Thiagarajar Mills (P) Limited, Madurai V. Addl. CIT, Madurai

MA 95/CHNY/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7019 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R SRINIVASAN
• Keywords: Depreciation
• Section: 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , !' # $! # % . & , ( * + [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] M.P. NO.95/CHNY/2018 (IN ./ I.T.A.NO.1201/CHNY/2015) !'# $%' / ASSESSMENT YEAR : 2008-2009 THIAGARAJAR MILLS (P) LIMITED, KAPPALUR, MADURAI 625 008. VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE I, MADURAI. [PAN AAACT 4304R] ( PETITIONER ) ( 3456 /RESPONDENT) PETITIONER BY : SHRI. R. SRINIVASAN, ADVOCATE RESPONDENT BY : NONE. & $!' ( )!*+ / DATE OF HEARING : 03-08-2018 ,- %#! ( )!*+ / DATE OF PRONOUNCEMENT : 03-08-2018 7 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:- ASSESSEE THROUGH THIS MISCELLANEOUS PETITION STATE S THAT THIS TRIBUNAL HAD COMMITTED AN ERROR WHEN IT HELD THE LOWER AUTHORITIES TO BE JUSTIFIED IN APPLYING PROVISO TO EXPLANATION 1(I ) OF SECTION 115JB(2) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). M.P.NO.95/CHNY/2018. . :- 2 -: 2. LD AUTHORISED REPRESENTATIVE SUBMITTED THAT AT PAGE 3 IN PARAGRAPH 3 OF THE IMPUGNED ORDER, EXCESS DEPRECIAT ION OF A1,27,12,073/- HAS BEEN MENTIONED AS RELATING TO A SSESSMENT YEARS 2006-2007 AND 2007-2008. ACCORDING TO HIM, THIS AMO UNT RELATED TO ASSESSMENT YEARS 2004-2005 AND 2005-2006, AND IN TH ESE YEARS THE COMPUTATION OF INCOME WAS AS PER NORMAL PROVISIONS AND NOT UNDER THE PROVISIONS RELATING TO BOOK PROFITS. FURTHER, ACCORDING TO HIM, THIS TRIBUNAL DID NOT CONSIDER THE DECISION OF AGRA BEN CH IN THE CASE OF ACIT VS. SRINIVAS SYNTHETICS PACKERS (P) LTD, 122 T TJ 832 , THOUGH IT WAS CITED IN THE COURSE OF ARGUMENTS. 3. NONE APPEARED ON BEHALF OF THE REVENUE. 4. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE. THIS TRIBUNAL HAD GI VEN A CLEAR FINDING THAT ASSESSEE IF ASSESSEE HAD ADOPTED DEPRECIATION @5.28% IN EARLIER YEARS INSTEAD OF 10.34%, THE BOOK PROFIT FOR SUCH E ARLIER YEARS WOULD HAVE BEEN PROPORTIONATELY HIGHER. IT WAS ALSO OBSER VED THAT THE INCOME COMPUTED U/S.115JB OF THE ACT WOULD HAVE BEE N MORE FOR SUCH YEARS. IN OUR OPINION WHETHER INCOME WHICH WAS FINA LLY ASSESSED WAS ONE UNDER NORMAL PROVISION OR UNDER PROVISIONS REL ATING TO BOOK PROFIT UNDER SECTION 115J OF THE ACT WILL NOT HAVE ANY REL EVANCE, SINCE BOTH THE COMPUTATIONS HAVE TO BE DONE IN ACCORDANCE WITH LAW, BEFORE M.P.NO.95/CHNY/2018. . :- 3 -: ASCERTAINING WHICH INCOME IS TO BE FINALLY ASSESSED . IN THE CIRCUMSTANCES, WHETHER THE SUM OF A1,27,12,073/- PE RTAINED TO ASSESSMENT YEARS 2004-05, 2005-06 OR ASSESSMENT YEA RS 2006-2007 AND 2007-2008 WOULD NOT HAVE ANY BEARING ON THE OUT COME OF THE DECISION. THAT APART, PARA 3 OF THE IMPUGNED ORDER WHERE THE ERROR HAS BEEN ALLEGED IS THE PART OF THE SUBMISSION OF T HE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND NOT THE FINDINGS OF THE TRIBUNAL. THE FINDINGS OF THE TRIBUNAL AS IT APPEARS AT PARAG RAPHS 6 & 7 OF THE ORDER IS REPRODUCED HEREUNDER:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS OF THE AUTHORITIES BELOW. IMPUGNED ASSESSMEN T ORDER WHICH WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), WAS PASSED BY THE LD. ASSESSING OFFICER, PURSUANT T O A DIRECTION OF LD. CIT U/S.263 OF THE ACT. LD. COMMISSIONER OF IN COME TAX HAD HELD THE ORIGINAL ASSESSMENT DONE BY THE LD. ASSESS ING OFFICER U/S.143(3) OF THE ACT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR A REASON THAT ASSESSEE HAD WRONGLY DEDUCTED A SUM OF A5,62,25,123/- WHILE COMPUTING PROFITS FOR T HE PURPOSE OF SECTION 115JB OF THE ACT. LD. COMMISSIONER OF INCO ME TAX HAD HELD THAT SUCH AMOUNTS WHICH WERE TRANSFERRED FROM DEPR ECIATION RESERVES, WERE HIT BY EXPLANATION (1) (I) OF SECTIO N 115JB(2) OF THE ACT. ASSESSEE HAD COMPUTED THE BOOK PROFIT AS UNDE R:- PROFIT AS PER PROFIT AND LOSS ACCOUNT 7,18,18,949 LESS: AGRICULTURAL INCOME 97,808 AMOUNT TRANSFERRED FROM DEPRECIATION RESERVE (VIDE PAGE 22 OF THE ANNUAL REPORT) 5,62,25,123 PROVISION FOR FBT 10,00,000 BOOK PROF IT UNDER SECTION 115JB 5,73,22,931 1,44,96,018 M.P.NO.95/CHNY/2018. . :- 4 -: AS PER THE ASSESSEE THE SUM OF A5,62,25,123/- WHICH WAS DEDUCTED BY IT, FROM ITS PROFIT AS PER PROFIT AND LOSS ACCOUNT, WAS ON ACCOUNT OF CHANGE IN THE DEPRECIATION METHOD A ND ADOPTION OF 5.28% AS DEPRECIATION RATE FOR WINDMILLS AGAINS T 10.34% APPLIED BY IT, FOR ASSESSMENT YEARS 2004-05 TO 2007 -08. QUESTION IN OUR OPINION CAN EASILY BE RESOLVED IF WE LOOK A T IT FROM THE EFFECT OF THE DEPRECIATION ON BOOK PROFITS FOR VA RIOUS YEARS. IF ASSESSEE HAD ADOPTED DEPRECIATION @5.28% IN THE EA RLIER YEARS INSTEAD OF 10.34%, DEFINITELY ITS BOOK PROFIT FOR SUCH EARLIER YEARS WOULD HAVE BEEN PROPORTIONATELY HIGHER. TAX PAY ABLE U/S.115JB OF THE ACT, IF INCOME COMPUTED UNDER THE SAID SECT ION WAS MORE THAT THE INCOME COMPUTED UNDER NORMAL PROVISIONS, W OULD HAVE PROPORTIONATELY GONE UP. 7 . FIRST STAGE OF THE PROCESS OF COMPUTATION OF IN COME OF A COMPANY IS COMPUTATION UNDER NORMAL PROVISIONS OF T HE ACT. SECTION STAGE IS COMPUTATION OF ITS BOOK PROFITS F OR PURPOSE OF SECTION 115JB OF THE ACT. RESULT OF THESE TAKES US TO THE THIRD STAGE WHICH IS TO DETERMINE WHICH ONE OF THESE HIGH ER. LAST STAGE OF THIS PROCESS IN NO WAY AFFECTS THE FORMER TWO S TAGES. QUANTUM OF PROFITS COMPUTED FOR THE PURPOSE OF APPL ICATION OF SECTION 115JB OF THE ACT REMAINS THE SAME, IRRESPEC TIVE OF THE SELECTION MADE IN THE THIRD STAGE. JUST BECAUSE IN COME UNDER NORMAL PROVISIONS WERE MORE, WE CANNOT SAY THAT COM PUTATION DONE UNDER SECTION 115JB OF THE ACT CAN BE IGNORED OR CAN BE INTERFERED WITH. IT HAS TO BE DONE AS PER THE MAND ATE UNDER SECTION 115JB OF THE ACT. IT IS TRUE THAT ASSESSE E WAS WELL WITHIN ITS RIGHT TO CHANGE THE RATE OF DEPRECIATION RELYI NG ON RELEVANT CLAUSES OF SCHEDULE XIV OF COMPANIES ACT. HOWEVER REWORKING OF ITS DEPRECIATION FOR EARLIER YEARS, AND TRANS FERRING THE DIFFERENTIAL AMOUNT FROM ITS RESERVE TO ITS PROFIT AND LOSS ACCOUNT, EFFECTIVELY RESULTED IN A PRO-RATA INCREASE TO IT S BOOK PROFITS FOR SUCH EARLIER YEARS. AT THIS JUNCTURE IT IS APPOSIT E TO REPRODUCE EXPLANATION (1) (I) TO SEC. 115JB (2) OF THE ACT AS IT STOOD AT THE RELEVANT POINT OF TIME. EXPLANATION 1. FOR THE PURPOSES OF THIS SECTION, B OOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UND ER SUB-SECTION (2), AS INCREASED BY (A.. (B) .. (C) .. (D) .. ( E) ......... (F) . (G) . (H) (I)..... M.P.NO.95/CHNY/2018. . :- 5 -: IF ANY AMOUNT REFERRED TO IN CLAUSES(A) TO (I) IS D EBITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY,- (I) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVIS ION (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF A PRIL, 1997 OTHERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO TH E PROFIT AND LOSS ACCOUNT : PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO A N ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES CREATED OR PROVISIONS MADE IN A PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1997 SHALL NOT BE REDUCED F ROM THE BOOK PROFIT UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115JA, AS THE CASE MAY BE; (II). (III)... (IV). (V). (VI). (VII). (VIII). ENHANCED CLAIM OF DEPRECIATION ON WINDMILLS MADE B Y THE ASSESSEE IN THE EARLIER YEARS, RESULTED IN DECREA SED PROFITS IN SUCH YEARS. IF LOOK AT IT VICE-VERSA, A LOWER RATE OF DEPRECIATION IF APPLIED IN THE EARLIER YEARS, WOULD HAVE RESULTED IN ENHANCED PROFIT AND HIGHER TRANSFERS TO RESERVES. THEREFORE, TRANSFER FROM RESERVES DONE BY THE ASSESSEE, THROUGH A CREDIT ENT RY IN ITS PROFIT AND LOSS ACCOUNT, FOR OFFSETTING THE EFFECT OF ENH ANCED DEPRECIATION, WAS CERTAINLY HIT BY PROVISO TO EXPLA NATION1(I) OF SECTION 115JB(2) OF THE ACT. WE ARE THEREFORE OF T HE OPINION THAT LD. ASSESSING OFFICER WAS JUSTIFIED IN APPLYING PR OVISO TO EXPLANATION 1(I) OF SECTION 115JB(2) OF THE ACT AN D DISALLOWING THE DEDUCTION OF A5,62,25,123/-, FROM THE PROFIT AS PER PROFIT AND LOSS ACCOUNT WHILE COMPUTING THE BOOK PROFIT U/S.1 15JB OF THE ACT. ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE IS CONFIRMED. TRIBUNAL HAD CONSIDERED THE QUESTION CONSIDERING TH E SPECIFIC FACTS IN ASSESSEES CASE AND HENCE DECISION OF AGRA BENCH I N THE CASE OF SRINIVAS SYNTHETICS PACKERS (P) LTD HAS NO RELEVANC E. WE ARE THEREFORE OF THE OPINION THAT ASSESSEE WAS UNABLE TO DEMONST RATE ANY MISTAKE M.P.NO.95/CHNY/2018. . :- 6 -: WHICH IS APPARENT ON RECORD WHICH REQUIRES RECTIFIC ATION U/S.254(2) OF THE ACT. WHAT IS RECTIFIABLE U/S.254(2) OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT) IS ONLY A GLARING AND APPARENT MISTAKE AND NOT ONE WHICH REQUIRE LONG ARGUMENTS AND DEBATES ON THE I SSUES INVOLVED. WE THUS DO NOT FIND ANY MERIT IN THIS MISCELLANEOUS PETITION FILED BY THE ASSESSEE. 5. IN THE RESULT, MISCELLANEOUS PETITION OF THE ASSES SEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON FRIDAY, THE 3 RD AUGUST, AT CHENNAI. SD/- SD/- ( # $! # % . & ) ( DUVVURU RL REDDY ) ( / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER ./0' / CHENNAI 12! / DATED:3 RD AUGUST, 2018. KV 2/3 ( 4)56 7/6%) / COPY TO: 1 . PETITIONER 3. & ;) () / CIT(A) 5. 6$=!> 4)? / DR 2. 4@AB / RESPONDENT 4. & ;) / CIT 6. >!C' D!' / GF