MAFATLAL DENI, LTD, V. DCIT RG 9(2),

MA 188/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8800 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 21-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: S K DASTUR
• Keywords: Depreciation; Validity of assessment; Unabsorbed depreciation
• Section: 80HHC; 115JB; 147; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH, B , MUMBAI BEFORE SHRI D. MANMOHAN (V.P.) AND SHRI RAJENDRA S INGH,(A.M.) MA NO: 188/MUM/2012 ARISING OUT OF :7239/M/2010 ASSESSMENT YEAR : 2003-04 MAFATLAL DENIM LTD. (FORMERLY KNOWN AS MAFATLAL BURLIGNTON INDUSTRIES LTD. APSARA HOUSE, 1 ST FLOOR 7, S.V. ROAD, SANTACRUZ-(W) MUMBAI-400 054 PAN NO.:AAACM 3977 B DY. COMMISSIONER OF INCOME TAX RANGE 9(2) AAYAKAR BHAVAN. M.K. MARG MUMBAI-400 020. (APPLICANT) VS. (RESPONDENT) APPLICANT BY : SHRI S.K. DASTUR RESPONDENT BY : SHRI P.K.B. MENON DATE OF HEARING : 18.5.2012 DATE OF PRONOUNCEMENT : 13.6.2012 ORDER PER RAJENDRA SINGH (AM). THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY THE ASSE SSEE REQUESTING FOR AMENDMENT OF THE ORDER DATED 21.12.20 11 FOR ASSESSMENT YEAR 2003-04 IN ITA NO.7239/M/10. IN THE SAID ORDER, THE TRIBUNAL HAD DISPOSED OFF THE APPEALS OF THE ASSESSEE FO R ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 IN A CONSOLIDATED M ANNER. IN ALL THE YEARS, THERE WAS A COMMON DISPUTE REGARDING LICENSE AND TECHNOLOGY FEE WHICH HAD BEEN ALLOWED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. 2. IN ASSESSMENT YEAR 2003-04, THERE WAS AN ADDITIONAL G ROUND REGARDING REDUCTION OF PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 2 80HHC WHILE COMPUTING BOOK PROFITS UNDER SECTION 115 JB. THE AUTHORITIES BELOW HAD NOT ALLOWED THE DEDUCTION AS PR OFIT OF THE BUSINESS COMPUTED UNDER NORMAL PROVISIONS OF THE ACT AFTER ADJUSTING THE BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION WAS NIL AND THEREFORE, THERE WAS NO PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THE LD. SR. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING OF THE APPEAL, HAD ARGUED THAT CIT(A) HAD DISALLOWED TH E CLAIM FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF AJANTA PHARMA LTD. (318 ITR 252) AND SINCE THE SAID JUDGMENT HAD BEEN OVER RULED BY THE HON'BLE SUPREME COURT SUBSEQUENTLY AS REPO RTED IN 327 ITR 305, THE CLAIM OF THE ASSESSEE WAS ALLOWABLE. 2.1 THE TRIBUNAL, HOWEVER DISTINGUISHED THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. (SUPR A) ON THE GROUND THAT THE SAID JUDGMENT WAS ON THE ISSUE AS TO WHE THER THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC SHOULD BE REDUCED WHILE COMPUTING BOOK PROFIT OR ONLY THE DEDUCTION ACTU ALLY ALLOWABLE UNDER SECTION 80-HHC WHICH SHOULD BE REDUCED. THE TRIBUN AL REFERRED TO ANOTHER JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SHIRKE CONSTRUCTION EQUIPMENT LTD. (291 ITR 380) IN W HICH IT WAS HELD THAT WHILE COMPUTING PROFIT ELIGIBLE FOR DEDUCTION UN DER SECTION 80- HHC, THE BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRE CIATION HAD TO BE SET OFF. THEREFORE, THE TRIBUNAL HELD THAT THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-HHC FOR THE PURPOSE OF RED UCTION UNDER SECTION 115JB SHOULD BE COMPUTED AFTER SETTING OFF BROUG HT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AND SINCE THERE W AS NO PROFIT LEFT AFTER SETTING OFF BUSINESS LOSS/UNABSORBED D EPRECIATION OF EARLIER YEARS, NO REDUCTION WAS REQUIRED TO BE MADE O N ACCOUNT OF PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC IN ASSESSM ENT YEAR 2003-04. MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 3 3. IN THE APPEAL FOR THE ASSESSMENT YEAR 203-04, THERE WAS ALSO A THIRD GROUND REGARDING VALIDITY OF RE-OPENING OF TH E ASSESSMENT UNDER SECTION 147 AND VALIDITY OF THE ASSESSMENT ON THE GROUND OF NOTICE UNDER SECTION 143(2) BEING NOT SERVED WITHIN LIMITATIO N PERIOD. THE TRIBUNAL IN THE ORDER DATED 21.12.2011 HELD THAT SIN CE CLAIM OF THE ASSESSEE HAD BEEN ALLOWED ON MERIT, IT WAS NOT NECESSARY TO GO INTO THIS LEGAL ISSUE AND ACCORDINGLY THE TRIBUNAL DISMISSED TH E GROUND AS HAVING BECOME INFRUCTUOUS. 4. IN THE MISCELLANEOUS APPLICATION, THE ASSESSEE HAS SUBMITT ED THAT THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0HHC AS PER CLAUSE-(IV) OF EXPLANATION TO SECTION 115 JB(2) IS REQU IRED TO BE COMPUTED ON THE BASIS OF THE BOOK PROFIT AND NOT ON TH E BASIS OF PROFIT COMPUTED UNDER NORMAL PROVISIONS OF THE ACT AND, THEREF ORE, BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION WERE NOT REQUIRED TO BE ADJUSTED. THE LD. SR. COUNSEL ARGUED THAT THIS P OSITION WAS NOW SETTLED BY THE JUDGMENT DATED 20.10.2011 OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. M/S BHARI INFORMATION TECH SYSTEM S PVT. LTD. (340 ITR 593) IN WHICH THE HON'BLE SUPREME COURT WHIL E CONSIDERING SIMILAR PROVISIONS OF CLAUSE-(IX) OF THE EXPLANATION TO SECTION 115 JA(2) UPHELD THE DECISION OF THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF DCIT VS. SYNCOME FORMULATIONS (106 ITD 193), IN WHICH I T WAS HELD THAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC F OR THE PURPOSE OF REDUCTION UNDER SECTION 115 JA HAS TO BE COMPUTED WIT H RESPECT TO BOOK PROFIT AND NOT WITH RESPECT TO THE PROFIT COMPUTE D UNDER THE NORMAL PROVISIONS OF THE ACT. IT WAS POINTED OUT BY THE LD. SR. COUNSEL THAT THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S BHARI INFORMATION TECH SYSTEMS PVT. LTD. (SUPRA), HAD BEEN DE LIVERED ON 20.10.2011, BEFORE THE IMPUGNED ORDER OF THE TRIBUN AL DATED 21.12.2011 THOUGH IT HAD NOT BEEN BROUGHT TO THE NO TICE OF THE MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 4 TRIBUNAL AT THE TIME OF HEARING OF THE APPEAL. IT W AS ALSO POINTED OUT THAT EVEN IF THE JUDGMENT OF THE HON'BLE SUPREME COU RT HAD BEEN PASSED SUBSEQUENT TO THE ORDER OF THE TRIBUNAL, THEN AL SO SUCH JUDGMENT BEING THE JUDGMENT OF HONBLE APEX COURT HA S TO BE CONSIDERED AS BASIS FOR RECTIFICATION UNDER SECTION 254(2) IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. SAURASHTRA KUTCH STOCK EXCHANGE (305 ITR 227). IT WAS ACCORDINGLY RE QUESTED THAT THIS APPARENT MISTAKE SHOULD BE RECTIFIED AND CLAIM OF THE ASSESSEE BASED ON BOOK PROFIT SHOULD BE ALLOWED. 4.1 IN REGARD TO THE GROUND RELATING TO LEGAL VALID ITY OF ASSESSMENT AS WELL AS LEGAL VALIDITY OF RE-OPENING OF THE ASSESSMEN T, IT WAS SUBMITTED BY THE LD. SR. COUNSEL THAT THERE WAS AN APP ARENT MISTAKE IN THE ORDER OF THE TRIBUNAL IN STATING THAT SINCE CL AIM OF THE ASSESSEE HAD BEEN ALLOWED ON MERIT, THE GROUND HAD BECOME INF RUCTUOUS. IN FACT, THE CLAIM OF THE ASSESSEE HAD BEEN ALLOWED ONLY IN RELATION TO THE LICENCE AND TECHNOLOGY FEES AND THE CLAIM HAD BEEN REJECT ED IN RELATION TO THE CLAIM OF REDUCTION UNDER SECTION 115JB ON ACCOUNT OF 80HHC DEDUCTION. SINCE ONE OF THE GROUND HAD BEEN DECIDED A GAINST THE ASSESSEE, THERE WAS A MISTAKE IN STATING THAT CLAIMS OF THE ASSESSEE HAD BEEN ALLOWED ON MERIT. IT WAS ACCORDINGLY SUBMITTED THAT THIS GROUND WAS REQUIRED TO BE ADJUDICATED IN CASE THE GROUN D RELATING TO REDUCTION UNDER SECTION 115JB ON ACCOUNT OF DEDUCTION UN DER SECTION 80HHC WAS DECIDED AGAINST THE ASSESSEE. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04 HAD R AISED A DISPUTE REGARDING REDUCTION OF PROFIT ELIGIBLE FOR DE DUCTION UNDER SECTION 80HHC FROM THE PROFIT OF THE BUSINESS UNDER THE PR OVISIONS OF CLAUSE-(IV) OF EXPLANATION-1 TO SECTION 115JB(2) WHILE COMPUTING BOOK MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 5 PROFIT. AS PER PROVISIONS OF CLAUSE (IV) OF EXLANATION- 1 TO SECTION 115 JB(2), THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC IS REQUIRED TO BE REDUCED FROM THE PROFIT OF BUSINESS WHILE COMPUTIN G BOOK PROFIT UNDER SECTION 115JB. THE HON'BLE SUPREME COURT IN CASE O F CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. (SUPRA) HAD HELD T HAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC HAD TO BE COMPUTED UNDE R NORMAL PROVISIONS OF THE ACT AFTER SETTING OFF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION. THE TRIBUNAL FOLLOWING T HE SAID JUDGMENT HELD THAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-HHC WAS REQUIRED TO BE COMPUTED UNDER NORMAL PROVISIONS OF TH E ACT AFTER SETTING OFF BROUGHT FORWARD BUSINESS LOSS /UNABSORBED DEPR ECIATION AND SINCE THERE WAS NO PROFIT AFTER SET OFF OF LOSS/UNABSORB ED DEPRECIATION, NO REDUCTION WAS REQUIRED TO BE MADE ON ACCOUNT OF SECTIO N 80HHC WHILE COMPUTING BOOK PROFIT. THE SAID JUDGMENT WAS I N RELATION TO COMPUTATION OF DEDUCTION UNDER SECTION 80HHC WHILE COMPUTI NG INCOME UNDER NORMAL PROVISIONS AND NOT IN RELATION TO SECTION 115JB BUT SINCE THE WORDS USED IN CLAUSE (IV) OF EXPLANATION - 1 TO SECTION 115JB(2) WERE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC, THE TRIBUNAL HAD FOLLOWED THE JUDGMENT OF HON'BLE SUPREM E COURT IN THE CASE OF SHIRKE CONSTRUCTION PVT. LTD. (SUPRA), WHICH ALSO RELATED TO COMPUTATION OF PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. 5.1 HOWEVER, THE JUDGMENT OF THE HONBLE APEX COURT I N THE CASE OF CIT VS. M/S BHARI INFORMATION TECH SYSTEMS PVT. LTD. (SU PRA), IS DIRECTLY ON THE ISSUE OF COMPUTATION OF PROFIT ELIGIB LE FOR DEDUCTION UNDER SECTION 80HHC IN RELATION TO COMPUTATION OF BOOK PROFIT UNDER SECTION 115JA. IN THAT CASE ALSO, REVENUE AUTHORITIES HAD DISALLOWED THE CLAIM OF REDUCTION ON ACCOUNT OF PROFIT ELIGIBLE FO R DEDUCTION UNDER SECTION 80 HHE WHILE COMPUTING BOOK PROFIT UNDER SECTION 1 15 JAA ON THE GROUND THAT THE PROFIT COMPUTED UNDER NORMAL PRO VISIONS AFTER MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 6 SETTING OFF BROUGHT FORWARD LOSS/UNABSORBED DEPRECIATI ON WAS NIL. THE HON'BLE SUPREME COURT HELD THAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHE FOR THE PURPOSE OF COMPUTATION OF BOOK PROF IT UNDER SECTION 115JA HAS TO BE BASED ON THE BOOK PROFIT AND NO T ON THE BASIS OF PROFIT COMPUTED UNDER THE NORMAL PROVISIONS. THE HON 'BLE SUPREME COURT UPHELD THE VIEW TAKEN BY THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF DCIT VS. SYNCOME FORMULATIONS (SUPRA), IN WHI CH IT HAS BEEN HELD THAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER SECTION 115 JA HAS TO BE BASED ON BOOK PROFIT AND NOT ON THE BASIS OF PROFIT COM PUTED UNDER NORMAL PROVISIONS OF THE ACT. THE HON'BLE SUPREME COUR T ALSO OBSERVED THAT THE PROVISIONS OF SECTION 80HHC WERE SMALLER TO THOSE OF SECTION 80 HHE AND BOTH FELL IN CHAPTER-VIA. THOUGH IN THE PRESENT APPEAL, WE ARE CONCERNED WITH SECTION 115JB, THE PROVISI ONS OF SECTION 115JB IN RELATION TO REDUCTION OF PROFIT ON ACCOUNT OF PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC ARE SIMILAR TO THOSE IN SECTIO N 115JA. THUS, IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COU RT IN THE CASE OF M/S BHARI INFORMATION TECH SYSTEMS PVT. LTD.(SUPRA), THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC FOR THE PURPOSE OF REDU CTION UNDER SECTION 115JB IS REQUIRED TO BE COMPUTED ON THE BASIS OF BOOK PROFIT AND, THEREFORE, BROUGHT FORWARD LOSS/UNABSORBED DEPRE CIATION ARE NOT REQUIRED TO BE ADJUSTED. THE SAID JUDGMENT OF HON'BLE SUPREME COURT HAD BEEN DELIVERED PRIOR TO THE IMPUGNED ORDER OF T HE TRIBUNAL AND EVEN IF THE JUDGMENT HAD BEEN REFERRED SUBSEQUENT TO THE ORDER OF THE TRIBUNAL, AN ISSUE COVERED BY THE JUDGMENT OF THE JUR ISDICTIONAL HIGH COURT OR THE APEX COURT WHETHER RENDERED PRIOR OR SU BSEQUENT TO THE ORDER WILL BE VALID GROUND FOR AN APPARENT MISTAKE I N THE ORDER FROM RECORD AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF A CIT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD.(SUPRA). WE, THEREFO RE AMEND MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 7 THE ORDER OF THE TRIBUNAL DATED 21.12.2011 IN RELAT ION TO GROUND NO. BY HOLDING THAT PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HHC FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTIO N 115JB WILL BE COMPUTED ON THE BASIS OF BOOK PROFIT AND NOT UNDER NORMAL PROVISIONS. THE AO WILL COMPUTE THE BOOK PROFIT ACCORDI NGLY. 6. THE OTHER APPARENT MISTAKE POINTED OUT IS REGARDIN G THE GROUND RELATING TO LEGAL VALIDITY OF ASSESSMENT AND LEGAL VALI DITY OF RE-OPENING OF THE ASSESSMENT. THE TRIBUNAL HAD DISMISSED THE GROUND AS HAVING BECOME INFRUSTUOUS. SINCE WE HAVE ALREADY AMENDED THE ORDER AND ALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO REDUCTIO N OF PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC WHILE COMPUTIN G THE BOOK PROFIT, ALL THE GROUNDS RAISED BY THE ASSESSEE STAND ALLO WED ON MERIT. THEREFORE, THERE IS NO APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL IN PARA-15 IN WHICH THE GROUND RELATING TO LEGAL VALID ITY OF ASSESSMENT / RE-OPENING HAS BEEN DISMISSED AS HAVING BECOME INFRUCTUOU S. NO RECTIFICATION OF THE ORDER IS THEREFORE REQUIRED ON TH IS ACCOUNT. 7. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE A SSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.6.2012. SD/- SD/- (D. MANMOHAN) ( RAJENDRA SINGH ) VICE PRESIDENT ACCOU NTANT MEMBER MUMBAI, DATED: 13.6.2012. JV. MA NO.188/M/12 ARISING OUT OF ITA NO. 7239/M/10 A.Y:03-04 8 COPY TO: THE APPLICANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.