Income Tax Appellate Tribunal - Ahmedabad
Riddhi Siddhi Gluco Biols Ltd.,, ... vs Department Of Income Tax on 29 March, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " C "
Before Shri G.D.AGRAWAL, VICE-PRESIDENT (AZ) and
Shri T.K.SHARMA, JUDICIAL MEMBER and
Date of hearing : 29/03/2010 Drafted on: 29/03/2010
ITA No.286/AHD/2007
Assessment Year : 2003-04
The Asst.CIT Vs.The Riddhi Siddhi Gluco
Circle-5 Boils Ltd.
Ahmedabad 701, Sakar-I,
Oppl.Gandhigram Rly Stn
Ahmedabad
PAN/GIR No. :
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri Shelly Jindal, CIT-DR
Respondent by: Ms. Urvashi Shodhan
ORDER
PER SHRI T.K.SHARMA, JUDICIAL MEMBER :
This appeal by the Revenue is against the order dated 15/11/2006 passed by the Learned CIT(Appeals)-XI, Ahmedabad for Assessment Year 2001-02 on the following grounds:-
1. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in deleting the addition made of Rs.2,19,92,647/-on account of disallowance of Pre-operative interest expenses which had been capitalized in the books and claimed as revenue expenses.
2. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in directing the Assessing Officer not to include the pre-operative interest expenses and prior period expenses while recomputing the Book Profit under section 115JB of the IT. Act, 1961.ITA No.286/Ahd/2007
Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -2-
3. The Ld. Commissioner of Income tax (A) - XI, Ahmedabad has erred in law and on facts in directing the Assessing Officer to delete the interest charged under sections 234B and 234C of the Income tax Act, 1961.
4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income tax (A)-XI, Ahmedabad ought to have upheld the order of the Assessing Officer to the above extent.
5. It is therefore prayed that the order of the Ld. Commissioner of Income tax (A)-XI, Ahmedabad may be set aside and that of the Assessing Officer be restored.
2. At the outset, Ms.Urvashi Shodhan, appeared on behalf of assessee produced a copy of the decision of the ITAT Bench "B" in assessee's appeals - ITA Nos.404, 1648, 2654/Ahd/2002 and No.3726/Ahd/2003 and Department's appeals - ITA Nos.440, 2252, 2751/Ahd/2002 and No.3722/Ahd/2003 and submitted that in the assessment year under appeal, the Assessing Officer disallowed Rs.2,19,92,647/- on account of pre-operative interest, treated as capital expenditure. In assessee's own case, the Learned CIT(Appeals) in the Assessment Years 2000-01, 2001- 02 & 2002-03 deleted the said disallowance following the decision of Hon'ble Gujarat High Court in the case of CIT vs. Core Health Care Limited 251 ITR 61 (Guj.). In those years, appeals of the Revenue were dismissed by the Tribunal (i.e. ITA Nos.440, 2252, 2751/Ahd/2002 and ITA No.3722/Ahd/2003) by discussing at length. The ld. counsel for the assessee particularly drew our attention towards page Nos.20 & 21 in paragraph No.54 of the decision of the Tribunal in ITA No.3722/Ahd/2003 for the Assessment Year 2000-01. She further pointed out that proviso to section 36(1)(iii) which provides "that any ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -3- amount of interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction", is inserted by the Finance Act, 2003, w.e.f. 01/04/2004. Therefore, the said proviso is not applicable in the assessment year under appeal, i.e. Assessment Year 2003-04.
3. With regard to ground No.2 the ld. counsel for the assessee pointed out that in the impugned order, the Learned CIT(Appeals) for directing the Assessing Officer not to include the pre-operative interest expenses and prior period expenses while computing book profit u/s.115JB of the I.T. Act, 1961 has followed his order for the Assessment Years 1998-99, 1999-2000 & 2000-01. The appeal of the Revenue against the said decision was also rejected. In support of this, she drew our attention towards paragraph No.5 at page Nos.3 & 4 of the decision of ITAT in ITA Nos.440/Ahd/2002 for Assessment Year 1997-98. She further pointed out that controversy involved in ground No.2 is also squarely covered by the decision of Hon'ble Supreme Court in the case of Apollo Tyres Limited 255 ITR 273 (SC).
4. In respect of ground Nos.1 & 2, Shri Shelley Jindal, Learned Departmental Representative appeared for the Revenue could not controvert the submissions of the ld. counsel for the assessee.
ITA No.286/Ahd/2007Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -4-
5. After hearing both the parties, in respect of ground Nos.1 & 2, we have carefully gone through the orders of the lower authorities as well as decision of the Tribunal in assessee's own case in ITA Nos.404, 1648, 2654/Ahd/2002 and ITA No.3726/Ahd/2003 for Assessment Years 1997- 98, 1998-99, 1999-2000 and 2000-01(supra). The interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not) is allowable u/s.36(1)(iii) as Revenue expenditure upto the Assessment Year 2003-04. This has been upheld by the Hon'ble Supreme Court in the case of Dy.CIT vs. Core Health Care Limited 167 Taxman 206 (SC) It is only by the Finance Act, 2003, w.e.f. 01/04/2004, following the proviso to section 36(1)(iii) of the I.T. Act, 1961, which reads as under:-
"Provided that any amount of interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction."
5.1. Admittedly, assessment year involved in the present appeal is Assessment Year 2003-04. Therefore, proviso to section 36(1)(iii) which is inserted by the Finance Act 2003, w.e.f. 01/04/2004 is not applicable. In view of this, we following the decision of the Tribunal in assessee's own case in the earlier assessment years(supra) and decision of Hon'ble Gujarat High Court in the case of CIT vs. Core Health Care Limited 251 ITR 61 (Guj.), hold that the Learned CIT(Appeals) is rightly deleted the disallowance of pre-operative interest holding that the same ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -5- is allowable income expenditure u/s.36(1)(iii) of the IT Act. Ground No.1 is, accordingly, rejected.
6. Coming to the ground No.2, the Tribunal in assessee's own case in ITA No.404/Ahd/2002 & Others for Assessment Year 1997-98 & Others held as under:-
"5. Having heard both sides, we have carefully gone through the impugned orders of the authorities below. Considering the facts and circumstances of the case, we find that the case of Apollo Tyres Limited 255 ITR 273 (SC) is squarely applicable, wherein it is held that while assessing a company for Income-tax under s. 115J the correctness of the P&L a/c prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Sch.VI to the Companies Act cannot be examined by the Assessing Officer. The AO does not have the jurisdiction to go behind the net profit shown in the P&L a/c except to the extent provided in the Explanation to s. 115J. Moreover, in the case of Quality Biscuits Ltd vs. CIT (243 ITR 519). Hon'ble Karnataka High Court has held that for the purpose of s. 115J r/w s. 205(1)(b) of the Companies Act the expression 'loss' under the Companies Act is to be reckoned after allowance of depreciation. In the case of CIT v. Rubamin P. Ltd., Hon'ble Gujarat High Court following the decision of Hon'ble Supreme Court in the case of Apollo Tyres vs. CIT (255 ITR 273) held that for the purpose of section 115J of the Act, only those adjustments, which are specified in the Explanation to section 115J can be made from the book profits and depreciation not being one of them and further the accounts of the company having been prepared in accordance with Schedule VI to the Companies Act, the Assessing Officer was in error in disallowing the depreciation as claimed by the company. In view of such judicial pronouncements, we do not find any infirmity in the impugned order of the learned CIT(A) in this regard and as such, the same needs no interference. Ground No.1 of the Revenue is, therefore, dismissed."
7. We, therefore, following the aforesaid decision of Tribunal in assessee's own case(supra), incline to uphold the order of the Learned ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -6- CIT(Appeals) and direct the Assessing Officer not to include the pre- operative interest expenses and prior period expenses while computing book profit u/s.115JB of the I.T. Act, 1961. Thus, this ground of appeal of Revenue is rejected.
8. With regard to ground No.3, the Learned Departmental Representative pointed out that in the impugned order, the Learned CIT(Appeals) erred in directing the Assessing Officer to delete the interest charged u/s.234B & 234C of the I.T. Act, 1961.
9. On the other hand, the ld. counsel for the assessee pointed out that no such direction has been given by the Learned CIT(Appeals) in the impugned order. Therefore, the view taken by the Learned CIT(Appeals) be upheld.
10. Having heard both the parties, we have carefully gone through the orders of the lower authorities. In order to understand what direction with regard to levy of interest charged u/s.234B & 234C of the I.T. Act, 1961 is given by the Learned CIT(Appeals) in the impugned order, one has to go through the entire order particularly paragraph Nos.8.1 & 8.1.2 which reads as under:-
"8.1. In this context the directions of my predecessor for A.Y. 1998-99 are relevant. Hence, the same are reproduced as following-
"I have gone through the judgements relied upon by the ld. Counsel in connection with the legal positions set out. As regards, chargeability of interest u/s.234B and 234C is concerned, Hon'ble judges in the case reported in 243 ITR 519 ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -7- (Karn) have held that the words "for the purposes of this section", in the Explanation to Section 115J (1A) are relevant and cannot be construed to extend beyond the computation of liability of tax. They were accordingly of the view that the Income Tax Appellate Tribunal was not justified in directing to charge interest under section 234B and 234C of the Act. There is however, another decision of Hon'ble Gauhati High Court in the case of Assam Bengal Carriers Ltd. vs. CIT reported in 239 ITR 862 wherein the Hon'ble judges have held that interest under section 234B and 234C of Income Tax is chargeable even in a case where taxability arises only by the applicability of the provisions of section 115J of the Act. On a careful consideration of the facts and circumstances of the case, it is held that the Assessing Officer should not in charge interest u/s.234 and 234C, if the total income under section 115JA is more than the normal income, in view of the decision of Hon'ble Apex Court in the case of CIT vs. Vegetable Products reported in (1973) 88 ITR 193, whereby a view which is favourable to the assessee, in case of contrary decisions, should be followed. In such a situation, the decision of Hon'ble Karnataka High Court (Supra) would have been followed and interest charged under section 234B and 234C would require to be recomputed. Further, similar issue was also decided by this office in favour of the appellant itself in A.Y. 1997-98. In view of the above facts and legal position, the Assessing Officer is directed to delete the interest charged under section 234B and 234C, if the assessee is not liable for taxation under normal taxation, after giving effect of this order."
8.1.2. Having considered the facts of the case, the assessing officer is directed to verify the appellant's claim from his record and recalculate income-tax, surcharge and interest thereon while giving effect to this order. With regard to giving proper credit of prepaid taxes, the assessing officer is directed to go through the appellate orders of my predecessor in the appellant's own case for A.Ys.1998-99 to 2000-01 and 2001-02 and allow credit of pre-paid taxes as per the provisions of Income-tax Act."
11. From the perusal of the aforesaid two paragraphs, it can be seen that the Learned CIT(Appeals) in paragraph No.8.1 of the impugned order reproduced the decision of his predecessor for the Assessment Year ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -8- 1998-99, wherein Assessing Officer was directed to delete the interest charged u/s.234B & 234C of the I.T. Act, 1961, if the assessee is not liable for taxation under normal taxation, after giving effect of this order. In the assessment year under appeal, the assessee-company is assessed to tax at book profit of Rs.33,67,424/- u/s.115JB of the I.T. Act, 1961. We accordingly held that for the assessment year under appeal, the levy of interest u/s.115JB of the I.T. Act, 1961 is mandatory as held by the Hon'ble ITAT Bench "B" (Third Member) in assessee's own case for Assessment Year 1997-98, 1998-99, 1999-2000 & 2000-01 (in ITA Nos.404, 1648, 2654/Ahd/2002 and ITA No.3726/ahd/2003 respectively). The relevant paragraph of the said order u/s.255(4) of the IT Act, 1961, reads as under:-
"2. In respect of question No.1, Hon'ble Vice President as Third Member concurring with the view of Accountant Member, held that interest under section 234B and 234C of the Income tax Act, 1961 is leviable, while computing the income in terms of provisions of section 115JA for the Assessment Year 1997-98 and 2000-2001. As per majority view, while computing income under section 115JA of the Income tax Act, 1961, the levy of interest by Assessing Officer under section 234B and 234C is restored. Consequently, ground No.VIII & IX in the appeal of the Revenue for the Assessment Year 1997-98, ground No.1 (VII) in the appeal of the Revenue for the AY 1998-99 and ground No.7 & 8 in the appeal of the Revenue for the AY 1999-2000 are allowed while ground nO.7 in the appeal of the assessee for the AY 2000-01 is dismissed."
12. It is pertinent to note that the ld. counsel for the assessee fairly admitted that in assessee's own case ITAT Bench "B" in Assessment Years 1997-98 to 2000-01 it is held that interest u/s.234B & 234C is leviable, when income is computing u/s.115JA of the I.T. Act, 1961. In order to remove any misunderstanding in this regard, we held that ITA No.286/Ahd/2007 Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04 -9- interest u/s.115JB can be levied when income is computed u/s.115JB of the I.T. Act, 1961 as held by Hon'ble Delhi High Court in the case of Jindal Exports Ltd. 314 ITR 137 (Delhi). In this decision, it has been held that Provisions of s. 234B and 234C are compensatory and not penal hence the interest under these provisions can be charged only if Government is deprived of its revenue. Interest u/ss. 234B and 234C is to be charged after tax credit (MAT credit) available u/s. 115J AA is set off against tax payable on total income of year in question. Even prior to amendment to Explanation 1 after s. 234B(1) and to Explanation after s. 234B(1) and to explanation after s. 234C(1) by virtue of Finance Act, 2006 w.e.f. 1-4-2007, expression "such tax" as appearing in s. 140 A, would have reference to tax payable on basis of return minus, inter alia, MAT credit claimed setoff in accordance with provisions of s. 115JAA and thus, said amendments were merely clarificatory and made explicit what was already implicit. We therefore, held that interest u/s.234B & 234C is leviable while computing the income in terms of provisions of Section 115JB of the I.T. Act, 1961. Therefore, the Assessing Officer directed to re-work out the interest chargeable, if any, after giving the appeal effect to this order. This ground of appeal is partly allowed.
13. In the result, appeal of the Revenue is partly allowed. Order signed, dated and pronounced in the Court on 31/03/2010.
Sd/- Sd/-
( G.D.AGRAWAL ) ( T.K.SHARMA )
VICE PRESIDENT (AZ) JUDICIAL MEMBER
Ahmedabad; Dated 31/ 03 /2010
T.C. NAIR
ITA No.286/Ahd/2007
Asst.CIT vs. Riddhi Siddhi Gluco Boils Ltd.
Asst.Year - 2003-04
- 10 -
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-XI, Ahmedabad
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad