSERTED UNDER EXPLANATION -1 OF SECTION 115JB AFTE R THE DECISION OF THE HONBLE APEX COURT GIVEN IN THE CASE OF APOLLO TYRES LTD. 255 ITR 273. HENCE, THE ASSESSING OFFICER WAS FULLY JUS TIFIED IN ADDING BACK THE DEPRECIATION CLAIMED ON THE FACTORY BUILDI NG AND ON PLANT & MACHINERY. ACCORDINGLY, THE CONTENTIONS RAISED BY THE APPELLANT IN THIS REGARD ARE REJECTED. 17.1 ONCE THE ASSESSEE CLOSED THE FACTORY THEN THE DECISION OF THE ASSESSEE TO BOOK THE DEPRECIATION OF DISMANTLED ASS ETS HAS TO BE DECIDED AS PER THE PROVISIONS OF COMPANIES ACT AS WELL AS A S-6. THE FUNDAMENTAL PRINCIPLE FOR PROVIDING DEPRECATION ON ASSET IS DIM INUTION IN THE VALUE OF RISHIROOP RUBBER INTERNATIONAL LTD 7 THE ASSETS DUE TO WEAR AND TEAR AS A RESULT OF USE OR RETAIN FOR BUSINESS OF THE ASSESSEE. THUS, UNDERLINE RULE FOR DEPRECIA TION IS USE OR RETAIN OF ASSETS FOR THE PURPOSE OF THE BUSINESS OF THE ASSES SEE. WHEN THE ASSET HAS BEEN DISCARDED AND DISMANTLED, THEN IN THE ABSE NCE OF PHYSICAL EXISTENCE OF THE USEFUL ASSETS, MERE RETENTION OF THE ASSETS IN THE BOOKS OF ACCOUNT WOULD NOT ENTITLED FOR ANY DEPRECIATION EVEN UNDER THE PROVISIONS OF COMPANIES ACT. 17.2 EVEN, AS PER AS-6, THE DEPRECIATION HAS BEEN D EFINED AS MEASURE OF WEARING OUT, CONSUMPTION OR OTHER LOSS OF VALUE OF A DEPRECIABLE ASSET. THE SAID LOSS IS ARISING DUE TO USE, EFFLUX OF TIME OR OBSOLESCENCE THROUGH TECHNOLOGY AND MARKET CHANGES. THEREFORE, AS-6 ALSO TALKS ABOUT THE ALLOCATION OF THE VALUE OF THE ASSET DURING THE EXP ECTED USEFUL LIFE OF THE ASSET. WHEN THE ASSET IS NO MORE IN USE OR IN EXIS TENCE, THEN THE DEPRECIATION IS NOT REQUIRED TO BE BOOKED. THEREFOR E, PRIMA FACIE BOOKING THE DEPRECIATION ON THE ASSETS, WHICH HAVE ALREADY BEEN DISCARDED AND DISMANTLED, IS NOT AS PER THE PROVISIONS OF COMPANI ES ACT OR AS PER AS-6. THERE IS NO DOUBT THAT, IF THE ACCOUNTS ARE MAINTAI NED AS PER THE COMPANIES ACT AND CERTIFICATED BY THE AUDITORS AND ACCEPTED OR APPROVED BY THE COMPANY IN THE ANNUAL GENERAL MEETING, THEN THE ASSESSING OFFICER CANNOT TINKER WITH THE ACCOUNTS FOR COMPUTING BOOK PROFIT U/S 115JB EXCEPT THE ADJUSTMENTS AS PROVIDED UNDER THE PROVISIONS IT SELF. HOWEVER, WHEN IT IS APPARENT AND MANIFEST FROM THE FACTS THAT THE AC COUNTS AND PARTICULARLY ON THE POINT OF DEPRECATION ARE NOT AS PER PART 1I & III OF SCHEDULE VI OF THE COMPANIES ACT AS WELL AS AS-6 THE SAID ILLEGALI TY CANNOT BE ALLOWED IN THE GRAB OF LIMITED POWERS OF THE AO U/S 115JB. 17.3 SUB.SEC. (2) OF SEC. 115JB MANDATES THAT EVER Y ASSESSEE, BEING A COMPANY, SHALL FOR THE PURPOSES OF THIS SECTION PR EPARE ITS P&L ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH T HE PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. WE QUOTE SUB.SEC. (2) OF SEC. 115JB AS UNDER: (2) EVERY ASSESSEE, BEING A COMPANY, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR TH E RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND I II OF SCHEDULE VI22 TO THE COMPANIES ACT, 1956 (1 OF 1956) : PROVIDED PROVIDED PROVIDED PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS I NCLUDING PROFIT AND LOSS ACCOUNT, (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION,SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURPOSE OF PR EPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956) : PROVIDED FURTHER PROVIDED FURTHER PROVIDED FURTHER PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THIS ACT, RISHIROOP RUBBER INTERNATIONAL LTD 8 (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUNTING S TANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPRECIATION W HICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFI T AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. 17.4 IN COMPARISON TO SEC. 115J WHERE THE REQUIR EMENT OF PREPARATION OF THE ACCOUNTS WAS LIMITED AS TO PREPARE IN ACCORD ANCE WITH THE PROVISIONS OF PARTS II & III OF SCHEDULE VI OF THE COMPANIES ACT, THE REQUIREMENT U/S 11JB IS APART FROM PREPARATION OF ACCOUNTS AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT ALSO REQUIR ES THAT ACCOUNTING POLICIES AND ACCOUNTING STANDARD ETC., ADOPTED FOR PREPARING THE ACCOUNTS SHALL BE THE SAME AS PER THE ACCOUNTING STANDARD L AID DOWN BEFORE THE COMPANY IN ITS ANNUAL GENERAL MEETING. WHEN THERE I S AN APPARENT AND TOTAL DEPARTURE FROM THE ACCOUNTING STANDARDS AS WELL AS PROVISIONS OF COMPANIES ACT WHILE PREPARING THE ACCOUNTS INCLUDI NG P&L ACCOUNT, THEN IN THE MATTER OF TAXATION NOBODY ELSE THAN THE A SSESSING OFFICER HAS THE POWER TO EXAMINE THE SAME UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT. THIS VIEW OF OURS HAS BEEN FORTIFIED BY THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD. V . DEPUTY COMMISSIONER OF INCOME-TAX REPORTED IN 40 SOT 264 WHEREIN THE SPECIAL BENCH HAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD AND THE CASE LAWS REL IED UPON BY BOTH THE PARTIES. WE HAVE TAKEN INTO CONSIDERATION THE R ATIO DECIDED OF ALL THE DECISIONS RELIED UPON BY THE RIVAL PARTIES. THE OMISSION OF REFERENCE TO SOME OF THE CASES IN THE ORDER IS EITH ER DUE TO THEIR IRRELEVANCE OR TO RELIEVE THE ORDER FROM THE REPETI TIVE NATURE OF THE DECISIONS. UNDER MINIMUM ALTERNATE TAX (MAT) PROVIS IONS, THE ASSESSING OFFICER IS CONCERNED WITH THE ADJUSTMENTS TO BE MADE WITH THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT. ONE OF THE MOOT QUESTION RELEVANCE TO THE ISSUE BEFORE US IS WHETHER THE ASSESSING OFFICER HAS POWER TO ALTER THE NET PROFIT ? IN OUR CONSIDERED OPINION, YES. WE AGREE THAT IT IS SETTLED LAW THAT ASSESSING OFFICER HAS THE POWER TO ALTERNATE, THE N ET PROFIT. IN THE FOLLOWING TWO CASES, THE ASSESSING OFFICER CAN REWR ITE THE PROFIT AND LOSS ACCOUNT, I.E., TO SAY THAT ASSESSING OFFICER S HOULD RECALCULATE THE NET PROFIT AND THEN FOLLOW THE ADJUSTMENTS OF M AT AS USUAL: (1) IF IT IS DISCOVERED THAT PROFIT AND LOSS ACCOUNT IS NO T DRAWN UP IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI TO THE2 COMPANIES ACT. HOWEVER, THE ASSESSING OFFICER CANNO T DISTURB THE NET PROFIT AS SHOWN BY THE ASSESSEE WHERE THERE ARE NO SUCH ALLEGATIONS, FRAUD OR MISREPRESENTATION BUT ONLY A DIFFERENCE OF OPINION AS TO WHETHER A PARTICULAR AMOUNT SHOULD BE PROPERLY SHOWN IN THE PROFIT AND LOSS ACCOUNT OR IN THE BALANCE SH EET. (2) IF ACCOUNTING POLICIES, ACCOUNTING STANDARDS NOT ADOPT ED FOR PREPARING SUCH ACCOUNTS AND METHOD, RATE OF DEPRECIATION WHIC H HAVE BEEN RISHIROOP RUBBER INTERNATIONAL LTD 9 INCORRECTLY ADOPTED FOR PREPARATION OF PROFIT AND 1 059 ACCOUNT LAID BEFORE THE ANNUAL GENERAL MEETING. EXCEPT FOR THE A BOVE TWO CASES, THE ASSESSING OFFICER HAS NO POWER TO ALTER THE NET PROFIT SHOWN L THE COMPANIES FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT. THUS, IT IS CLEAR THAT UNDER MAT, THE ASSESSING OFFICER SHOU LD TAKE THE NET PROFIT AS COMPUTED BY THE ASSESSEE AND THEN MAKE TH E ADJUSTMENTS UNDER SECTION 11 5JB OF THE ACT. IT IS COMMON THAT SOME COMPANIES FOLLOW AN ACCOUNTING YEAR UNDER THE COMPANIES ACT, 1956 WHICH IS DIFFERENT FROM THE FINANCIAL YEAR UNDER INCOME-TAX ACT, 1961. THESE COMPANIES GENERALLY PREPARE TWO SETS OF ACCOUNTS - ONE FOR COMPANIES ACT AND ANOTHER FOR INCOME-TAX ACT. THE R EASON BEING DIFFERENT ACCOUNTING POLICIES, STANDARDS, DEPRECIAT ION METHODS AND RATES ARE ADOPTED IN TWO SETS OF ACCOUNT SO THAT HI GHER PROFIT IS REPORTED TO SHAREHOLDERS AND LOWER PROFIT FOR THE I NCOME-TAX AUTHORITIES. TO CURB THE ABOVE PRACTICE ONLY THIS R ECALCULATION OF NET PROFIT UNDER MAT WAS INCORPORATED SO THAT THERE SHO ULD BE A CONSISTENCY IN ACCOUNTING POLICIES, STANDARDS, METH ODS AND RATES OF DEPRECIATION WITHIN THE KNOWLEDGE OF INCOME-TAX AUT HORITIES. THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F CIT V. AKSHAY TRADING & AGENCIES (P.) LTD [2008] 304 ITR 401 THE QUESTION REFERRED TO THE HIGH COURT AND THE DECISION OF THE HIGH COURT, AS REPORTED ARE AS UNDER: C. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE HONBLE INCOME-TAX APPELLATE TRIBUN AL WAS CORRECT IN UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN HOLDING THAT THE CAPITAL GA INS OF RS. 19,74,489 ARE NOT TO BE TAKEN INTO ACCOUNT WHILE CO MPUTING THE PROFITS LIABLE TO BE TAXED UNDER SECTION 11 5JA OF THE INCOME-TAX ACT, 1961 AND THAT THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN CIT V. VEEKAYLAL LNVESTMENT CO . (P.) LTD. 249 ITR 597 WAS NOT APPLICABLE? INSOFAR AS QUESTION NO. OUR ATTENTION IS INVITED TO THE JUDGMENT OF THE SUPREME COURT IN APOLLO TYRES LTD V. C1T255 ITR 273. THE QUESTION FRAMED THEREIN WHICH IS SIMILAR TO QUESTIO N NO. C HAS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE LIGHT OF THAT, THE QUESTION OF LAW AS FRAMED WOULD NOT ARISE. FROM THE ABOVE, IT IS DIFFICULT TO CONCLUDE THAT TH E DIVISION BENCH OF BOMBAY HIGH COURT IN THIS CASE HAS OVERRULED THE DE CISION OF ANOTHER DIVISION BENCH WITHOUT EVEN A LINE OF DISCU SSION. THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF VE EKAYLAL INVESTMENT CO. (P.) LTD. (SUPRA) HOLDING THAT THE B OOK PROFITS HAVE TO BE COMPUTED IN ACCORDANCE WITH PARTS II AND IF OF S CHEDULE VI TO THE COMPANIES ACT. THIS IS IN LINE WITH THE DECISION OF THE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA). THE MUMBAI H IGH COURT IN THE CASE OF AKSHAY TEXTILES TRADING & AGENCIES (P.) LTD . (SUPRA) HAS HELD THAT THERE IS NO QUESTION OF LAW IN VIEW OF TH E DECISION OF THE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) . FROM THIS WE ARE NOT ABLE TO INFER THAT THE DECISION OF THE BOMBAY H IGH COURT IN THE RISHIROOP RUBBER INTERNATIONAL LTD 10 CASE OF VEEKAYLAL INVESTMENT CO. (P.) LTD. (SUPRA), IS NO LONGER GOOD IN LAW. THEREFORE, THIS CASE DOES NOT HELP THE ASSE SSEE. 17.5 A SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS BOMBAY DIAMOND REP ORTED IN 33 DTR MUM(TRIB) 59 VIDE ORDER DATED 30.11.2009. 17.6 IT IS CLEAR FROM THE ABOVE DECISION THAT THE A SSESSING OFFICER HAS POWER TO EXAMINE WHETHER THE ACCOUNTS ARE MAINTAIN ED AS PER THE ACCOUNTING STANDARD AND POLICIES AS PROVIDED UNDER THE COMPANIES ACT. THE SPECIAL BENCH OF THE TRIBUNAL, AFTER CONSIDERIN G THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES L TD. (SUPRA) AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF AKSHAY TEXTILES TRADING & AGENCIES (P.) LTD. REPORTED IN 304 ITR 401 & THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF VE EKAYLAL INVESTMENT CO. (P.) LTD. REPORTED IN 249 ITR 597 HAS TAKEN A VIEW THAT THE DECISION IN THE CASE OF VEEKAYLAL INVESTMENT CO. P. LTD. [SUPRA ] HAS NOT BEEN OVERRULED BY THE DECISION IN THE CASE OF AKSHAY TEX TILE TRADING & AGENCIES PVT. [SUPRA]. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE. 6 IN THE MISCELLANEOUS APPLICATIONS AS WELL AS IN T HE ARGUMENTS ADVANCED BY THE LEARNED A.R DURING THE HEARING OF THE MISCELLAN EOUS APPLICATIONS ARE SAME AS RAISED AT THE TIME OF HEARING OF APPEALS; THEREFORE , IN VIEW OF THE SETTLED PROPOSITION OF LAW THE TRIBUNAL HAS NO JURISDICTION TO RE-APPR ECIATE THE CONTENTIONS AS WELL AS EVIDENCE IN THE PROCEEDINGS UNDER SECTION 254(2). ONCE THE FINDING HAS BEEN GIVEN ON MERIT THAN UNDER THE PROCEEDINGS OF 254 (2), THE SAME CANNOT BE REVERSED. 7 THE ASSESSEE HAS ALSO POINTED OUT A TYPOGRAPHICAL MISTAKE IN PARAGRAPH 10 OF THE IMPUGNED ORDER WHEREBY THE GROUND NO. 1 IS REPR ODUCED AND THE AMOUNT OF DEPRECIATION DISALLOWED IS MENTIONED AS RS. 2,06,7 47/- WHEREAS THE ACTUAL AND CORRECT AMOUNT IS RS. 21,06,747/-. 8 AFTER GOING THROUGH THE RECORD, WE NOTE THAT THER E IS NO MISTAKE IN THE IMPUGNED ORDER OF THE TRIBUNAL IN REPRODUCING THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE. IN GROUND NO. 1 RAISED IN THE APPEAL FOR THE ASSESSMENT YEAR 2007-08, THE AMOUNT OF DISALLOWANCE OF DEPRECIATION HAS BEEN MEN TIONED AS RS. 2,06,747/-. IT APPEARS THAT THE ASSESSEE ITSELF HAS WRONGLY MENTIO NED THE AMOUNT OF DEPRECATION DISALLOWED BY THE ASSESSING OFFICER IN GROUND NO. 1 OF THE APPEAL AS RS. 2, 06, 747/- RISHIROOP RUBBER INTERNATIONAL LTD 11 INSTEAD OF RS. 21,06,747/- WHICH WAS ACTUALLY DISAL LOWED. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, W E RECTIFY THE MISTAKE OF THE AMOUNT OF DISALLOWANCE OF DEPRECIATION AND THE SAME MAY BE READ AS RS. 21,06,747/- IN PARA 10 OF THE IMPUGNED ORDER. 9 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND A NY SUBSTANCE AND MERIT IN THE MISC. APPLICATION OF THE ASSESSEE AND THE SAME IS DISMISSED. 10 IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FI LED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 13 TH , DAY OF JUNE 2012 SD/- SD/ - ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:13 TH ,JUNE 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI