Income Tax Appellate Tribunal - Mumbai
Dcit 5(3)(2), Mumbai vs Tolani Shipping Co. Ltd, Mumbai on 13 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E", MUMBAI
Before Shri P K Bansal, Vice President &
Shri Pawan Singh, Judicial Member
ITA No.1251/Mum/2015
Assessment Year : 2006-07
Dy CIT 5(3)(2) Tolani Shipping Co. Ltd.,
Mumbai 10-A, Bakhtawar, Nariman Point,
Vs. Mumbai 400 021
PAN AAACT4127C
(Appellant) (Respondent)
Appellant By : Shri V Justin
Respondent By : Shri Neelkanth Khandelwal
Date of Hearing : 31.10.2017 Date of Pronouncement : 13.11.2017
ORDER
Per P K Bansal, Vice-President:
This appeal has been filed by the Revenue against the order of the CIT(A)-10, dated 02.12.2014, for A.Y.2006-07, by taking the following effective grounds of appeal:
"(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the enhancement of book profit of the assessee u/s. 115JB(2) by holding that the enhancement made in book profit was a debatable issue and issues where two opinions are possible cannot be a subject matter of rectification u/s. 154 of the Income-tax Act, 1961.
(ii) On the facts and in the circumstances of the case and in laws the Ld. CIT(A) failed to appreciate that the reduction of profit on sale of depreciable asset from the profit as per Profit & Loss account was not covered under any of the clauses (i) to (viii) of the 2 ITA No.1251/Mum/2015 Tolani Shipping Co. Ltd.
Explanation 1 to section 115JB(2) and, therefore, the assessee had erred in reducing the profit on sale of depreciable asset while computing the book profit and this was a mistake apparent from record which could be rectified u/s. 154 of the Income-tax Act, 1961."
2. The brief facts of the case are that the assessment u/s. 143(3) was completed, wherein additions on account of order u/s. 92CA(3) amounting to ` 9,69,74,059/- and disallowance u/s.14A amounting to ` 45,54,204/- were made. The Assessing Officer noted that there are discrepancies on account of irregular allowance of chapter VIA deduction and escapement of book profit u/s. 115JB. Accordingly, notice u/s. 154 was issued to the assessee. The assessee objected to the notice stating that there is no mistake apparent which requires rectification. The Assessing Officer did not agree with the assessee and observed that the assessee in its second revised return filed on 05.03.2009 has declared income under normal provisions of the Act at ` 18,30,43,646/- and profit taxable u/s. 115JB at loss of ` 4,02,99,527/-. As the assessee is a shipping company income and has offered to pay tax on its income as per tonnage tax scheme, income is to be computed in accordance with the provisions of section 115V-I of the Income tax Act. As per clause (i) of sub-section (1) of section 115VI, the profits from core activities of a company are from operating qualifying ships. The Assessing Officer therefore enhanced the book profits u/s 154 and worked out the same to ` 50,46,75,094/-. The assessee went in appeal before the CIT(A). The 3 ITA No.1251/Mum/2015 Tolani Shipping Co. Ltd.
CIT(A) did not agree with the Assessing Officer and partly allowed the appeal of the assessee and so far as enhancement of income on account of profit on depreciable asset is concerned, the CIT(A) deleted it.
3. We have heard the rival submission and have gone through the same along with the orders of the authorities below. In the appeal before us, there is only one issue regarding the enhancement of income u/s. 154 on account of the reduction of profit on sale of depreciable assets. We noted that there are two Special Bench decisions relating to the issue. The Special Bench of the ITAT, Kolkata, in the case of Sutlej Cotton Mills (45 ITD 22) decided the issue in favour of the assessee and the Special Bench of ITAT, Hyderabad, in the case of Rain Commodities Ltd. (ITA No.673/Hyd/2009) decided the issue in favour of the department. We noted that there are two Special Bench decisions taking different view, therefore, the issue involved is a debatable one. Since the issue is a debatable one, it cannot be regarded to be a mistake apparent on record. A mistake apparent on record can only be one where there cannot be any two conceivable opinions. This is a case where even the Special Bench has taken two different views. We further noted that the Mumbai Bench of the Tribunal in the case of ITO vs. Su-ra Jeweller India Ltd 21 SOT 79, took a view that capital receipt which do not constitute income under the Act cannot be brought to tax net by employing the mechanism of Section 115JB. Since the issue involved is a debatable one and 4 ITA No.1251/Mum/2015 Tolani Shipping Co. Ltd.
different Special Bench has taken different views, therefore, we do not find any illegality or infirmity in the order of the CIT(A) deleting the enhancement made by the Assessing Officer in the income of the assessee by taking action u/s. 154. We accordingly, confirm the order of the CIT(A).
4. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 13th day of November, 2017.
Sd/- Sd/-
(Pawan Singh) (P K Bansal)
JUDICIAL MEMBER VICE-PRESIDENT
Mumbai; Dated: 13th November, 2017
SA
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A),Mumbai
4. The CIT
5. DR, 'E' Bench, ITAT, Mumbai
BY ORDER,
#True Copy #
Assistant Registrar
Income Tax Appellate Tribunal, Mumbai