RELIANCE INDUSTRIES LTD, V. JT. CIT (OSD) Rg. - 3(3),

MA 278/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9708 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 1997-1998
• Appeal Filed On: 09-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJ PRADHAN
• Assessee Lawyers: F V IRANI
• Keywords: Retrospective amendment; Bad and doubtful debts
• Section: 2

Judgement Text

1 M.A.NO.278/MUM/2012 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA , JUDICIAL MEMBER. M.A. NO. 278/MUM/2012. (IN ITA NO .1645/MUM/2006) ASSESSM ENT YEAR : 1997-98. M/S RALIANCE INDUSTRIES LTD., DY. COMMISSIONER OF MAKER CHAMBERS IV, VS. INCOME-TAX, 3 RD FLOOR, 222, NARIMAN POINT, CIRCLE-3(3), MUMBAI 400 021. MUMBAI. PAN AAACR 5055K APPLICANT. RESPONDENT. APPLICANT BY : SHRI F.V. IRANI. RESPONDENT BY : MS. NEERAJ PRADHAN. DATE OF HEA RING : 07-12-2012. DATE OF PRONOUNCEM ENT : 14-12-2012. O R D E R PER P.M. JAGTAP, A.M. : BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE IS SEEKING RECTIFICATION OF THE MISTAKE ALLEGED TO HAVE CREPT IN THE ORDER OF T HE TRIBUNAL DATED 30 TH JUNE, 2011 PASSED IN ITA NO. 1645/MUM/2006. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ONE OF THE ISSUES INVOLVED IN THE APPEAL OF THE ASSESSEE FILED BEFORE THE TRIBUNAL WAS RELATING TO EXCLUSION OF PROVISION FOR BAD AND DOUBTFUL DEBTS I N COMPUTING BOOK PROFITS AND THE SAME HAS BEEN DECIDED BY THE TRIBUNAL AGAINST T HE ASSESSEE RELYING ON THE AMENDMENT MADE BY THE FINANCE ACT NO. 2 OF 2009 TO SECTION 115JA WITH 2 M.A.NO.278/MUM/2012 RETROSPECTIVE EFFECT FROM 01-04-1998. HE SUBMITTED THAT THE SAID AMENDMENT MADE TO SECTION 115JA IS APPLICABLE ONLY FROM ASSESSMENT YEAR 1998-99 AS NOTED BY THE TRIBUNAL IN ITS ORDER ITSELF IN PARAGRAPH NO. 26, B UT THE SAME HAS BEEN INADVERTENTLY APPLIED TO DECIDE THE ISSUE AGAINST THE ASSESSEE FO R ASSESSMENT YEAR 1997-98. HE SUBMITTED THAT THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. HCL COMNET SERVICES AND SYSTEMS LTD. 305 ITR 409 WHICH IS IN FAVOUR OF THE ASSESSEE WAS APPLICABLE PRIOR TO THE SAID AMENDMENT MADE TO SECTION 115JA WITH EFFECT FROM 01-04-1998. HE CONTENDED THAT THE DECISION REN DERED BY THE TRIBUNAL ON THIS ISSUE RELYING ON THE AMENDED PROVISIONS OF SECTION 115JA WHICH ARE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION HAS GIVEN RISE TO A MISTAKE APPARENT FROM RECORD. HE ALSO CONTENDED THAT THE DECISION SO RENDERED IS ALSO CONTRARY TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HCL COMNET SE RVICES AND SYSTEMS LTD. (SUPRA) WHICH AGAIN CONSTITUTES A MISTAKE APPARENT FROM RECORD. THE LEARNED DR HAS NOT BEEN ABLE TO RAISE ANY MATERIAL CONTENTION IN HER REPLY. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LEGAL P OSITION ON THE ISSUE OF EXCLUSION OF PROVISION FOR BAD AND DOUBTFUL DEBS IN COMPUTING BO OK PROFITS INVOLVED IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 1997-98 W AS DISCUSSED BY THE TRIBUNAL IN PARAGRAPH NO. 26 OF ITS ORDER WHICH READS AS UND ER : AGGRIEVED THE REVENUE IS ON APPEAL ON THIS ISSUE OF EXCLUSION OF PROVISION FOR BAD AND DOUBTFUL DEBTS IN COMPUTING B OOK PROFITS, EVEN THOUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CI T VS. HCL COMNET SERVICES AND SYSTEMS LTD. REPORTED IN 305 ITR 409 I S IN FAVOUR OF THE ASSESSEE, WE FIND THAT SECTION 115JA HAS BEEN SUBSE QUENTLY AMENDED BY FINANCE ACT NO.2 OF 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.1998 (AR: 1998-99) INCLUDING EXPLANATION (G) WHEREBY ANY AMOU NT SET ASIDE TOWARDS PROVISION FOR DIMINUTION OF ASSETS IS TO BE ADDED B ACK IN COMPUTING THE BOOK PROFITS U/S 115JA. AS HELD BY THE APEX COURT IN THE CASE OF CIT VS HCL COMNET SERVICES AND SYSTEMS LTD. REPORTED IN 305 IT R 409, ANY PROVISIONS 3 M.A.NO.278/MUM/2012 MADE TOWARDS BAD AND DOUBTFUL IS NOTHING BUT PROVIS IONS MADE IN DIMINUTION IN VALUE OF ASSETS AND IN RESPECT OF SUC H PROVISIONS EXPLANATION (G) WOULD APPLY AND HENCE SUCH PROVISIONS ARE TO BE ADDED BACK IN COMPUTING THE BOOK PROFITS U/S 115JA. 4. AFTER DISCUSSING THE RELEVANT LEGAL POSITION AS ABOVE, THE TRIBUNAL DECIDED THE ISSUE IN PARAGRAPH NO. 27 WHICH READS AS UNDER : IN THIS VIEW OF THE MATTER HAVING REGARD TO THE A MENDMENT TO SECTION 115JA BY WAY OF INTRODUCTION OF EXPLANATION (G), WE UPHOLD THE CLAIM OF THE REVENUE AND SET ASIDE THE ORDER OF THE CIT(A) AND C ONFIRM THE ORDER OF THE ASSESSING OFFICER THAT THE PROVISIONS FOR BAD AND D OUBTFUL DEBS SHOULD NOT BE DEDUCTED WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA. THE APPEAL OF THE REVENUE ON THIS ISSUE IS ALLOWED. THE APPEAL OF THE REVENUE IN ITA NO. 1645/M/2006 FOR ASSTT. YEAR 1997-98 IS PARTLY ALLOW ED. 5. AS IS CLEARLY EVIDENT FROM THE LEGAL POSITION DI SCUSSED BY THE TRIBUNAL IN PARAGRAPH NO. 27, THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF HCL COMNET SERVICES AND SYSTEMS LTD. (SUPRA) WHICH WAS IN FAVOUR OF THE ASSESSEE GOVERNED THE FIELD UPTO ASSESSMENT YEAR 1997-98 AS THE AMENDMENT MADE IN SECTION 115JA NULLIFYING THE SAID DECISION WAS MADE WITH RETROSPECTIVE EFFECT FROM 01-04-1998 WHICH WAS APPLICABLE FROM ASSESSMENT YEA R 1998-99. THE TRIBUNAL, HOWEVER, INADVERTENTLY RELIED ON THE SAID AMENDMENT TO DECIDE THE ISSUE AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 1997-98 IN PARAGRAPH N O. 27 WHICH, IN OUR OPINION, CONSTITUTES A MISTAKE APPARENT FROM RECORD. MOREOVE R, THE SAID DECISION RENDERED BY THE TRIBUNAL IS ALSO CONTRARY TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HCL COMNET SERVICES AND SYSTEMS LTD. (SUPRA ) WHICH WAS DIRECTLY APPLICABLE IN ASSESSMENT YEAR 1997-98 AS NOTED BY T HE TRIBUNAL IN ITS ORDER ITSELF IN PARAGRAPH NO. 26 WHICH AGAIN HAS GIVEN RISE TO A MI STAKE APPARENT FROM RECORD. WE, THEREFORE, RECTIFY THE SAID MISTAKE BY DELETING THE EXISTING PARAGRAPH NO. 27 OF THE ORDER OF THE TRIBUNAL AND SUBSTITUTING THE SAME WITH THE FOLLOWING : 4 M.A.NO.278/MUM/2012 27. IN THE PRESENT CASE THE ASSESSMENT YEAR INVOLV ED IS ASSESSMENT YEAR 1997-98 TO WHICH THE AMENDMENT TO SECTION 115JA BY THE FINANCE ACT NO. 2 OF 2009 WITH RETROSPECTIVE EFFECT FROM 01-04-1998 I S NOT APPLICABLE. ON THE OTHER HAND, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. HCL COMNET SERVICES AND SYSTEMS LTD. (SUPRA) IS DIR ECTLY APPLICABLE TO THE ISSUE FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSM ENT YEAR 1997-98 AND RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE IMPU GNED ORDER OF THE LEARNED CIT(APPEALS) DELETING THE ADDITION MADE BY THE AO TO THE INCOME COMPUTED U/S 115JA ON ACCOUNT OF PROVISION FOR DOUB TFUL DEBTS. THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 1997-98 IS ACCOR DINGLY DISMISSED. 6. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF DECEMBER, 2012. SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 14 TH DEC., 2012. WAKODE COPY TO : 1. APPLICANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. D.R., D-BENCH. (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.