Income Tax Appellate Tribunal - Mumbai
Acit Cen. Cir. 17 & 28, Mumbai vs M/S. J.B. Bada Offshore Surveyors ... on 13 February, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E" MUMBAI
BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER)
AND
SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
IT (SS)A No. 580/MUM/2004
Block Period: 01-04-1995 to 07-11-2001
Asst. CIT, Central Circle 17 & M/s J.B. Boda & Co. Pvt. Ltd.,
28, Maker Bhavan No. 1, Sir V.T.
R.No. 401, 4th floor, Aayakar Vs. Marg,
Bhavan, M.K. Road, Mumbai-20.
Mumbai-400020.
PAN No. AAACJ 2289 F
Appellant Respondent
IT (SS)A No. 18/MUM/2010
Block Period: 01-04-1995 to 07-11-2001
M/s J.B. Boda & Co. Pvt. Ltd., DCIT 17 & 28,
Maker Bhavan No. 1, Sir V.T. Aayakar Bhavan,
Marg, Vs. Mumbai.
Mumbai-400020.
PAN No. AAACJ 2289 F
Appellant Respondent
Assessee by : Mr. Sukhsagar Syal
Revenue by : Mr. Harishankar Lal, CIT-DR
Date of Hearing : 17/11/2022
Date of pronouncement : 13/02/2023
M/s J.B. Boda & Co. Pvt. Ltd. 2
IT(SS) No. 580/M/2004 & 18/M/2010
ORDER
PER OM PRAKASH KANT, AM
These two appeals by the Revenue and assessee respectively are directed against two separate orders, orders passed by Ld. First Appellate Authority. The appeal by the Revenue is directed against order dated 10.08.2004 passed by the Ld. Commissioner of Income-
Income tax (Appeals), Central - IV, Mumbai for assessment of block period 07.11.2001 arising from the block assessment from 01.04.1995 to 07.11.2001, order dated 07.04.2004 passed u/s 158BC of the Income Income-tax Act, puty Commissioner of Income-tax, 1961 (in short 'the Act') by the Deputy Income Central Circle -17 17 & 28, Mumbai (in ( Short 'the officer the Assessing officer').
The appeal by the assessee is against another order dated tax (Appeals)-39, 31/12/2009 of the Ld. Commissioner of Income-tax (Appeals) Mumbai for the same block period i.e. 1/4/1995 to 7/11/2001, which is arising from order dated 23.06.2008 passed by the Assessing Officer, while giving effect to the e order of the Ld. CIT(A) dated 26/02/2008.
2. The ground raised by the Revenue in its form No. 36 are reproduced as under:
1. On the facts and circumstances of the case and in law, the LD.CIT(A) erred in deleting the additions of 2,34,24,148/ for the A. Yr. 1996-97 the sums of Rs. 2,34,24,148/- 1996 M/s J.B. Boda & Co. Pvt. Ltd. 3 IT(SS) No. 580/M/2004 & 18/M/2010 made on account of excess deduction claimed us 80-80 0 of the Income tax Act, 1961."
2. On the facts and circumstances of the case and in law, the LD.CIT(A) erred in deleting the additions of 2.34.24.148/ for the A. Yr. 1996-97 the sums of Rs. 2.34.24.148/- 1996 without appreciating that the Finance Act, 2002 has amended the relevant provisions retrospectively we.f. 17.1.1995 to provide that any expense, deduction or allowance claimed, which is found false shall be included in the undisclosed income."
3. "On the facts and circumstances of the case and in law, the LD.CIT(A) erred in directing the A.O. to grand additional deduction u/s 80-0 0 on the undisclosed income determined in the block assessment without appreciating that the deduction u/s 80 80-00 under chapter VIA can't be claimed beyond the relief claimed in the original assessment.
3. y the Income-tax This appeal of the Revenue was disposed off by 'Tribunal') vide order dated Appellate Tribunal (In short the 'Tribunal') 9/04/2008. In this appeal the Tribunal dismissed the first two grounds following the finding of the Tribunal in another case of the Group namely M/s J B Boda Surveyors P Ltd in IT(SS)A No. 578/Mum/04. On a miscellaneous application filed by the assessee that Ground No. 3 of the appeal of the Revenue was not adjudicated, the Tribunal vide order dated 4/07/2008 passed in MA No. 320/Mum/2008 dismissed the Ground No. 3 of the appeal of Revenue, observing as under:
"4. After hearing the Ld. Departmental Representative, we find substance in M.A. Non adjudication of ground of appeal is apparent mistake the order rectified u/s under consideration, ground No. 3 254(2). In the case under has been adjudicated therefore there is apparent M/s J.B. Boda & Co. Pvt. Ltd. 4 IT(SS) No. 580/M/2004 & 18/M/2010 mistake in the order and same is rectified by inserting para 5A in the order reads as under:
5A. The issue raised in ground No. 3 in Form No. 36 is pertaining to additional deduction eduction u/s 80-OO on the undisclosed income determined in the block assessment. The CIT(A) decided the issue in favour of the assessee after considering amended provisions of the Explanation below section 158BB(1) and the proviso to the same section, which were amended by the Finance Act, 2002, with retrospective effect from 1st July, 1995 as well as clarification issued by CBDT vide Circular no. 8 of 2002 dated 27th August, 2002. We noticed that the issue is also covered in favour cision of ITAT Pune of the assessee by the decision Bench in the case of Control Touch Electronics (Pune) Pvt. Ltd. v. ACIT 77 ITD 522 wherein it has been held that undisclosed income u/s 158BB should be computed after allowing deduction under Chapter VIA. Respectfully following the abov e decision of ITAT in the case above of Control Touch Electronics (Supra), we confirm the order of the CIT(A)."
3.1 Further, on a Miscellaneous Application filed by the Revenue that revised grounds filed by the Revenue vide their letter dated 30/12/2006 were not ot considered and adjudicated, The Tribunal vide order passed on 19/12/2008 in MA No. 509/M/2008 , recalled its order dated 9/4/2008 passed in the appeal of the Revenue.
Revenue The relevant finding of the Tribunal recalling its order dated 9/4/2008 are reproduced ced as under:
3. Briefly, the facts of the case are that the ITAT has "3.
decided the appeals filed by the revenue vide IT(SS)A No.s 578/M/04 & 580/M/04 for the block period 01.04.95 to M/s J.B. Boda & Co. Pvt. Ltd. 5 IT(SS) No. 580/M/2004 & 18/M/2010 C7.11.2001 in respect of J.B. Boda Offshore SurveySurveyors and Adjustors P. Ltd. and M/s s J.B. Boda & Co Put. Ltd., respectively vide original order dated 9th April, 2008. The assessee filed M.A. No. 320/N/08, 320/N/08, which arose out of A No. 580/M/04 and decided on 4th July, 2003. IT(SS)A Now the revenue has filed M.A. pointing out that the revised grounds filed by the Revenue on 10.10.06 have not been decided. It is pertinent to note that this fact has not been pointed out by the revenue neither at the time of hearing and deciding the original appeal nor at the time of Miscellaneous Application filed by the assessee and the ous Application same were not found on record. The Ld. DR filed a photo copy of acknowledgment, showing these revised grounds of appeal have been filed on 30.10.2006. On enquiry from registry, it is noticed that the revenue has filed the these revised grounds in appeal section and the same entered at S.No. 900, dated 30.10.06 in the diarize register of appeal section. The relevant extract of the diarize script the th registry has been kept on record.
reco Non-adjudication
adjudication of
grounds of appeal amounts to mistake apparent from record, which rectifiable u/s 254(2). We, accordingly, accordin ITAT dated 9.4.08 and modified recall the above order of ITAT dated 4' July, 2008 for the limited purpose to adjudicate the following revised grounds of appeal of revenue:
"1. the facts and in the circumstances of the case
1. On the and in law, the Ld. CIT(A) errederred in deleting the addition, of Rs.
R 2,34,24,148/- for AY 1996-97,97, made on account of excess excess deduction claimed u/s 80-O 80 of the Income-tax Income Act, 1961.
circumstances of the case
2. On the facts and in the circumstances and in law, the Ld. CIT(A) erred in deleting the Rs.2,34,24,148/- for the AY addition of the sum of Rs.2,34,24, 97 without appreciating the fact that the 1996-97 Finance Act, 2002 has amended the reievent provisions retrospectively w.e.f. 17.1.1995 to t provide that env I eypense, deduction or allowance claimed which is found teleg shall be included in the undisclosed income.
M/s J.B. Boda & Co. Pvt. Ltd. 6 IT(SS) No. 580/M/2004 & 18/M/2010
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to grant addition deduction us 80- 80 0 onn the undisclosed income of Rs.11,73,76,489/ Rs.11,73,76,489/-
declared in the block return without appreci appreciating that the deduction us 80-O80 under Chapter VIA cannot be claimed beyond the relief claimed in the originai assessment.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding without examining that the assessee is entitled to deduction 0 on the undisclosed income returned on Rs. us 80--0 11,73, 76, 489/ 489/- when a. The said sum of Rs. 11, 73, 76, 489/- 4 represented the foreign currency/Indian currency credit balances of 136 different parties.
b. The income represented by foreign currency credit baiances was not received within the time prescribed under the statute c The assessee has nowhere nowhereestablished d that these foreign currency/Indian currency credit balances foreign\currency/Indian income Table for deduction us 80-O represented income 80 of the Income-tax Income Act, 1961.
requisite conditions for allowability u/s 80-O d. The requisite 80 of the Income tax Act, 1961 in respect of credit Income-tax Indiancurrency has also not been balances in Indiancurrency satisfied.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in giving the direction which had the effect of reducing the undisclosed income beiow the amount that has been offered by the assessee in the block return filed.
4. Against above order of the Tribunal in MA No. 509/Mum/2008, the assessee again sought rectification stating that only Ground No. 4 and 5 are additional ground, which were not M/s J.B. Boda & Co. Pvt. Ltd. 7 IT(SS) No. 580/M/2004 & 18/M/2010 Tribunal should restrict adjudicated by the Tribunal and thus the Tribunal adjudication of additional ground No. 4 and 5 only. But, the Tribunal in order passed on 11/02/2011 in MA No. 283/Mum/2010, rejected this request holding that Act does not permit for rectification of order passed u/s 254(2) of the Act.
4.1 Thus, the appeal of the Revenue is before us for adjudicating above five revised grounds.
5. Briefly stated facts of the case are the assessee company is one of the main concerns of J B Boda Group of Companies. During relevant period, the assessee company was engaged in the brokerage business as reinsurance brokers.
reinsurance-brokers. It received a commission @ 3 to 6 percent, relating to maritime and other insurance. In respect of insurance risk covered by Indian or foreign covered insurance companies, the assessee arranges for the reinsurance of portion of risk with various reinsurance companies either directly or through foreign brokers. In return for the above services, the assessee company receives a pe percentage rcentage of the premium received by the foreign companies as its share of brokerage. The assessee company retains its commission out of the premium of re-insurance re o foreign reinsurance remitted by the customer from India to company.
M/s J.B. Boda & Co. Pvt. Ltd. 8 IT(SS) No. 580/M/2004 & 18/M/2010 5.1 A search and seizure action u/s 132 of the Act was carried out in the case of M/s J.B. Boda group of cases on 07.11.2001. During the course of search proceedings, Shri C.V. Sheth, Sheth Senior Executive Director of the assessee-company, assessee who was working for group for f last 50 years, stated on oath u/s 132(4) of the Act on 8/11/2001 that certain credit balances of insurance companies and outstanding expenses in India were appearing in books of account for a long period and non-moving and thus became non non-existence.
He admitted that those liabilities of Rs. 11.74 crores already ceased and no longer payable, therefore same was offered to tax as undisclosed income. His statement was further affirmed by Shri J.B. Boda chairman of the group or Director of the assessee assessee-
company and total undisclosed income of Rs. 16,15,21,267/-
16,15,21,267/ for the entire Group was offered in his statement dated 9/11/2001 u/s 132(4) of the Act. The breakup of the said disclosure during the course of search proceedings made is reproduced as under:
Name of the Company Block Period/Asst. Disclosure made on Amount (Rs.) Year account of J.B. Boda & Co. Pvt. Ltd. Block Period None existent i.e. 10,03,72,942/-
01/04/1995 to seized liabilities of
07/11/2001 credit balances in $
and UK pound
-do- existent
Non-existent dues 1.66 crores
payable to the Indian
Insurance Companies
-do- AY 1996-97 Deduction u/s 80--O 2,31,59,273/-
wrongly claimed
Total 14,01,31,215/-
Crowe Boda & Co. Pvt. AY 1996-97 & 1997- Deduction u/s 80--O 1,08,07,912/-
Ltd. 98 wrongly claimed
J.B. Boda Surveyors Pvt. AY 1996-97 & 1997- Deduction u/s 80--O 82,71,381/-
Ltd. 98 wrongly claimed
M/s J.B. Boda & Co. Pvt. Ltd. 9
IT(SS) No. 580/M/2004 & 18/M/2010 J.B. Boda Offshore AY 1996-97 & 1997- Deduction u/s 80--O 12,47,411/- Surveyors & Adjustors 98 wrongly claimed Pvt. Ltd.
J.B. Boda & Bros Pvt. AY 1996-97 Deduction u/s 80--O 14,35,290/-
Ltd. wrongly claimed
Total 16,18,93,209/-
5.2 The breakup of Rs.14,01,32,215/
Rs.14,01,32,215/- offered in respect of the assessee company was as under:
"4.4 .....
break up of the undisclosed income is as under: Thus the break-up a. Long standing creditors in US $ Rs.7,27,35,250/ Rs.7,27,35,250/-
b. Long standing creditors in St. Pound Rs.2,76,37,692/-
Rs.2,76,37,692/ c. Dues payable to Indian Companies Rs.1,66,00,000/ Rs.1,66,00,000/-
d. On account of erroneous claim of Rs.3,21,59,273/-
Rs.3,21,59,273/
deduction u/s 80-O
80
Total Rs.14,01,32,215/
Rs.14,01,32,215/-
5.3 Consequent to the search action, notice u/s 158BC of the Act
response the assessee
was issued to assessee on 25.02.2002. In response, filed return of income in prescribed Form No. 2B for block period (from 01.04.1995 to 07.11.2001) on 26.03.2002 declaring total undisclosed Rs.11,73,76,489/ . The detail of said isclosed income of Rs.11,73,76,489/-. undisclosed income declared alongwith foot note is reproduced for ready reference as under:
Previous Year Asstt. Year Total Income Total return Total Total income
including loss assessed/ret including
undisclosed urn income undisclosed
income income
computed
u/s 158BB of
(in Rs.)
Total Income Total Loss Total Income Total Loss
(A) (B) (C) (D)
M/s J.B. Boda & Co. Pvt. Ltd. 10
IT(SS) No. 580/M/2004 & 18/M/2010 1st 1996-97 97 256,416,836 -- 15,674,552 --
2nd 1997-98
98 34,311,650 --
3rd 1998-99
99 -- 7,545,290 --
4th 1999-2000
2000 17,820,762
5th 2001-01
01 8,881,354
6th 2001-02
02 -- 16,109,739 --
7th upto -- 38,700,000 --
07.11.2001
Total 256,419,836 139,043,347
Total Undisclosed Income for the Block period = (A - C) + (D
- B) =117,376,489/-
=117,376,489/ NOTE:-
1. This figure has been arrived at after reconciling the various accounts having credit balances as far as possible. In addition there are corresponding debit balances standing in party's accounts aggregating to Rs.22,780,431/ in respect of whom the assessee has no Rs.22,780,431/-
hope of recovery as balance is outstanding for more than 6 years.
2)The above credits are offered to tax, however if any claim arise on account of these balances written back at any time the same shall be allowed as a deduction from business of the year of payment of such claim profit of the business
3)The assessee had claimed deduction under Section 80 80-0, in the original returns filed for the period covered by the block retur, at 50% of the convertible foreign exchange entitlement to the brought into India. The assessee's entitlement deduction has been accepted by the department in all the years. In the course of the search . statements had been recorded of the assessee's employees wherein it has been a erroneous deduction under 80-O has been stated that an assessee submits that the deduction has claimed. The assessee been correctly claimed and allowed in the original assessment proceedings and hence in the present return the deduction as earlier claim has not been withdrawn.
"4) In respect of additional income offered. which is ceived in convertible foreign exchange, the also received 80 0 of the assessee is entitled to a deduction Us. 80-0 M/s J.B. Boda & Co. Pvt. Ltd. 11 IT(SS) No. 580/M/2004 & 18/M/2010 Income Tax Act 1961, which may be considered at the time of assessment for the Assessment Years 1996-97, 97, 1997-98."1997
5.4 In above foot note no. 4 to the undisclosed income computed, the assessee mentioned that assessee was entitled for deduction O of the Act in respect of additional income declared for u/s 80-O assessment year 1996-97 1996 and 1997-98, which might be considered at the time of the assessment assessmen for block period.
6. We note that that in the disclosure made during the course of search proceedings, the assessee offered undisclosed income of Rs.2,31,59,273/- as erroneous claim of deduction u/s 80-O 80 of the income for AY 1996-97.
Act which was made in regular return of income 1996 However, while filing the return of income for block period, same was not declared for the purpose of undisclosed income. The assessee contended that in regular return of income filed for AY 1996-97 and 1997-9 e Act on brokerage 98, deduction u/s 80-O of the commission income received in convertible foreign exchange was claimed on gross ross basis (after reducing only the expenses incurred in foreign currency), following the finding of the Tribunal in ITA No. 1850 and 1851 of 1991 in the case of the assessee for assessment year 1987-88 198 and 1988-89. In the said case Tribunal held that only the expenses incurred in foreign currency were to be deducted from the gross foreign currency earning for the purpose of which deduction u/s 80-O working out net foreign exchange on which 80 was M/s J.B. Boda & Co. Pvt. Ltd. 12 IT(SS) No. 580/M/2004 & 18/M/2010 to allowed. However, due to subsequent decision of the Special Bench of the Tribunal in the case of M/s Petroleum International ltd vs DCIT Spl Range-9 9 in ITA No. 9882/Mum/95, where it is held that deduction u/s 80-O 80 should be allowed wed on net basis i.e. after reducing expenses incurred in India also, the assessee was advised to claim said deduction u/s 80 80-O of the Act on net basis i.e. after reducing expenses incurred in Indian currency in India. The assessee claimed that in view of above, sh C V Seth admitted during the course of search and offered the withdrawal of claim u/s 80 80-O 1996 O in respect of AY 1996-97. During he assessee contended that this item of assessment proceedings, tthe disclosure was not falling under definition of the 'undisclosed income' and therefore, the assessee did not declare the said income for the purpose of the return of the block period. The Assessing Officer rejected the said claim of the assessee regarding claim of O of the Act on net basis vis-à--vis gross basis. deduction u/s 80-O According to the Assessing officer, the definition of the undisclosed income as amended by the Finance Act, 2002 include any expenses, deduction or allowance Act, which is found to be llowance claimed under this Act, false.. This amendment w was as introduced with retrospective effect from 1st July, 1995. Thus, the AO held that this deduction u/s 80 80- 97 was claimed falsely, hence to be treated as O for AY 1996-97 undisclosed income. The Ld AO in para 17 of the assessment order M/s J.B. Boda & Co. Pvt. Ltd. 13 IT(SS) No. 580/M/2004 & 18/M/2010 comput the disallowance of deduction u/s dated 07.04.2004, computed u 80- O of the Act as under:
Gross Receipt -- Rs.12,78,73,843 Add: Receipt in Foreign Exchange -- Rs.11,18,53,134 Less: Expenses in Foreign exchange Rs.1,92,64,686 Net Receipt of Foreign exchange Rs.9,25,88,448 Net foreign exchange earned as 72.40% % of gross receipt 72.40% of Gross total income Rs.4,57,40,152 (i.e. 72.40% of Rs.6,31,77,006/-) Rs.6,31,77,006/ The amt. eligible for deduction Rs.2,28,70,076 u/s 80-O 80 @ 50% of above The deduction claimed by the Rs.4,62,94,224 assessee Less: Amount eligible for deduction Rs.2,28,70,076 u/s 80-O 80 Amount of deduction to be Rs.2,34,24,148 withdrawn Undisclosed income on account of erroneous deduction ofRs.2.34.24.148/ is added to the undisclosed claimed ofRs.2.34.24.148/-
income disclosed by the assessee."
assessee.
6.1 Further, the Assessing Officer also rejected the claim of the 80 O of the Act in respect of undisclosed assessee for deduction u/s 80-O Rs.11,73,76,489/- declared from non-moving income of Rs.11,73,76,489/ non long standing creditors. According to the Assessing Officer, no outstanding deduction was available to the assessee under provisions of section 158BC against undisclosed income. The relevant para of the order of the Assessing Officer is reproduced as under:
25. Further, section 158BC although part of a taxing "25.
statue, imposes no charge on the subject but deals merely with the machinery of assessment and in interpreting a M/s J.B. Boda & Co. Pvt. Ltd. 14 IT(SS) No. 580/M/2004 & 18/M/2010 provision of that kind, the rule, is that construction should be preferred which makes the machinery workable. Since the proceeding under section 158BC are for the benefit of the revenue and not an assessee and are aimed at gathering the 'undisclosed income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceeding at the instance of the assessee, thereby making the machinery unworkable.
26. Further, in proceedings under Block assessment the jurisdiction of the assessing officer is confined to only to calculate the undisclosed income as defined in sec.
B(b) and does not extent to revising, reopening or 158B(b) reconsidering the whole assessment or permitting the assessee to agitate questions, which have been decided in the original assessment proceedings. In other words assessing officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not subject matter of Block assessment.
7. On further appeal, the Ld. CIT(A) vide order dated 10.08.2004 allowed the claim of the assessee in respect of deduction deducti u/s 80-O Rs.2,34,24,148/ . According to the Ld. of the Act amounting to Rs.2,34,24,148/-. CIT(A), there is no incriminating material or evidence vis-à-vis vis withdrawal of deduction u/s 80 80-O O of the Act in res respect of 1996-97, claimed in the regular return of income assessment year 1996 filed and allowed by the Assessing officer u/s 143(1) of the Act, therefore, the Assessing Officer was not justified in treating the same as undisclosed income of the assessee during block assessment proceedings. The observation of the Ld CIT(A) on the issue in dispute are reproduced for ready reference as under:
M/s J.B. Boda & Co. Pvt. Ltd. 15 IT(SS) No. 580/M/2004 & 18/M/2010
15. In the case of the Assessee, the issue in question is "15.
the claim of deduction W/s. 80-O 80 O of the I.T. Act for the A. 97 which, according to the AO, was falsely Y.1996-97 claimed. In the A.Y.1996-97, A.Y. 97, a detailed computation of the 80 0 had been furnished along with Assessee's claim w/s. 80-0 return of income. In this computation, the foreign exchange earnings had been reduced by the expenditure incurred in foreign exchange and the deduction was clai med on the claimed net earnings so determined. The claim of the Assessee had been accepted and the return had been proceed w/s.
143(1)(a) of the IT. Act. Therefore, all relevant materials on the basis of which the deduction w/s. 80 80-OO had been claimed, were placed on record and were available with the AO to take a decision in the matter while processing the return. It thus appears that, the recomputation of the admissible deduction w/s. 80-0 assessment 80 in the block-assessment proceedings was the result of a change of opinion on o the part of the AO and a difference between the AO and the Assessee in the method of computation to be adopted for determining the sum on which the deduction was admissible. It further appears that is change of opinion came about from the decision of the Special Bench of the Mumbai ITAT in the case of Petroleum India International Mumbai vs. DCIT Special Range 9 in ITA No. 9882/BOM/95 dated 25.06.1999 and the decision of the Mumbai High Court in the case of M/s. Asian Cable Corporation Ltd, 252 ITR 537. It It was on the basis of this order that the assessment in the case of a sister concern, M/s.J.B. Boda Offshore Surveyors and Adjusters Pvt. Ltd. for the A.Y. 1997 98 was first completed and the 1997-98 assessment for the A.Y. 1996-97 97 was reopened and reassessed.
16. In such a situation, it could not be said that the claim 80 0 made by the Assessee in the return of deduction us. 80-0 A.Y.1996 97 and most importantly, in the block-
for the A.Y.1996-97 block assessment proceedings, was patently false. It also could not be said that the Assesse Assessee e had failed to disclose or would not disclose any information or material, which were relevant or critical for the computation of the admissible deduction under the said section. Consequently, once a claim of deduction could not be said M/s J.B. Boda & Co. Pvt. Ltd. 16 IT(SS) No. 580/M/2004 & 18/M/2010 to be false, it could not be brought within the purview of could the definition of undisclosed income us. 158B(b) of the I.T. Act. And hence, it could not be a subject matter of the block-assessment assessment proceedings.
17. On the other hand, there was no incriminating material ce found in course of the search, nor was there or evidence any information available with the AO which would confirm or even indicate that, the Assessee's claim of deduction us. 80-0 80 0 for the said assessment year covered by the block period, was fraudulent or was base block-period, based on incorrect or even incomplete information. Thus, in the absence of any evidence, neither could the claim of 80 0 be treated as a false claim nor could deduction us. 80-0 the difference in the claim of the Assessee and the deduction computed by the AO, be treated treated as the undisclosed income of the Assessee as contemplated u/s. 158BB(1) of the I.T. Act
18. Section 158BA (1) lays down the basis of a special procedure for assessment of search cases, which is the XIV According to this section, subject matter of Chapter XIV-B se where a search has taken place w/s. 132 or any books or documents have been requisitioned ws.132A then, "the Assessing Officer shall proceeded to assess the undisclosed income in accordance with the provisions of this chapter," This undisclosed inco me is to be assessed at income a special rate as specified in section 113, as provided for section (2) to section 158BA. With the undisclosed by sub-section income being the lone subject matter of this Chapter, section 158BB provides the method of computation of undisclosed Sub section (1) to sed income for the block period. Sub-section this section clearly says that "The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing officer..." It is therefore, absolutely clear that the A.O, while completing the block assessment has to confine himself only to the undisclosed income of the block period, M/s J.B. Boda & Co. Pvt. Ltd. 17 IT(SS) No. 580/M/2004 & 18/M/2010 and this undisclosed income is to be computed only on the basis of evidence found as a result of search us. 132 of the IT.Act or the requ isition of books of account u/s.
requisition 132A."
7.1 The Ld. CIT(A) further relied on the various decisions of the Hon'ble Courts on the issue issue-in-dispute dispute and deleted the said addition made by the Assessing Officer observing as under:
27. In the case of the Assessee, all relevant particulars regarding the earning of the income in foreign exchange and the expenditure incurred in earning such income had not only been recorded in the regular books of account but had also been disclosed for Income-tax S tax purposes. Simply nference regarding the because the AO drew an adverse inference Assessee's claim u/s. 80-O on such income, the same could not be treated as undisclosed. On the other hand, vidence found in course of the search, nor there was no evidence was any information gathered b byy the AO or available with him, to empower him to draw any presumption regarding the falsity of the Assessee's claim. The only evidence, if it could be treated so, was in the form of the statement of Shri C.V. Sheth (Advisor of Accounts) of the group who hadh stated in course of the search that, the claim of deduction us. 80-OO in earlier years had been erroneous. As different Courts have held, a statement made at the time of the search cannot be held to be sacrosanct and the Assessee would be well within his right to change his statement provided the change is backed up by concrete facts. On the other hand, the onus would be on the AO to prove that the changed position was not correct and that the original statement should hold good. In the case of the Assess Assessee, the original statement made by the Advisor of Accounts block returns filed by was effectively retracted through the block-returns the different entities of the group. And, as the facts on record have shown, and which have been discussed in this order in considerable detail, there was absolutely no merit in the statement made by Shri Sheth. It was therefore, beyond the scope of the powers vested with the AO under the provisions of Chapter XIVB, to recompute th the M/s J.B. Boda & Co. Pvt. Ltd. 18 IT(SS) No. 580/M/2004 & 18/M/2010 admissible deduction u/s. 80-O 80 and thereby, treat the difference ference as the undisclosed income of the Assessee for the A. Y. 1996 1996-97, covered by the block-period.
Decision
28. In view of the above detailed discussion, it is held that, assessment order failed to establish that the the block-assessment claim of the Assessee us. 80-O of the IT. Act for the A. Y. 97, was false. There was no evidence available with 1996-97, the AO to prove the falsity of the Assessee's claim. All relevant materials necessary for deciding on the deduction admissible w/s.80-O w/s.80 O were already on record and were we available to the AO in course of the regular assessment proceedings for the said assessment years. Therefore, there was absolutely no basis for either treating the claim of the Assessee as representing his undisclosed income u/s. determining the undisclosed income s. 158B(b) or for determining under the provisions of section 158BB(1) of the I.T. Act. Consequently, the addition of the sum of Rs.2,34,24,148/-
Rs.2,34,24,148/ A.Y.1996 97 being the difference hetween the claim for the A.Y.1996-97 of the Assessee and the amount computed by the AO, will wil stand deleted."
deleted.".
7.2 Further, regarding the claim of deduction u/s 80-O 80 of the Act in respect of undisclosed income of Rs.11,73,76,489/ Rs.11,73,76,489/-, the Ld. CIT(A) referred to the CBDT Circular No. 8 of 2002 dated 27.08.2002 and held that said Circular provided for allowance of Chapter-VIA of the Act, while calculating the deduction under Chapter undisclosed income for the block period and directed the Assessing Officer to take action for allowing the said deduction. The relevant finding of the Ld. CIT(A) is reproduced as under:
u "Findings:
M/s J.B. Boda & Co. Pvt. Ltd. 19 IT(SS) No. 580/M/2004 & 18/M/2010
32. I have carefully considered the view taken by the A.O as well as the Assessee's submissions. To begin with, I find some contradiction in the position taken by the A.O. On one hand, he recomputed the deduction admissible 97 and thereby, made under section 80-O for the A.Y.1996-97 an addition on account of excess claim to the extent of Rs.2,34,24,148/ . On the other hand, he took the view, Rs.2,34,24,148/-.
while rejecting the Assessee's claim of similar deduction on the returned undisclosed income, that only onl that deduction or relief could be allowed in block assessment block-assessment which was the subject matter of enquiry and the subsequent determination of undisclosed income. In taking such a position, he on one hand allowed deduction ws.80 ws.80-
O for the A.Y. 1996-97
1996 'even though
hough the quantum of
deduction was reduced by him, while on the other hand, he rejected the Assessee's claim of similar deduction on the undisclosed income declared by the Assessee. The fact of the matter is that, the undisclosed income declared by the Assessee essee was automatically a subject matter of the assessment proceedings and since, such income as block-assessment confessed by the Assessee had been earned in convertible w/s.80 0 was clearly foreign exchange, deduction w/s.80-0 admissible. Apart from the reference made by the th Assessee to the Explanation below section 158BB(1) and the proviso to the same section, which were amended by the Finance Act of 2002 with w.r.e.f. 1.7.1995, and which clearly provides for allowing deduction under Chapter VIA aggregating or computing the total for the purpose of aggregating income or loss which is to be adiusted against the block assessment undisclosed income determined in block-assessment proceedings, reference may also be made to CBDT's Circular No.8 of 2002 dated 27.8.2002 wherein the amendment to section 158BB has has been clarified in para 61.7.1 of the Circular as under :
he Finance Act, 2002, has carried out amendments to The clarify that the aggregate total income is to be computed in accordance with the provisions ofthe Act including the provisions of Chapter VI-A VI nd that for the purpose of and computing deductions under Chapter VI-A VI A effect shall be given to set off of brought forward lossess or unabsorbed deprecation. "
M/s J.B. Boda & Co. Pvt. Ltd. 20 IT(SS) No. 580/M/2004 & 18/M/2010 32.1 In such a situation where both the amended provisions of the Explanation as well as the proviso to section 158BB(1) as well as the clarification issued by the CBDT through the aforesaid circular, clearly provide for VI A, and which the allowance of deduction under Chapter VI-A, is further reinforced by the provisions of section 158BH, there remains no scope scope for denial of the deduction W/s.80- W/s.80 0 on the undisclosed income declared by the Assessee in the block-return.
return.
Decision:
33. In view of the above discussion, it is held that the Assessee was fully entitled to the deduction w/s.80-O w/s.80 of the IT. Act, on the undisclosed income of Rs.11,73,76,489/ declared in the block return. The Rs.11,73,76,489/-
A.O is directed to take action accordingly."
(Emphasis supplied externally) 7.3 Against the said order of the Ld. CIT(A) dated 10.08.2004, 10.08.2004 both the Revenue and the assessee preferred appeal before the Tribunal. The Tribunal decided the appeal of the Revenue on 9/4/2008 , which subsequently,, on a miscellaneous application filed by the Revenue has been recalled vide order dated 19/12/2008 in MA No. No 509/M/2008 and relevant part of which we have already reproduced above.
he Assessing Officer on 1/4/2005 gave effect to the order of 7.4 The the Ld. CIT(A) dated 10.08.2004 and allowed the deduction u/s 80- 80 Rs.4,09,18,041/-,, notwit O of the Act amounting to Rs.4,09,18,041/ notwithstanding the fact department had not accepted the decision of the CIT(A) dated 10/08/2004. Simultaneously, the Assesing Officer approached to M/s J.B. Boda & Co. Pvt. Ltd. 21 IT(SS) No. 580/M/2004 & 18/M/2010 the ld CIT(A) with an application seeking rectification of apparent mistake in the order dated 10/08/2004 of the CIT(A). The Ld CIT(A) issued a show cause use notice to the assessee and after giving an nity of being heard, the Ld. CIT(A) vide order dated opportunity 26/02/2008 rectified the order dated 10.08.2004 of the CIT(A) and the finding of the CIT(A) in order dated 10/08/2004 that assessee 80 O of the Act in respect of the was entitled for deduction u/s 80-O undisclosed income of Rs.11,73,76,489/-
Rs.11,73,76,489/ , was withdrawn and further direction was issued to the Assessing Officer to verify whether the conditions onditions laid down u/s 80-O 80 O of the Act were fulfilled by the assessee in respect of its claim of deduction. The relevant finding of the Ld. CIT(A) in order u/s 154 dated 26.02.2008 is reproduced as under:
"8. I have carefully considered the written submis submissions on record and the order of my predecessor CIT(A), dated 10.08.2004. My predecessor CIT(A) has given a finding in the appeal order mentioned above, that the appellant is entitled to deduction us.800 of the I.T.Act, on the undisclosed income of Rs.1173764891-
Rs.1173 declared in the block return but he did not verify himself or by way of a remand report, whether the conditions laid down in tion 800, have been met by the appellant. In my view, section this is a mistake apparent from record, and the AO is directed to verify whether the conditions laid down in section 800 were fulfiled by the appellant."
appellant.
7.5 Further, an appeal filed by the assessee, against the order dated 26/02/2008 of the ld CIT(A) challenging the validity of M/s J.B. Boda & Co. Pvt. Ltd. 22 IT(SS) No. 580/M/2004 & 18/M/2010 been rejected by the Tribunal rectification action of ld CIT(A), has been on 23/01/2009 in IT(SS)A No. 40/Mum/2008.
7.6 Consequent to the order of the Ld. CIT(A) dated 26.02.2008, the Ld. Assessing Officer after giving the opportunity to the assessee and after verification, withdrawn the claim of deduction u/s 80-O 80 of the Act on 30/07/2009, observing as under:
5.In view of the above facts and circumstances of the caseand on perusal of block return of income alongwith various statements recorded u/s. 132(4) of the IT. Act during ng the course of search proceedings reveals the following :-
(i)The undisclosed income declared by the assessee companyin its return for the block period consisting of credit balances in US $ and UK Pound amounting to Rs.
10,03,72,942/ appearing in the balance 10,03,72,942/- lance sheet right from prior to the block period which was never brought to India by the assessee company. Further an amount of Rs. 1,66,00,000/ which consists of dues payable to Indian 1,66,00,000/-
Indian Insurance Companies which were showing as ceased to exist (Refer answer to question liabilities have ceased No. 10 of the statement of Shri C.V.Sheth recorded on 8.11.01) )During the course of search operation statement
(ii)During us.132(4) of the Act were recorded. When the questions were asked pertaining to long standing credits in their accounts Shri C.V. Sheth, Sr. Executive Director of the assessee company, in his statement u/s.132(4) dated 8.11.2001 admitted that the credit entries included in the total liabilities in the balance sheet were outstanding for a long period of time existent" i.e. had tim had become"non-existent"
ceased to exist.
M/s J.B. Boda & Co. Pvt. Ltd. 23 IT(SS) No. 580/M/2004 & 18/M/2010
(iii) ShriB.J.Boda, Chairman of the J.B.BodaGroup of Companies. confirmed this statement of Shri C.V. Sheth, in response to question No. 2 of his statement dated 9.11.01.
(iv)In the course of post search enquiries the assessee wasasked to provide a partywise disclosure of the non existent and outstanding liabilities that have become non-existent have ceased to exist. Shri C.V.Sheth the Sr. Executive Director of the Company has provided the said break-upbreak vide his lette letterr dated 15.1.02 and the same has been confirmed by Shri B.J. Boda in response to question No. 3 of the statement dated 21.1.02. (The details of break break-up of liabilities are mentioned in this order at Para 4.1.).
The long outstanding non-existent non liabilities or credit balances standing in the balance sheet of the assessee company from the dates prior to 31.3.1995 which had ceased to exist had been declared as undisclosed income in the block return of income.
(vi)The undisclosed income of Rs. 11,73,76,489/ 11,73,76,489/-
represented the foreign currency/Indian currency credit balances shown as outstanding labilities in the balance non existent and had ceased to sheet which have become non-existent exist. By surrendering these non existent and non-moving non-existent non liabilities the assessee company has made only book entry and the same has been written back through the book entries.These amount cannot be considered as amount eligible for deduction u/s. 80-0.
80(vii) The assessee has nowhere established that these foreign currency/Indian currency creditt balances credi represented income eligible for deduction u/s. 80-0 80 of the tax Act, 1961. Assessee was also not able to Income-tax produce necessary certificate from RBI as proof that this amount had been brought into India in convertible foreign exchange as deduction deduct 0 is allowable only on that us. 80-0 part of the eligible income which is brought into India in convertible foreign exchange.
M/s J.B. Boda & Co. Pvt. Ltd. 24 IT(SS) No. 580/M/2004 & 18/M/2010
(viii)) The requisite conditions for allowability of deduction u/s. 80-0 0 of the Income-tax Income tax Act, 1961 in respect of credit balances s in Indian currency has also not been satisfied.
(ix)The undisclosed income of Rs.11,73,76,489/ Rs.11,73,76,489/- is profits chargeable to tax u/s. 41(1) of the Act which cannot be considered as income earned in foreign exchange for the purpose of deduction u/s.80-0 u/s.80 of the Act.
6.For an income to be eligible for deduction us.80-0 us.80 thefollowing conditions have to be satisfied-
satisfied [a]the income should be received by the assessee by way of royalty In fact w.e.f. 1.4.1998 this section has become even more restrictive and only income income received by the assessee from the gist of a foreign state or foreign enterprise for the use outside India of any patent, invention, design or registered trade mark is considered and such income should be received in convertible foreign exchange.
[b]such income should be received in convertible foreign exchange [c]such income should be received within a period of 6 months from the end of previous year.
6.2. As discussed in detail in para 4 of this order, it is the offered additional fact of the case that the assessee had offered income for tax as a result of search on account of long outstanding credit balances which were non non-existent. These amounts were not received / receivable by a tie, sine assessee from the Govt. of Foreign State or Foreign Enterprises, in consideration for the use outside India of any patent, invention, designor registered trade mark and such income is received in convertible foreign exchange in India or having been received in convertible delanange outside India, or having been converted into into convertible foreign exchange outside India is brought into India by or behalf of theassessee in accordance with any law for the time being in force for regulating payments and dealings in M/s J.B. Boda & Co. Pvt. Ltd. 25 IT(SS) No. 580/M/2004 & 18/M/2010 foreign exchange but were in fact liabilities payable by the assesse se which ceased to exist i.e. which was no longer payable by the assessee to various parties.
6.3. The fact that these liabilities which had ceased to exist and which had been offered as additional income 80 0 is also evident was not eligible for deduction u/s. 80-0 ev from the fact that the assessee has Itself not claimed the deduction in its computation of total undisclosed income filed with the Block return.
6.4. The assessee has also not furnished a certificate in the prescribed form No. 10HA along with the Return Ret of Income certifying that the deduction has been correctly claimed in accordance with the provisions of Section 80-0.
80Hence, even the condition of 2nd proviso to Section 80 80-0 has not been fulfilled by the assessee.
6.5 From the above, it is seen that tthe he additional income (cession of liabilities) offered for tax in the block return is itself not eligible for deduction u/s.80-0.
u/s.80 0. None of the conditions laid down in Section 80-080 0 has been fulfilled by the assessee. Therefore, the assessee is not entitled for fo deduction u/s.80-0 u/s.80 of the I.T.Act, 1961.
para 4, 5 & 6 it is
7.In view of the findings given in para-4, clearthat the undisclosed income of Rs.11,73,76,489/ Rs.11,73,76,489/-
offered for tax during the course of search and seizure operation by the assessee company on account of non-
non moving credit balances appearing in the existent and non-moving Balance Sheet as on 31.3.1995 which is prior to block period is not at all eligible for claiming any deduction us. 80-00 of theI.T. Act as neither the income is eligible for u/s.80 nor has the assessee company fulfilled deduction u/s.80-0 any of the conditions laid down in Section 80-0 80 for claiming such deduction. Accordingly the deduction Rs.4,09,18,041/- vide order giving allowed amounting to Rs.4,09,18,041/ effect to CIT(A)'s order passed on 1.4.2005 is hereby withdrawn.
8.Subject to the above remarks, total income of theassessee is computed as under:-
under:
M/s J.B. Boda & Co. Pvt. Ltd. 26 IT(SS) No. 580/M/2004 & 18/M/2010 Total undisclosed income as per Rs. 7,64,58,448/-
7,64,58,448/
order giving effect dated
01/04/2005.
Add: Deduction wrongly allowed Rs.4,09,58,448/-
Rs.4,09,58,448/
withdrawn as discussed above.
Assessed undisclosed income, as Rs.11,73,76,489/-
Rs.11,73,76,489/
declared by the assessee
8. Aggrieved with the above finding of the Ld. Assessing Officer, the assessee filed appeal before the Ld. CIT(A), CIT(A), who upheld the disallowance in order dated 31/12/2009 observing as under:
9. I have considered the facts and submissions. I have
"9.
gone through the issue. The issue to be decided is whether u/s.80-0 on the the appellant is entitled tothe deduction u/s.80- outstanding credit balances which are offered to tax by the assessee essee consequent to search operations or not. The A.O. has very categorically has held that the appellant company is not entitled for the deduction /s.80-
/s.80-O
/s.80 of the
I.T. Act for the following reasons:
1. The assesse had offered additional income for tax as a result of search on account of long outstanding credit balances which were non existent. These amounts were not received/receivable by the assessee from the Govt. of Foreign State or Foreign Enterprises, in consideration for the use outside India of any p atent, invention, design or patent, registered trade mark and such income is received in convertible foreign exchange in India or having been received in convertible foreign exchange outside India is brought into India by or behalf of the assessee in accordance wi th any law for the time being in force for with regulating payments and dealings in foreign exchange but were in fact liabilities payable by the assessee which ceased to exist i.e. which was no longer payable by the assessee to various parties.
2. The fact that these liabilities which had ceased to exist and which had been offered as additional income was not eligible for deduction u/s.80-O u O is also evident from the fact M/s J.B. Boda & Co. Pvt. Ltd. 27 IT(SS) No. 580/M/2004 & 18/M/2010 that the assessee has itself not claimed the deduction in the computation of total undisclosed undisclosed income filed with the Block return
3. The assessee has also not furnished a certificate in the prescribed form No.10HA along with the return of income certifying that the deduction has been correctly claimed in 8 0. Hence, accordance with the provisions of section 80-0.
80 0 has not even the condition of 2nd provision to Section 80-0 been fulfilled by the assessee."
80 0 is different from section 80HH and 80I. 9.1Section 80-0 Section 80HH and 801 deals with the deductions based whereas deduction on the income from the undertakings whereas u/s.80-OO is based on the certain income received from foreign enterprises which are listed in section 80 80-0. In section 80HH and 80-80 if the income determined during the assessment is higher, the appellant company may be 0 of the IT.
entitled to a higher deduction. But in section 80-0 Act if any further income is added in the assessment then such income will be entitled to deduction under section 80- O only if the following conditions are satisfied:
(i) income should be an income listed in sectio section 80-0 of the IT. Act.
(ii) The income should have been received in convertible foreign exchange.
9.2 During the appellate proceedings the assessee company was requested by me to prove that the outstandingsgs which were offered as income are commission recei pts for technical services done. Inspite of receipts sufficient time given, the appellant could not prove that the outstanding amounts were commission earned by the assessee company.
Further, it is seen that the income now offered and assessment was not all brought into assessed in the block assessment India within the time allowed by the RBI. The income assessed does not satisfy the condition (i) listed above and M/s J.B. Boda & Co. Pvt. Ltd. 28 IT(SS) No. 580/M/2004 & 18/M/2010 u/s.80 O of the I.T. hence it is not eligible for deduction u/s.80-O Act.
Further, these are the credit balances outstanding outstandin in the name of various foreign parties i.e. the amounts are payable by the appellant company to foreign parties and hence there is no question of receiving these amounts in India in convertible foreign exchange by the assessee company.
I am in full agreement agreement with the .O.'s observations/findings in the impugned order. In view of the A.O.'s findings and coupled with my above observations, I am fully convinced that the income offered in the block assessment is not the income which are listed in Section Section-80-O of the IT.
Act and the income offered in the block assessment is not at all entitled for deduction u/s.80 0 of the I.T. Act.
u/s.80-0 9.3 I uphold the A.O.'s action."
action.
8.1 Aggrieved with the above finding, the assessee is before the Tribunal by way of appeal in IT(SS)A No. 18/Mum/2010, raising grounds, which are reproduced as under:
1 a) The learned CIT (A) erred in upholding the action of the Assessing Officer in withdrawing deduction us. 80'' 4,09,18,041/ on the ground that the appellant of Rs. 4,09,18,041/-
companyny had not fulfilled any of the conditions laid down in Income TaxAct 1961 to claim deduction under section 80'0
b) He denied the deduction us. 80'0' of the Income Tax Act, 1961 as according to him the appellant company had:
us. 80'' in the computation of i. not claimed the deduction us.
total undisclosed income filed with the Block Return without appreciating the appellant's note to claim the deduction in the Return of Income in the absence of assessed blockincome M/s J.B. Boda & Co. Pvt. Ltd. 29 IT(SS) No. 580/M/2004 & 18/M/2010 not complied ii. the second provision to section 80°' was not with by the appellant without appreciating that the same was inserted only by the Finance Act, 1999 w.e.f. 1.6.1999 and hence not applicable for A.Y. 1996-97 1996 & 1997-98.
iii. the sundry creditors written back and offered to tax were liabilities payable by the appellant company which ceased to exist without appreciating the fact that the same were non-trading trading liabilities which were never debited to the profit and loss account ofof the appellant and it was not a case that all of them ceased to exist.
iv. the appellant company had failed to prove the outstanding amounts as commission earned for technical services even when it was placed before him that the credit balances of reinsurance /ceding companies written back and offered to tax could only partake the character of brokerage income i.e. the only business income of the appellant and eligible for deduction us. 80'0'.
8.2. Before us, the assessee has filed on additional ground gro vide undated letter, which is reproduced as under:
On facts and in the circumstances of the case and in law, the order passed bu Assessing Officer dated 23.06.08 is invalid and bad in law being contrary io directions of (Appeals) in the order Commissioner of Income Tax (Appeals) dated21.02.08 passed us 154 of the ITA and hence liable to be set aside"
8.3 The assessee has also filed another additional ground vide letter dated 20/10/2022, which is reproduced as under:
On the facts and circumstances of the case and in law, "On the alleged undisclosed income of Rs. 11, 73,76,489, being cessation of liabilities is not chargeable to tax in view of the judgement of the Hon'ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1).
M/s J.B. Boda & Co. Pvt. Ltd. 30 IT(SS) No. 580/M/2004 & 18/M/2010 assessee craves leave to add, alter, amend, or The assessee withdraw any of its grounds of appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing."
hearing.
9. We have heard rival submission of the parties on the th issue-in-
dispute and perused the relevant material on record, record including paper book filed by the assessee containing pages 1 to 286.
9.1 As far as revised ground Nos. 1 to3 of the appeal of the Revenue are concerned, the ld Counsel in his written note submitted as under:
3. Insofar as the addition of Rs. 2,34,24,148 is "3.
concerned, it is submitted that the same arose due to the fact that the assessee had claimed a deduction of 80 0 in its return of income for the Rs.4,62,94,224 U/s. 80-0 97, by reducing only expenses incurred in A.Y. 1996-97, foreign currency from the total foreign commission (para 6 of block assessment order), whereas the AO sought to allow a deduction of Rs. 2,28,70,076 only, after further reducing expenses incurred in India (para 17 of bloc block assessment order). It was submitted before the AO and the CIT(A) that the basis of the assessee's claim were the decisions of the Tribunal in its own case for the AYs 1987- 1987 1988 89, wherein it was held that the deduction 88 and 1988-89, gross basis. It was only by virtue was to be granted on a gross of the subsequent reversal of law by the Special Bench in the case of Petroleum India International vs. DCIT (ITA 9882/Bom/95) and the Bombay High Court in CIT vs. Asian Cable Corporation Ltd. (2002) (262 IT 537), wherein it was held that deduction is to be allowed on net basis that the addition was made. In this regard, it is submitted that the difference in interpretation of law cannot lead to an income being classified as 'undisclosed income' as defined in section 158B(b). More particularly, the AO's allegation that this difference in interpretation has led to the assessee's claim for deduction to be 'false' is incorrect M/s J.B. Boda & Co. Pvt. Ltd. 31 IT(SS) No. 580/M/2004 & 18/M/2010 as the Supreme Court has held in the case of Cement Marketing Co. of India Ltd. vs. ACT (1980) (124 ITR 15) 1 that for a claim to be 'false', it has to be demonstrated that the basis of the claim was malafide. In the instant case, it cannot be said that the assessee's claim was based on any malafide intention as the basis of making such claim was the order passed passed by the Tribunal in its own case for the AYs 1987-88 1987 and 1988-89. Basis the aforesaid facts, the CIT(A) in his order dated 10th August, 2004 allowed the issue in assessee's favour. The Department's appeal against the said order of the CIT(A) was dismissed dismisse by the ITAT in its order dated gth April, 2008 (pg. 83 of paperbook), although the said order was recalled subsequently by the ITAT in its order dated 19th December, 2008 (pg. 141 of the paperbook) as the revised grounds filed by the Department with respect respect to the second addition were not considered. Nevertheless, the ratio of the Tribunal's decision while deciding the issue in the assessee's favour, which was based on the judgements of the High Court has remained the same as the said legal position has not not been reversed subsequently.
4. It is further submitted that the basis of making this addition was only the statement of Mr. CV Sheth and no incriminating material was found in the course of the search, which could lead to such an addition. In this d, reliance is placed on the judgement of the Delhi regard, High Court in the case of CIT vs. Harjeev Aggarwal (2016) (290 CTR 263) wherein it was held that a statement recorded under section 132 of the Act without any other material found in the course of the search search cannot constitute incriminating material for making an addition in a block assessment under section 158BB of the Act.
Act."
9.2 We find that Tribunal while adjudicating ground No. 1 and 2 of the appeal in order dated 9/04/2008 (which which has been subsequently ecalled on 19/12/2008) recalled had adjudicated the issue relying the finding of the Tribunal dated 22/02/2008 in the case of M/s JB M/s J.B. Boda & Co. Pvt. Ltd. 32 IT(SS) No. 580/M/2004 & 18/M/2010 Boda Surveyors Pvt. Ltd in IT(SS)A No.579/Mum/2004, who was also subjected to search proceedings and similar claim of withdrawal off section 80-O 80 O of the Act in respect of one of the assessment year of block period was though offered during the course of the search proceedings, proceedings however same was not declared for the purpose of return filed for the block period. The relevant ground raised and finding of the Tribunal in the case of M/s J B Boda Surveyors P Ltd (supra) is reproduced as under:
GROUNDS:
"GROUNDS:
"I. On the facts and circumstances of the case and in law. the learned CIT(A) erred in deleting the (Rs.22,47,563/ for the A.Yr. 1996-97 additions of (Rs.22,47,563/- 1996 and of Rs. 40,94,623/-for 40,94,623/ 98) made on the AY. 1997-98) account of excess deduction claimed us. 80-0 80 of the Income tax Act, 1961.
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the additions of the sums of Rs.22,47,563%- for the A. Yr. 1996-97 1996 for the AX. 1997-
and of Rs.40,94,623/-for 1997 Rs.63,42,186/ without appreciating 98 totaling to Rs.63,42,186/-
that the Finance Act, 2002 has amended the relevant provisions retrospectively w.e.f. 17.1.1995 to provide that any expense, deduction or allowance any claimed, which is found false shall be included in the undisclosed income."
FINDINGS:~ "4. After hearing the learned Counsel for the assessee, we de not find any merit in the grounds section 1588(b) raised by the Revenue. No doubt, section was amended by Finance Act, 2002 with retrospective effect from it July, 1995 by which the M/s J.B. Boda & Co. Pvt. Ltd. 33 IT(SS) No. 580/M/2004 & 18/M/2010 scope of the expression, "undisclosed income" was enlarged so as to bring the cases within the net of undisclosed income where in excess deduction or allowance wance claimed under the Act is found to be false. However, computation of undisclosed income has to be made u/s. 158BB which provides that undisclosed income shall be computed comput in accordance with the pro visions of the Act on the provisions basis of evidence found as a result of search as. requisition isition of hooks of accounts, or oother documents and such, other materials"
materi nformation, which
add, information,
are available with the Assessing Officer and relatable to such evidence Therefore, both the provisions have to be read together. If If both the provisions are read together, then the assessment can be made on account of undisclosed income only an the basis of material found in the course of search or other evidence related to the evidence found in the course of search. Consequently, the falsity of the claim of the assessee must have nexus with the evidence found in the course of search: In the present case, no material whatsoever was found in the course of search which can indicate the falsity of the claim of the assessee. The word 'false' presupposes the fraudulent act an the part of the assessee. The perusal of the record shows that the claim of the assessee was based on the earlier decision of the Tribunal in the case of J.B. Boda and Company Put. Ltd. and the Assessing Officer had alsoo allowed such claim u/s. 143(3) as is apparent assessment pertaining to from the original order of assessment Assessment Year 1996 mputation of 1996-97: The computation income also shows that assessee had specifically mentioned that the claim of the assessee was based decision of the Tribunal. Therefore, the claim on the decision of the assessee was bonafide and cannot be considered as false. Therefore, in our opinion, the learned CIT(A) was justified in deleting the addition made by Assessing Officer. The order of learned CIT(A) is therefore therefo upheld."
M/s J.B. Boda & Co. Pvt. Ltd. 34 IT(SS) No. 580/M/2004 & 18/M/2010 9.3 Thus, the Tribunal (supra) held that there was no falsity in the 80 O of the Act made on claim of the assessee for deduction u/s 80-O gross receipt basis in regular assessment proceedings. The parties submitted that the decision of the Tribunal is still in operation and not reversed by the Hon'ble High Court. In the instant case also, the 80 O of the Act on gross basis was made in claim for deduction u/s 80-O regular assessment for AY 1996-97 1996 on bonafide belief of issue decided in favour of the assessee by the Tribunal in AY 1987-88 1987 and 1988-89. Since, the issue in dispute in the instant case is identical to the issue decided by the Tribunal in the case of M/s JB efore, respectfully following the Boda Surveyor p Ltd (supra), therefore, finding of the Tribunal (supra) therevised Ground Nos.
No 1 to 3 of the appeal of the Revenue are dismissed.
10. As far revised ground round No. 4 and 5 of the appeal of the Revenue 80 O of the Act in respect of relating to the deduction u/s 80-O Rs.11,73,76,489/ are concerned, those are undisclosed income of Rs.11,73,76,489/-
however due the arising from order dated 10.08.2004 of Ld. CIT(A),however subsequent rectification of the said order of the Ld. CIT(A) by the order dated 26.11.2008 of CIT(A), which has been een further upheld by the Tribunal vide order dated 23/01/2009 , same are rendered irrelevant. The said deduction u/s 80-O has already been withdrawn by the Assessing Officer vide his order dated 23/06/2008, which has been further upheld by the Ld. CIT(A) in M/s J.B. Boda & Co. Pvt. Ltd. 35 IT(SS) No. 580/M/2004 & 18/M/2010 order dated 31.12.2009 therefore, those grounds of the Revenue are rendered infructuous, hence same are dismissed.
11. Now we come to the ground groundss and additional grounds of appeal of the assessee.
11.1 The first additional ground raised was not pressed before us and therefore same is dismissed as infructuous.
.2 The second additional ground raised being legal in nature and 11.2 does not require investigation of fresh facts and hence admitted for adjudication in view of settled principles as held in the case of Hon'ble Supreme Court in the case of NTPC Ltd reported in 220 ITR 283(SC).
12. In the grounds, the assessee is aggrieved by deduction u/s 80- 80 Income tax Authorities. The ground O of the Act withdrawn by the Income-tax No. 1 is general in nature nature,, hence does not require specific adjudication. In the ground No. 1b(i), the assessee has claimed that Ld. CIT(A) has not appreciated that the claim for the deduction was made in the return of income filed for the block period with a separate note.
e find that the Assessing Officer has made only comment in 12.1 We respect of claim made by a foot note to the return of income income, to support his observation that assessee had not seriously claimed M/s J.B. Boda & Co. Pvt. Ltd. 36 IT(SS) No. 580/M/2004 & 18/M/2010 this deduction in the return of income. The finding of the Assessing Officer is reproduced as under:
6.3. The fact that these liabilities which had ceased to "6.3.
exist and which had been offered as additional income 80 O is also evident was not eligible for deduction u/s. 80-O from the fact that the assessee has itself not. claimed the undisclosed income deduction in its computation of total undisclosed filed with the Block return."
return.
12.2 It is not the case that in the block return no undisclosed income was declared and the assessee wanted to make claim against any future income to be assessed by the Assessing Officer but in the case assessee had already declared undisclosed income and did not claim deduction in the return of income and claim was left open for the Assessing officer to decide at his discretion. However, we find that admissibility of claim has been accepted by the Ld. CIT(A) in order dated 26/02/2008 and matter was restored to the AO for verifying the eligibility of conditions of section 80 80-O of the Act . The CIT(A) in impugned order dated 31/12/2009 has not given any specific finding on this issue and therefore this ground is infructuous and dismissed accordingly.
13. As farr as second ground grou No. 1(b)(ii) of the assessee regarding not filing of a certificate in prescribed Form No. 10HA of the Act income the Ld. Counsel of the assessee has along with return of income, submitted that said condition has been prescribed by way of M/s J.B. Boda & Co. Pvt. Ltd. 37 IT(SS) No. 580/M/2004 & 18/M/2010 nce Act, 1999 w.e.f. 01.06.1999 and hence same is not Finance applicable for assessment year 1996 98.
1996-97 and 1997-98.
80 O is reproduced as under:
13.1 The relevant part of the section 80-O Provided further that no deduction under this section "Provided shall be allowed unless the assessee furnishes a certificate, in the prescribed form, along with the return of income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section."
section.
13.2 Before the ld CIT(A) the assessee submitted as under:
"7.5 7.5 Further, with regard to A.O.'s observation at para 6.4 of the order that "The assessee has also not furnished a certificate in the prescribed Form No. 10HA along with the Return of Income certifying that the deduction has been correctly claimed in accordance with the provisions of section 80-O.O. Hence, even the condition of 2nd proviso to section 80-0 0 has not been fulfilled by the assessee." the appellant submitted that second proviso to section 80 80-0 Form 10HA was which requires furnishing of certificate in Form inserted by Finance Act 1999 w.e.f. 1.06.1999 whereas 80 0 has been claimed with reference to the deduction u/s 80-0 A.Y. 1996-97 1997 98 included in the Block Period.
97 and 1997-98 Since the prescribed form was not applicable for A.Y. 1996-9797 and 1997-98 1997 the same was not submitted while filing the block return. The appellant submitted that in any case, the benefit of an incentive provision cannot be denied to an assessee merely on account of a technical lapse, if the assessee is otherwise entitled to it in la law."
13.3 With submission, the ld CIT(A) made his ith regards to above submission, observation as under:
3. The assessee has also not furnished a certificate in the "3.
prescribed form No.10HA along with the return of income certifying that the deduction has been correctly claimed cl in M/s J.B. Boda & Co. Pvt. Ltd. 38 IT(SS) No. 580/M/2004 & 18/M/2010 80 0. Hence, accordance with the provisions of section 80-0. even the condition of 2nd provision to Section 80-0 80 0 has not been fulfilled by the assessee."
13.4 However, we are of the opinion that the assessee is claiming this deduction u/s 80-O 80 of the Actt in the return of income filed for the block period and not in any return of income filed for assessment year 1996-97 1996 and 1997-98, and therefore, the provisions of the Finance Act 1999 which have been introduced w.e.f. 01.06.1999 are applicable in respect of claim of deduction u/s 80-O of the Act ct made in the return of income filed for the block Accordingly, we uphold the period from 01.04.1995 to 07.11.2001. Accordingly, finding of the Ld. CIT(A) that assessee has not fulfilled the said condition of proviso to section 80-O 80 of the Act.
14. In ground No. 1(b)(iii) 1( the assessee has contested the finding that the sundry creditors were non-trading non trading liability liabili and never debited to the profit and loss account of the assessee and it was not a case that all of them ceased to exist. The second additional ground raised is also related to the issue that undisclosed income declared is not cessation of liability.
14.1 Regarding the claim of sundry creditors written off, off the ld summariz the submission of the assessee as under:
CIT(A) has summarized
7. In this regard, during the appellate proceedings, the "7.
appellant submitted that the appellant company is engaged in the busines businesss of reinsurance broking. It receives premiums and claims on behalf of its clients - ceding and M/s J.B. Boda & Co. Pvt. Ltd. 39 IT(SS) No. 580/M/2004 & 18/M/2010 reinsurance companies and after deducting its commission/ brokerage therefrom, the balance amounts are required to be paid to reinsurance / ceding companies as the case may be, upon completion of various formalities which take several years as per appellant's experience. It was submitted that for processing the claims and payments, substantial time is taken due to various relating to claims reasons such as receipt of documents relating made by parties and submitting the same to the satisfaction of the reinsuring company for settlement of claim by them etc, thereby resulting in continuing of balances in clients accounts with the assessee company.
debit balances remaining to be So also there would be debit recovered from various companies due to payments made by the assessee company and due to the settlement by insurance companies on net basis (payables less recoveries) as per international practice. It was contended this practice of the assessee company, the last that due to this balance sheet of the assessee company drawn before the date of search i.e. 7.11.2001 showed amounts payable and recoverable pertaining to earlier years. In the search proceedings carried out on the assessee company, pany, the credit balances outstanding were offered as undisclosed income.
7.1 Further, the appellant submitted that credit balances written back by the appellant company had never entered its Profit & Loss Account These credit balances merely represent amounts held by the appellant on behalf of its clients - reinsurance/ceding companies. Therefore, creditor written back in the present case are not in the nature of trade creditors since the appellant had had never claimed deduction or allowance thereof in the past. The commission brokerage income earned out of transactions with such reinsurance/ceding companies which were standing as creditors in the books of the appellant has already been offered to tax and deduction u/s 80-O 80 had been claimed and allowed on such income in the respective years. Further, in the block assessment, AO has treated the entire claim/premium amounts to be the undisclosed income of the appellant. So far as nature of income is concerned, the appellant such undisclosed income M/s J.B. Boda & Co. Pvt. Ltd. 40 IT(SS) No. 580/M/2004 & 18/M/2010 submitted that it can only partake the character of brokerage' income.
7.2 The appellant stated that the undisclosed income of the appellant company can never be treated as profits chargeable u/s 41(1) of the Income Tax Act,Act, 1961 as held by the AO since section 41(1) deals with cessation of trading liabilities whereas creditors written back by the appellant are not trade creditors as explained above. It was submitted that these amounts were held by the appellant company in a fiduciary capacity and therefore the credit balances on such account cannot be compared to trade creditors which amounts if written back come within the scope of provisions of sec. 41(1) of the IT Act 1961. The appellant submitted that as the whole basis of AO's finding is incorrect and without the proper appreciation of facts, the allegation made by the A.O. is ill founded."
ill-founded.
14.2 Before us the ld counsel of the assessee has filed written submission, which is reproduced as under:
"Addition Addition of Rs. 11,73,76,489-
11,73,7 write back of
creditors-
5. Insofar as the aforesaid addition is concerned, the assessee had offered the above sum as undisclosed income in the course of the search on account of the fact that this amount represented creditors, which were outstanding for a long period of time and the assessee did not foresee the possibility of such payables being crystalised into payments. The details of these creditors and the breakup thereof is contained in para 3.2 of the CIT(A) order dated 31* December, 2019. Out of the aforesaid sum payable to 136 insurance/reinsurance companies which was then written back, a sum of Rs. 7,27,35,250 represented sum payable in USD, a sum of Rs. 2,76,37,692 represented sum payable in pounds and represented payables to Indian a sum of Rs. 1,66,00,000 represented companies in rupees. It was submitted before both the lower authorities that the assessee never claimed a deduction for this amount, and, therefore an addition M/s J.B. Boda & Co. Pvt. Ltd. 41 IT(SS) No. 580/M/2004 & 18/M/2010 under section 41 could not be made on the basis of the write back. IIn n fact, the AO (on pg. 4 of his order) and the CIT(A) (on pg. 11 and 14) note this contention of the assessee, and do not dispute it.
6. In this regard, the assessee has four arguments, each of which is without prejudice to and in the alternate to the other i) whether it is income chargeable to tax under the Act?, i) whether it is undisclosed income as per section 158B of the Act?, iii) whether the income can be taxed in the block assessment, only on the basis of the statement recorded under section 132 of the Act, without any incriminating material? and iv) if the aforesaid three questions are answered against the assessee, whether it is eligible for deduction under section 80-0 80 0 of the Act on such income.
Whether it is income chargeable to tax under the th Act?
7. The taxability of write back of creditors can be considered either under section 28(iv) or under section 41 of the Act. Insofar as section 41 is concerned, it is an undisputed factual position that the assessee has not claimed any deduction on accountaccount of such creditors, therefore, the question of taxing the write back does not arise. Insofar as section 28(v) is concerned, it is submitted that as held by the Hon'ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1), for an income to be taxable under section 28(iv), two satisfied i) a benefit must arise in conditions have to be satisfied- the course of the business and ii) such benefit should be in a form, other than money. The first test is satisfied in the benefit has accrued to the assessee in present case as a benefit the course of its business, but the second test, in the humble submission of the assessee, has not been satisfied. As held by the Supreme Court in Mahindra & Mahindra (supra), cancellation of a liability which was ble in cash is tantamount to a cash receipt (para 13) payable and such a benefit cannot be brought to tax under section 28(iv) as the second limb of the section, i.e. 'whether convertible into money or not' fails. In the present case, the M/s J.B. Boda & Co. Pvt. Ltd. 42 IT(SS) No. 580/M/2004 & 18/M/2010 creditors which have been written back were to be paid in cash (USD, pounds and rupees). Therefore, their cancellation, as held by the Supreme Court is a benefit in cash and will be outside the purview of section 28(iv) of the Act. Similarly, in the context of section 40A(5), wherein wher the same expression 'whether convertible into money or not' was employed, the Supreme Court in the case of CIT vs. Mafatlal Gangabhai & Co. P. Ltd. (1996) (219 ITR 644) held that payments in cash will not be covered by the section. It is further submit ted that the ratio of the submitted aforesaid two judgements of the Supreme Court will apply the moment there is a cancellation of a liability which was to be repaid in cash and that it does not make a difference whether that liability was owed to a bank or a trade creditor. Reliance in this regard is placed on the decision of the Tribunal in the case of Infrastructure Logistics P. Ltd. vs. JCIT (2022) (196 ITD 153) (Panaji), wherein the ratio of the Supreme Court in the case of Mahindra and Mahindra (supra) was applied applied to a case of write back of trade creditors and addition under section 28(iv) was deleted.
Whether it is undisclosed income?
8. Without prejudice to the above, it is submitted that the write back of creditors can in no circumstance fall within ition of undisclosed income contained in section the definition 158B(b) of the Act, which presupposes a default of non-non disclosure on the part of the assessee. In this case, the creditors were duly disclosed in the assessee's books of information or facts which accounts. Therefore, there is no information were withheld by the assessee and which can lead to the characterization of write back of creditors as undisclosed income. It is submitted that while the assessee had offered the aforesaid sum as undisclosed income in its return of ncome, it is a settled position in law that there is no income, estoppel against law [Peerless General Finance and Investment Co. Ltd. vs. CIT (2019) (416 ITR 1) (SC), Balmukund Acharya vs. DCIT (2009) (310 ITR 310), CIT vs. Tata Power Solar Systems Ltd. (2017) (2 98 CTR 197) (298 (Bom)] and the assessee can resile from its own offer of income if such withdrawal is in accordance with the law.
M/s J.B. Boda & Co. Pvt. Ltd. 43 IT(SS) No. 580/M/2004 & 18/M/2010 Whether the addition as undisclosed income can be made solely on the basis of a statement recorded under section 132?
9. It is reiterated terated that no incriminating material was found during the search pertaining to any of the additions and both the additions are based solely on the statement recorded in the course of the search. It is submitted that as held by the Delhi High Court in the case of Harjeev Aggarwal (supra), an addition cannot be sustained basis only on the statement recorded in the course of the search."
14.3 In our opinion it is the assessee who has treated those sundry creditors as non-moving moving and non existence liability and declared non-existence the same as undisclosed income in the return of income filed for the block period. Therefore, it is irrelevant whether same were liabilities written back under section 41(1) of the Act or section 28(iv) of o the Act. The Assessing officer has never questioned this action of the assessee of declaring undisclosed income of Rs. 11,73,76,489/-.
11,73,76,489/ It was a matter within the domain of the assessee as how it treated the said non-moving moving creditors as undisclosed income inco for the nd whether same were purpose of return filed for block period and routed through ugh profit and loss account or not. The Assessing Officer has not expressed any doubt on the undisclosed income already declared in the return of block period. Thus, it is irrelevant relevant whether same falls under section 41(1) of the Act or falls under section 28(iv) of the Act. This issue is not arising from order of lower authorities and now after more than 20 years from filing of income for the block raising a plea, taking complete turn from his period, the assessee is raising M/s J.B. Boda & Co. Pvt. Ltd. 44 IT(SS) No. 580/M/2004 & 18/M/2010 position he took in the return of income. Therefore, the contention that said item of sundry balances were undisclosed income or not cannot be considered now, when no remedy has been left with Revenue for taking corrective action, if any, hence ground No. 1(b)(iii) & additional ground raised are dismissed as infructuous.
15. In ground No. 1(b)(iv), 1( (iv), the assessee contested that outstanding amounts were in the form of commission earned for technical nd No. 1(b) (v), the assessee has contested the services. In ground finding of lower authorities that the assessee had not brought the receipt in convertible foreign currency (sic).
15.1 Regarding the issue in dispute of deduction u/s 80-O 80 of the Act, it is important to reproduce the sai said d section in existence during relevant period as under:
"Deduction in respect of royalties, etc. from certain foreign enterprises ::-
(1) Where the gross total income of an assessee, being an Indian company or a person (other than a company) who is resident in India, includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of anyny patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to to such Government or enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered M/s J.B. Boda & Co. Pvt. Ltd. 45 IT(SS) No. 580/M/2004 & 18/M/2010 outside India to such Government or enterprise by the assessee, and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of the income so received in, or brought into, India in computing the total income of the assessee.
assessee."
15.2 Before the CIT(A), the assessee contested that prior to e Ld CIT(A), amendment off section 80-O 80 w.e.f. 1/04/1998,, the scope of section 80-O O included fee for technical services and the assessee had been providing such services of broking in relation insurance/ reinsurance in past and there has been no change in the nature of services rendered by them. Therefore, under similar circumstances, there can be no denial of deduction u/s 80 O of the Act for AY 80-O 1996-97 and 1997-98.
98.15.3 The ld CIT(A) after considering submission of the assessee rejected the claim of the assessee observing as under:
9. I have considered the facts and submissions. I have "9.
gone through the issue. The issue to be decided is whether the appellant is entitled to the deduction u/s.80--0 on the outstanding cr edit balances which are offered to tax by the credit assessee consequent to search operations or not. The A.O. has very categorically has held that the appellant company is not entitled for the deduction u/s.80-O u/s.80 of the I.T. Act for the following reasons:
1. The assesse had offered additional income for tax as a result of search on account of long outstanding M/s J.B. Boda & Co. Pvt. Ltd. 46 IT(SS) No. 580/M/2004 & 18/M/2010 credit balances which were non existent. These amounts were not received/receivable by the assessee from the Govt. of Foreign State or Foreign Enterprises, in consideration for the use outside Enterprises, India of any patent, invention, design or registered trade mark and such income is received in convertible foreign exchange in India or having been received in convertible foreign exchange outside India is brought into India by or behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange but were in fact liabilities payable by the assessee which ceased to exist i.e. which was no longer payable payable by the assessee to various parties.
2. The fact that these liabilities which had ceased to exist and which had been offered as additional income was not eligible for deduction u s. 80-O is u/s.
also evident from the fact that the assessee has claimed the deduction in the computation itself not claimed of total undisclosed income filed with the Block return
3. The assessee has also not furnished a certificate in the prescribed form No.10HA along with the return of income certifying that the deduction has correctly claimed in accordance with the been correctly 80 0. Hence, even the condition provisions of section 80-0.
of 2nd provision to Section 80-080 0 has not been fulfilled by the assessee."
9.1 Section 80-0 80 0 is different from section 80HH and 80I. Section 80HH and 801 deals with the deductions based on the income from the undertakings whereas deduction u/s.80-OO is based on the certain income received from section 80-0.
foreign enterprises which are listed in section 80 In section 80HH and 80- 80 if the income determined during the assessment is higher, the appellant company may be 80 0 of the IT.
entitled to a higher deduction. But in section 80-0 Act if any further income is added in the assessment then M/s J.B. Boda & Co. Pvt. Ltd. 47 IT(SS) No. 580/M/2004 & 18/M/2010 such income will be entitled to deduction under section 80- O only if the following conditions are satisfied:
(i) income should be an income listed in section 80-0 80 of the IT. Act.
(ii) The income should have been received in convertible foreign exchange.
9.2 During the appellate proceedings the assessee company was requested by me to prove that the outstandingsgs which were offered as income are commission receipts for technical services done. Inspite of sufficient time given, the appellant could not prove that the nding amounts were commission earned by the outstanding assessee company.
Further, it is seen that the income now offered and assessed in the block assessment was not all brought into India within the time allowed by the RBI. The income ondition (i) listed above and assessed does not satisfy the ccondition u/s.80 O of the I.T. hence it is not eligible for deduction u/s.80-O Act.
Further, these are the credit balances outstanding in the name of various foreign parties i.e. the amounts are payable by the appellant company to foreign parties partie and hence there is no question of receiving these amounts in India in convertible foreign exchange by the assessee company.
I am in full agreement with the .O.'s observations/findings in the impugned order. In view of the A.O.'s findings and coupled with my above observations, I am fully convinced that the income offered in the block assessment is not the income which are listed in Section Section-80-O of the IT.
Act and the income offered in the block assessment is not at all entitled for deduction u/s.80 he I.T. Act.
u/s.80-0 of the 9.3 I uphold the A.O.'s action.
M/s J.B. Boda & Co. Pvt. Ltd. 48 IT(SS) No. 580/M/2004 & 18/M/2010 15.4 Before us the ld Counsel of the assessee filed a written submission as under:
"Deduction Deduction under section 80-O-80
10. Without prejudice to any of the above, it is submitted that out of the sum of Rs. 11,73,76,489, the assessee is entitled to deduction under section 80-0 80 0 of the Act on the sum of Rs. 10,03,71,942 (Rs. 7,27,35,250 (write back of creditors payable in USD) and Rs. 2,76,37,692 (write back of creditors payable in pounds)). The assessee's issions qua satisfaction of the provisions of section submissions 80-00 of the Act are noted in para 7 of the order passed by the CIT(A). In para 9 of his order, the CIT(A) has held that deduction under section 80-080 0 cannot be allowed as the alleged undisclosed income is is not in the nature of commission income and that the assessee has not brought such income into India. In this regard, it is submitted that section 80-0 0 as it stood at the relevant time and as reproduced on page 16 of the CIT(A's order covered not mission income, but also any fees or any similar only commission payment received in consideration of technical or professional services rendered or agreed to be rendered outside India. Therefore, the case of the assessee certainly falls within the parameters of section 80-0 8 0 of the Act. Insofar as the allegation of the CIT(A) that there is no receipt in the hands of the assessee, it is submitted that cancellation of liability is itself tantamount to receipt. In this regard, reliance is placed on Mahindra & Mahindra (supra) wherein cancellation of liability was equated with words "Hence, waiver of a cash receipt in the following words-
loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee". To the same effect is the decision of the Chandigarh Tribunal in the case of Jai Pal Gabba vs. ITO (2019) (178 IT'D 357) wherein it was held -"So "So far as the argument of the Ld. Counsel for the assessee that waiver of loan does not constitute a receipt, we are again not in ement with the Ld. Counsel for the assessee regarding agreement this contention also. Simply to say that the waiver of the M/s J.B. Boda & Co. Pvt. Ltd. 49 IT(SS) No. 580/M/2004 & 18/M/2010 loan amount does not constitute a receipt, in our view, will not be appropriate as it may lead to absurd, confusing and interpretation. In our view, if the donor gives to unintended interpretation.
a donee certain amount directly or indirectly it does not make a difference. To elaborate further, if the donor firstly, give some amount as a loan and then waive of or relinquish the right to recover the said amount, then, in our view, on the date of such remission or relinquishment, the nature of such loan changes from loan to receipt /gift". Therefore, it is submitted that cancellation of a liability results in a receipt in the hands of the debtor and therefore, the assessee is entitled to deduction under section 80-0 0 on the amount of Rs. 10,03,71,942.
11. For the sake of completeness, it is submitted that there is no bar on the assessee to make a claim for deduction under chapter VI A of the Act on an income which is VI-A i added in block assessment. This has been affirmed by the Tribunal in the assessee's own case in MA no. 320/M/2008 (pg. 123 of the legal compilation) wherein having regard to the Explanation to section 158BB and the assessee is several decisions, it has been held that the entitled to claim deduction under chapter VI-AVI A in block proceedings. This order of the Tribunal has not been recalled and has become final."
final.
15.5 We find that assessee has primarily made two submissions. Firstly, the undisclosed income declared in the return for the block period has been earned from the technical or professional services rendered. Secondly,, the cancellation of liability, results in a receipt in the hands of the assessee, therefore the assessee is eligible for O in respect of undisclosed income declared in deduction u/s 80-O the return of the block period.
15.6 We have considered submission and arguments of both sides on this issue. We are the opinion that firstly,, the undisclosed M/s J.B. Boda & Co. Pvt. Ltd. 50 IT(SS) No. 580/M/2004 & 18/M/2010 income has been declared by way of writing off of as non non-moving outstanding foreign creditor in the books of account of the assessee. The ld CIT(A) asked the assessee to substantiate that outstanding credits declared as undisclosed income are commission receipts for technical services, but the assessee failed in doing so. In our opinion, the credit balance in the case of the assessee might be from three sources. Firstly, brokerage commission income, p secondly, premium amount collected from insurers but not paid to re-insurers, thirdly insurance claims received from re-insurer re but not paid to insurer. Before the lower authorities, the assessee submitted that as regard to commission income from brokerage relevant evant to AY 1996 1996-97 and 1997-98,, the assessee had already claimed section deduction u/s 80-O O of the Act in the regular return of income filed. Regarding the non moving creditor, the assessee non-moving himself has submitted that those were not routed through profit and loss account and those amounts were belonging to those parties.
rties. In the footnote to the computation of und undisclosed isclosed income in block return,, the assessee has mentioned that ab above ove credits were offered to tax,, however, if any claim arise on account of those balances written back bac at any time,, the same shall be allowed as deduction from profit of the business of the year of payment of such claim. This undertaking of the assessee itself shows that the itself undisclosed income declared is not arising from any technical or professional services and arising only by way treating the t M/s J.B. Boda & Co. Pvt. Ltd. 51 IT(SS) No. 580/M/2004 & 18/M/2010 outstanding balances of dues of foreign parties written off in its books of account.
15.7 Secondly, we e also note that the assessee himself has admitted that money of outstanding creditor had been brought brought into India on observation of ld CIT(A) is reproduced as 10/03/2002.. The relevant observation under:
"7.3 With regard to the A.O's view that the undisclosed income of Rs.11,73,76,489/-
Rs.11,73,76,489/ represented the non- non moving/long outstanding credit balances which have been written back through the book entries and the appellant has not brought any amount in convertible foreign exchange in India, the appellant submitted that monies were lying abroad and were brought into India on 10.03.2002 i.e. before filing of the block return.
The appellant observed that at para 6 on page 11 of the impugned order, the AO while specifying the conditions for eligibility of deduction us 80-0 0 has stated as under:
"In fact we.f. 01.04.1998 this section has become even more restrictive and only income received by foreign state or the assessee from the govt of a foreign foreign enterprise for the use outside India of any patent, invention, design or registered trade mark is considered and such income should be received in convertible foreign exchange."
15.8 When the money has been brou brought ght in India only on 10/03/2002,, then ld CIT(A) is correct in holding that the assessee has not brought the money into India within the time allowed by the RBI, and so the assessee is not eligible for deduction for this reason also.
M/s J.B. Boda & Co. Pvt. Ltd. 52 IT(SS) No. 580/M/2004 & 18/M/2010 15.9 We find the provisions of section 80-O 80 for granting deduction in respect of profession and technical services has been amended w.e.f 1/4/1998 as under:
"80-O. "[Where the gross total income of an assessee, being an Indian company *or a person (other than a company) who is resident in India]], includes any income received by the assessee from the Government of a foreign State or foreign enterprise in consideration for the use"
outside India of any patent, invention, design' or registered trade mark] "[*] "and such income is received in convertib convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, "La deduction of an amount equal to
(i) forty per cent for an assessment as eginning on the year beginning 1st st day of April, 2001;
(ii)) thirty per cent for an assessment year beginning on the 1st day of April, 2002;
assessment year beginning on
(iii)) twenty per cent for an assessment the 1st st day of April, 2003;
(iv) ten per cent for an assessment as nning on the year beginning 1st st day of April, 2004, of the income so received" in, or brought into, India, in computing the total income of the assessee and no assessment deduction shall be allowed in respect of the assessment 1st day of April, 2005 and any year beginning on the 1st subsequent bsequent assessment year]"
M/s J.B. Boda & Co. Pvt. Ltd. 53 IT(SS) No. 580/M/2004 & 18/M/2010 14.10 The assessee is before us in respect of undisclosed income for the block period as result of search dated 7/11/2001. The return of undisclosed income for block period is distinct from the regular assessee has declared the undisclosed return of income. The assessee income post the search action and claiming deduction against the said undisclosed income, thus, under amended provisions also, the claim, even for a moment we assessee is not eligible for making any claim presume that the receipt were from professional or technical services.
15. In view of above discussion, we do not find any error in the order of the Ld. CIT(A) on the issue-in-dispute issue dispute and accordingly uphold the same. The grounds of appeal of the assessee are accordingly dismissed.
both the appeal of the assessee and Revenue are
16. In the result, both, dismissed.
(4) of the ITAT Rules, Order pronounced under Rule 34(4) 1963 on 13/02/2023.
/02/2023.
Sd/- Sd/-
(VIKAS
VIKAS AWASTHY)
AWASTHY OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 13/02/2023
Rahul Sharma, Sr. P.S.
M/s J.B. Boda & Co. Pvt. Ltd. 54
IT(SS) No. 580/M/2004 & 18/M/2010 Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai