Income Tax Appellate Tribunal - Hyderabad
Kirby Building Systems India Ltd, Medak ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA.No.1490/Hyd/2008
Assessment Year 2004-05
The DCIT, Circle 8(1), Hyderabad Vs M/s Kirby Building Systems
India (L), Medak District,
Hyderabad
(Appellant) (Respondent)
ITA.No.1509/Hyd/2008
Assessment Year 2004-05
M/s Kirby Building Systems India Vs The DCIT, Circle 8(1), Hyderabad
(L), Medak District, Hyderabad
(Appellant) (Respondent)
Appellant by : Smt. Vasundhara Sinha
And Shri K.E. Sunil Babu
Respondent by : Shri C.N. Prasad
ORDER
Per Chandra Poojari, Accountant Member:
These two Cross appeals are directed against the order passed by the CIT(A)-III dated 23.7.2008 and pertains to assessment years 2004-
05.
2. The learned authorized representative for the assessee submitted that the CIT(A) not justified in sustaining the order of the assessing officer in adding provision of Rs.80,94,207/- made towards bad and doubtful debts, Rs.1,84,000/- towards advances and Rs.1,02,65,335/- towards slow moving inventory, to the net profit as per profit and loss account while computing the book profits u/s 115JB of the 2 ITA Nos.1490 & 1509/H/2008 M/s Kirby Building Systems India Ltd., Medak Act. The CIT(A) having observed that the Special Bench ITAT Kolkata in the case of Usha Martin Industries Ltd. (288 ITR 63 (AT) held that "the provision for bad and doubtful debts cannot be said to be a provision for liability because even if the debt were not recovered, no liability would be fastened upon the assessee. Any provision towards irrecoverability to a debt cannot be justified in sustaining the addition towards provision for bad and doubtful debts of Rs.80,94,207/- under clause ( c) of Explanation to section 115JB of the Act. The CIT(A) also not justified in holding that the provision for diminution in value of asset is to be considered as a reserve and to be added back under clause (b) of Explanation to section 115JB of the Act. It have to be seen that provision made for bad and doubtful debts, advances and slow moving inventory is not a liability at all but was made on account of an asset item of the balance sheet and therefore either clause (b) or (c ) of Explanation to Sec. 115JB has no application to the facts of the assessee's case and hence adding back the amount of Rs.1,85,43,562/- (80,94,207 + 1,84,000 + 1,02,65,335/- ) while computing book profits is not proper and justified. That clause (c ) of Explanation to section 115JB provides for increasing the provisions made for meeting the liabilities other than ascertained liabilities only and the provision made for bad and doubtful debts, advances and slow moving inventory are not the items falling under clause ( c) of Explanation to section 115JB of the Act.
3. The learned departmental representative submitted that there is an Amendment to the provisions of section 115JB with retrospective w.e.f. 1.4.2001 by Finance (No.2) 2009. As per the Amendment, for the purpose of 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub section (2) of 115JB of the Act, has increased by:
a) ........
b) ..........3 ITA Nos.1490 & 1509/H/2008
M/s Kirby Building Systems India Ltd., Medak
h)..........
i) an amount or amounts set aside as provisions of diminution in the value of any asset, if any amount referred to in clause (a) to (i) is debited to be profit and loss account, and as reduced by, .......
3.1. According to her, in view of the above Amendment the issue is to be decided against the assessee even though there is an order of the Tribunal in the case of JCIT Vs. Usha Martin Industries Ltd. (288 ITR 63) (AT) (SB).
4. We have heard both the parties and perused the material available on record. We have also gone through the case law cited by the rival parties. Admittedly, there is an Amendment to the provisions of Explanation (1) to Sec.115JB (2) and as per which the amount or amounts set aside as provisions for diminution in the value of any asset has to be added back to the book profit as shown in the profit and loss account for the relevant previous year prepared u/s 2 of Sec.115JB of the IT Act. This Amendment came into effect from 1.4.2001 by the Finance Act (No.2) 2009 with retrospective effect from 1.4.2001. The assessment year under consideration before us is 2004-05. Being so, the retrospective amendment is applicable to the assessment year under consideration before us. Accordingly, we decide the issue against the assessee and the ground raised by the assessee stands dismissed.
5. The assessee raised additional ground with regard to sustaining the interest u/s 234B and 234C while computing the book profit. According to learned authorised representative of the assessee, the interest could not be levied in view of the judgement of Hon'ble Supreme Court in the case of CIT Vs. Kwality Biscuits Ltd. (284 ITR 434) ((SC). 7.
4 ITA Nos.1490 & 1509/H/2008M/s Kirby Building Systems India Ltd., Medak On the other hand the learned departmental representative submitted that the judgement of the Hon'ble Supreme Court in the case of Kwality Biscuits cited (supra) delivered in the context of provisions of Sec.115J. However, there is a direct judgement on the issue in the case of CIT Vs. Brindavan Beverages Ltd. (Karnataka HC) (321 ITR 197) , Jindal Thermal Power Co. Ltd. Vs. DCIT (286 ITR 182) (Karnataka HC) and also orders of this Tribunal Special Bench in the case of ACIT Vs. Ashima Syntex Ltd. (117 ITD 1) (Ahemadabad) (SB) and in view of this , she submitted that there is no question of deciding the issue in favour of the assessee by following the judgement in Kripa Chemicals (P) Ltd. Vs. DCIT (88 ITD 192) (AT Pune Bench) or judgement of Supreme Court cited supra.
6. We have heard both the parties and perused the material available on record. The learned representative for the assessee relied on the judgement in the case of Snowcem India Ltd. (313 ITR 170) (Bom.) and also relied on the order of this Tribunal dated 26.5.2010 in the case of Inventaa Chemicals Ltd. in ITA No.328/H/2006 for the assessment years 2003-04 wherein the Tribunal decided the issue in favour of the assessee. The issue involved herein is squarely covered by the order of this Tribunal SB in the case of ACIT Vs. Ashima Syntex Ltd. (117 ITD 1) (SB) wherein it was held that when the total income computed under the provisions of Sec.115JA which is liable to pay advance tax and in the event of default in payment of advance tax, the payment of interest u/s 243C is mandatory. In view of the order of this Tribunal (SB), we are inclined to dismiss the additional ground with regard to charging of interest u/s 234B & 234C of the Income Tax Act. Accordingly, the assessee appeal dismissed.
7. The Revenue raised ground in its appeal that CIT(A) erred in holding that deduction u/s 80HHC of the IT Act has to be calculated on adjusted book profit and not on the profit calculated under other provisions of the Act and he is also erred in holding that it has to be allowed on adjusted 5 ITA Nos.1490 & 1509/H/2008 M/s Kirby Building Systems India Ltd., Medak book profit after applying the procedure of computation as prescribed u/s 80HHC of the IT Act in computing the income u/s 115JB of the Act. This issue has been squarely covered in favour of the assessee by the judgement of the Hon'ble Supreme Court in the case of Ajantha Pharm Ltd. Vs. CIT 327 ITR 305 wherein it was held that:
i) reversing the decision of the High Court and restoring that of the Appellate Tribunal, (i) that section 115JA was a self contained code and applied notwithstanding any provision in the Act. Section 115JB is the successor section to section 115JA. Section 115JB continues to remain a self contained code.
ii) That all assessable entities were not eligible for deduction u/s80HHC(1B). Similarly, only eligible goods were entitled to such special deduction u/s 80HHC(1). Section 80HHC(3) was geared to the exports, whereas the levy u/s 115JB was on the deemed income. The idea was to exclude 'export profits' from the computation of book profits u/s 115JB.
iii) That if the dichotomy between 'eligibility' of profits and 'deductibility' of profits was not kept in mind section 115JB would cease to be self contained code.
iii) That, therefore, the Appellate Tribunal was rightly in holding that 100 percent of the export profits earned by the assessee as computed u/s 80HHC(3) was eligible for reduction under clause (iv) of the Explanation to Section 115JB.
8. Accordingly, we decide the issue in favour of the assessee and against the Revenue. Hence, this ground taken by the Revenue is dismissed.
9. The next ground raised by the Revenue in its appeal is with regard to computation of income u/s 115JB of the Act, after deduction of unabsorbed depreciation of Rs.1,72,03,120/- has to be allowed as against Rs.47,79,134/- allowed by the assessing officer.
10. After hearing both the parties, we are of the opinion that this issue has also been squarely covered by the order of this Tribunal dated 6 ITA Nos.1490 & 1509/H/2008 M/s Kirby Building Systems India Ltd., Medak 18.6.2010 in assessee's own case in ITA No.198/Hyd/2007 for the assessment years 2003-04 wherein it was held:
3. We have also carefully gone through the impugned order of the CIT(A) and that of the assessing officer. The assessing officer found that the accounts are prepared year to year and profit or loss is computed year wise for tax purposes. Therefore, the book profit u/s 115JB is also be computed year wise. The assessing officer further found that the loss brought forward or unabsorbed depreciation whichever is less computed year after year is to be reduced from the book profit. Explanation 1(iii) to Sec.115JB clearly says that the amount of loss or unabsorbed depreciation whichever is less as per books of account shall be reduced while computing the income from the book profit. The Mumbai Bench of this Tribunal in the case of Amline Textiles (P) Ltd. examined this issue elaborately and found that the unabsorbed depreciation or loss brought forward for all the earlier years is to be reduced from the book profit for computing the book profit u/s 115JB. Since the Mumbai Bench of this Tribunal considered the issue elaborately and found that unabsorbed depreciation or loss brought forward for earlier years taken together is to be reduced for the purpose of computing the book profit u/s 115JB, in our opinion, the CIT(A) has rightly found that the aggregate of the unabsorbed depreciation or loss whichever is less as per books of account shall be reduced. Therefore, we do not find any infirmity in the order of the lower authorities. Accordingly, the same is confirmed.
11. In view of this, we decide this issue in favour of the assessee and the ground taken by the Revenue stands dismissed.
12. In the result, the appeals of the assessee as well as Revenue are dismissed.
Order pronounced in the open Court 8.10 .2010
Sd/- sd/-
G.C. GUPTA CHANDRA POOJARI
VICE PRESIDENT ACCOUNTANT MEMBER
Dated the 8th September, 2010
7 ITA Nos.1490 & 1509/H/2008
M/s Kirby Building Systems India Ltd., Medak
Copy forwarded to:
1. M/s Kirby Building Systems India Limited, Plot No.8-15, IDA, Phase-III, Pashamylaram Mandal, Medak District.
2. The DCIT, Circle 8(1), Hyderabad
3. CIT(A)-III, Hyderabad.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
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