Income Tax Appellate Tribunal - Delhi
Dhir Global Industria P Ltd, New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'I' BENCH BEFORE
SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM
IT A No.4894/D/2009
Assessment Year:2003-04
Income Tax Officer, V/s. M/s Dhir Global Industrial
W ard 10(3),Room no. P. Ltd., 375,Phase-IV,
199C,CR building, Udyog Vihar,
New Delhi Gurgaon
[P AN: AAACD 7431 P]
(Appellant) (Respondent)
Assessee by Shri R.S. Singhvi,AR
Revenue by Shri A.K. Monga,DR
Date of hearing 07-12-2011
Date of pronouncement 16-12-2011
ORDER
A.N.Pahuja:- This appeal filed on 30.12.2009 by the Revenue against an order dated 16.10.2009 of the ld. CIT(A)-XIII, New Delhi, raises the following grounds:-
1 "On the facts and circumstances of the case and in law, the CIT(A) has erred that there was no omission on the part of the assessee to compute the tax liability u/s 115JB.
2 On the facts and circumstances of the case, the CIT(A) has erred that insufficient reasons were given for the issue of notice u/s 148.
3 On the facts and circumstances of the case, the CIT(A) has erred that b/f depreciation along with the current year depreciation was liable to be excluded for working out the eligible profit for computing the exemption u/s 10B to be reduced from the book profit.
4. The appellant may be allowed to alter, amend, modify, add or any grounds of appeal during the appellate proceedings."
2. Facts, in brief, as per relevant orders are that return declaring nil income filed on 25.11.2003 by the assessee after being processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) was selected for 2 I.T.A. no.4894/Del./2009 scrutiny with the service of notice U/s 143(2) of the Act. Subsequently, assessment was completed vide order dated 31st March, 2005 determining nil income after set off of brought forward depreciation. Inter alia, the Assessing Officer[AO in short] reduced deduction u/s 10B to an amount of `1,40,34,521/-, without any reasons or discussion in the assessment order as against the claim of `2,83,97,520/- nor determination of book profits forms part of the original assessment order .However, the assessee is stated to have reduced the book profits by an amount of `2,83,97,520/- on account of deduction u/s 10B of the Act. Since while completing assessment u/s 143(3) of the Act ,deduction u/s 10B was allowed to the extent of ``140.34 lacs, assessment was reopened u/s 147 of the Act on the ground that income of `143.63 lacs escaped assessment due to excess deduction u/s 10B of the Act having been allowed while computing book profits u/s 115JB of the Act. Accordingly , a notice dated 30th April, 2007 u/s 148 of the Act was served upon the assessee. There is nothing to suggest as to whether or not the assessee filed any return or reply to this notice. However, after obtaining a copy of the reasons recorded by the AO, the assessee contended during the course of reassessment proceedings that the computation of book profits enclosed by them with return was correct.. After considering the reply of the assessee, the AO withdrew excess claim of deduction of ``143.63 lacs u/s 10B of the Act while determining book profits u/s 115JB of the Act..
3. On appeal, the learned CIT(A), without going into the legality of notice issued u/s 148 of the Act ,concluded that there was no mistake in payment of tax liability u/s 115JB of the Act . The findings of the ld. CIT(A) read as under:-
"The reasons for difference in computation of exemption u/s 10B for the purpose of regular provisions and under MAT is because of claim of depreciation. Prescribed rate of depreciatifon under I.T. Rules and under Companies Act are different. The balance sheet is prepared as per schedule-VI to the Companies Act 1956 after taking into consideration stipulated rate of depreciation as provided in the Companies Act. However, in case of regular assessment, depreciation is required to be considered as per income tax rules, which provide for different rate of depreciation. The appellant has 3 I.T.A. no.4894/Del./2009 placed on record statement of income in support of claim of depreciation as per books and as per I.T. Rules.
I have carefully considered the facts of the case and legal provisions. It is noticed from the assessment order that there is no working of MAT calculation in the original assessment order and only tax liability that was worked out and paid is on the basis of computation of book profit made by the appellant. The Assessing Officer has also not given any specific reasons for reopening except by making observations that there was omission in computation of income u/s 115JB.
In my view, issue on merits is fully supported as per decision in the case of Apollo Tyres Pvt. Ltd. and CIT vs. Dynamic Orthopedics Pvt. Ltd..It has been specifically provided that MAT calculation is to be on the basis of book profit as per the audited balalncesheet subject to various adjustments provided in the provisions of sec. 115JB.It is not the Assessing Officer's case that the mistake in computation of income u/s 115JB by the appellant is on account of such adjustment. I have taken in to consideration computation of income as placed on record and it is self evident that only difference in the working of exemption u/s 10B is on account of claim of depreciation. The concept of tax liability u/s 15JB is well laid down in the scheme of the Act itself. And also supported from legal decisions referred to above T here is thus no mistake in payment of tax liability u/s 115JB by the appellant. In view of above directions, it is not necessary to adjudicate the legal ground.
The ground regarding charge of interest is of consequential nature and Assessing Officer may give relief as per law."
4. The Revenue is now in appeal before us against the aforesaid findings of ld. CIT(A).The ld. DR supported the findings of the AO while the learned AR on behalf of the assessee relied upon the impugned order in the light of decision of Hon'ble Kerala High Court in CIT vs. Dynamic Orthopedics Pvt. Ltd. ,257 ITR
446. To a query by the Bench, the ld. AR pointed out that the assessee is not in appeal before the ITAT.
5. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of Hon'ble Kerala High Court relied upon by the ld.
4 I.T.A. no.4894/Del./2009 AR. Indisputably, determination book profits u/s 115JB of the Act does not form part of the assessment order dated 31st March, 2005. It appears that the assessee in their computation u/s 115JB of the Act, reduced the book profits by an amount of `2,83,97,520/- on account of deduction u/s 10B of the Act while under the normal provisions such benefit worked out to ``140,34,521/- due to difference in rates of depreciation in accordance with IT Rules,1962 vis-à-vis provided in the Companies Act,1956. The AO, in the reassessment proceedings, validity of which is not in question before us nor the ld. CIT(A) adjudicated the legal ground, restricted the deduction u/s 10B of the Act to an amount of 1,40,34,521/- while determining book profits u/s 115JB of the Act. The detailed working of this amount is not evident from the impugned order nor has been placed before us. However, it is submitted that variation in deduction u/s 10B of the Act is due to difference in rates of depreciation in terms of IT Rules,1962 vis- à-vis Companies Act,1956. In this connection, the ld. AR invited our attention to decision of the Hon'ble Kerala High Court in the context of provisions of section 115J of the Act, wherein it was held that the book profit estimate under section 115J has to be made on the basis of depreciation calculated in accordance with Schedule VI to the Companies Act,1956 and not as per the provisions of the Act. The findings of the Hon'ble High Court read as under:
" Sub-section (1A) of the Act says that every assessee, being a company, shall, for the purpose of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The argument of learned counsel for the assessee is that the respondent being a private company, the preparation of its profit and loss account for the relevant previous year in accordance with the provisions of Part II of Schedule VI to the Companies Act is not applicable. Section 350 of the Companies Act, 1956, states as follows: "The amount of depreciation to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written-down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year at the rate specified in Schedule XIV". What is submitted by learned counsel is that under section 355 of the Companies Act, nothing in section 349 shall apply to a private company unless it is applicable to the private company. Hence, learned counsel contends that his client has calculated the depreciation on the basis of the provisions of the Income-tax Act.
5 I.T.A. no.4894/Del./2009 We are afraid, this explanation cannot be accepted. Section 115J has to be looked into for the following reasons: "It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so-called 'zero- tax' highly profitable companies deserves attention. In 1983, a new section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will have to pay a 'minimum corporate tax' on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30 per cent. of its book profits. In other words, a domestic widely held company will pay tax of at least 15 per cent. of its book profit. This measure will yield a revenue gain of approximately Rs. 75 crores". Section 115J of the Act broadly makes applicable to the assertible depreciation at the rates prescribed in Schedule VI. Thus, this provision is incorporated in the Act. Section 355 of the Companies Act cannot be made applicable in such cases. We are of the view that depreciation has to be calculated as stated in section 350 of the Companies Act.
5.1 Even otherwise, in view of decision of the Hon'ble Apex Court in Apollo Tyres Ltd. Vs. CIT,255 ITR 273, the AO, while assessing a company for income- tax under section 115J of the Act, cannot question the correctness of the profit and loss account prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act .In terms of the extant provisions of sec. 115JB of the Act, every company is required to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 and while preparing the annual accounts including 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, have to be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 .
6 I.T.A. no.4894/Del./2009 5.2 In view of the specific provisions contained in sub-section (2) of sec. 115JB of the Act, especially when the ld. CIT(A) merely followed the aforesaid decision in accepting the claim of the assessee while the Revenue have not brought to our notice any contrary decision nor any other material, so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground nos. 1 to 3 in the appeal are dismissed.
.
6. No additional ground having been raised before us in terms of residuary ground no.4 in the appeal, accordingly, this ground is also dismissed.
7. No other plea or argument was raised before us.
8. In result, appeal is dismissed.
Order pronounced in Open Court
Sd/- Sd/-
(RAJPAL YADAV) (A.N. PAHUJA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
NS
Copy of the Order forwarded to:-
1. M/s Dhir Global Industia P. Ltd., 375, Phase-IV, Udyog Vihar, Gurgaon.
2. Income Tax Officer, W ard 10 (3), New Delhi.
3. CIT (Appeals)-XIII, New Delhi
4. The CIT concerned.
5. The DR, ITAT,'I' Bench, New Delhi
6. Guard File.
By Order, Deputy/Asstt.Registrar ITAT, Delhi