Income Tax Appellate Tribunal - Mumbai
Besix Kier Dabhol S.A , Mumbai vs Assessee
ITA No.: 4250 and 4977/Mum/07
Assessment year: 2003-04
Page 1 of 7
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI L BENCH, MUMBAI
[Coram : N V Vasudevan JM, and Pramod Kumar AM]
ITA No.: 4250/Mum/07
Assessment year: 2003-04
Besix Kier Dabhol, SA ................................ Appellant
Vs.
Deputy Director of Income Tax
-(International Taxation)
Circle 3 (2), Mumbai 400 020 .......................... Respondent
ITA No.: 4977/Mum/07
Assessment year: 2003-04
Assistant Director of Income Tax
-(International Taxation)
Circle 3 (2), Mumbai 400 020 .......................... Respondent
Vs.
Besix Kier Dabhol, SA ................................ Appellant
Appearances:
Sunil M Lala, for the assessee
Narendra Singh, for the Assessing Officer
O R D E R
Per Pramod Kumar:
1. These cross appeals are directed against the CIT(A)'s order dated 29 th March 2007, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2003-04.
ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 2 of 7
2. We will first take up the appeal filed by the assessee, i.e. ITA No 4250/Mum/07.
3. In the first ground of appeal, the assessee has raised the following grievance:
On the f acts and in the circumstances of the case, the learned CIT(A) has erred in upholding the disallowance of interest of Rs 26,29,193.
4. Learned representatives agree that so far as this issue is concerned, whatever we decide in assessee's appeal for the assessment year 2002-03, which involved identical issue and which was heard alongwith this appeal, will follow mutatis mutandi here as well. The material facts and circumstances of the case and grievance of the assessee, barring the quantum of disallowance though, are exactly the same as in the assessment year 2002- 03; there is no dispute on this aspect of the matter. The CIT(A) has also merely followed his order for the assessment year 2002-03. Vide our order dated 10 th November 2010, on assessee's appeal for the assessment year 2002-03, we have upheld the grievance of the assessee and directed the Assessing Officer to delete the impugned disallowance. We see no reasons to take any other view of the matter than the view so taken by us for the said assessment year. A copy of the said order is deemed to be attached to, and forming part of, this order as well. Respectfully following the same, we uphold this grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance of Rs 26,29,193.
5. Ground No. 1 is thus allowed.
6. In ground no. 2, the assessee has raised the following grievance:
On the f acts and in the circumstances of the case, the learned CIT(A) has erred in confirming the action of the AO in not reducing the interest of Rs 2,36,35,987 from net profit to arrive at the book profit under section 115 JB of the Act.
ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 3 of 7
7. So far as this grievance of the assessee is concerned, it is necessary to take note of a few material facts of the case. During the course of the assessment proceedings, it was noticed by the Assessing Officer that, in the computation of tax liability under section 115 JB of the Act, the assessee has reduced an amount of Rs 2,36,35,987 being interest pertaining to earlier years, from net profit as per profit and loss account. The Assessing Officer as of the view that Section 115JB does not provide for any such deduction in computation of book profit. He, therefore, denied the adjustment claimed by the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). It was contended by the assessee that this receipt by the assessee is on account of interest on income tax refunds for the assessment year 2000-
01. It was submitted by the assessee that the interest was actually received on 30 th April 2003, and thus this income did not accrue in the relevant previous year - but in the assessment year 2004-05. It was also pointed out that under the Income Tax Act, 1961, it is well settled principle that the income that has accrued or has become due , which is required to be offered to tax. On this reasoning, the assessee defended exclusion of interest of Rs 2,36,35,987 from normal income offered to tax as also from book profit under section 115 JB. A reference was also made to Hon'ble Supreme Court's judgment in the case of CIT Vs Shoorji Ballabhdas & Co (46 ITR 144). None of these submissions, however, impressed the CIT(A). Learned CIT(A) observed that reference to Shoorji Ballabhdas & Co (supra) was unwarranted inasmuch as the issue in the present context is determination of income under section 115JB and not the normal provisions of the Act. He was of the view that, as held by Hon'ble Supreme Court in the case of Apollo Tyres Ltd s CIT (255 ITR
273), only such adjustments can be made to the profit as per profit and loss account as are specifically authorized by the mandate of legislative provisions regarding book profits. He extensively quoted from the judgment of Hon'ble Supreme Court and held that it was beyond the powers of the Assessing Officer to make adjustments to the profit as per profit and loss account except ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 4 of 7 to the extent law specifically provides so. In the absence of any provision enabling adjustment on account of interest relatable to earlier years, the adjustment sought by the assessee was declined. The assessee is not satisfied and is in further appeal before us.
8. Having heard the rival submissions and having perused the material on record, we see no reasons to disturb the findings of the learned CIT(A). As he rightly observed, in view of Hon'ble Supreme Court's judgment in the case of Apollo Tyres (supra), it is not open to the Assessing Officer to make any adjustments in the audited profit and loss account - save and except, as permitted by the statue itself. The law so laid down by Hon'ble Supreme Court is binding under Article 141 of the Constitution of India. Respectfully following the esteemed views of Hon'ble Supreme Court, we uphold the stand of the learned CIT(A) and decline to interfere in the matter.
9. Ground No. 2 is thus dismissed.
10. In ground no. 3, the assessee has raised the following grievance :
On the f acts and in the circumstances of the case, the learned CIT(A) has erred in upholding the action of the AO in levying interest under section 234 B of the Act.
11. The short issue in this grievance is whether or not interest under section 234 B can be levied in respect of tax liability under section 115 JB. Learned representatives agree that this issue is now covered, in favour of the assessee, by Hon'ble jurisdictional High Court's judgment in the case of CIT Vs Natural Gems Limited (327 ITR 269), even though learned Departmental Representative rather dutifully relied upon the orders of the authorities below. Hon'ble High Court has held that interest under section 234 B and 234 C cannot levied in respect of tax liability under section 115 JB.
12. Respectfully following the esteemed views of Hon'ble jurisdictional high ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 5 of 7 Court, we uphold the grievance of the assessee, and, accordingly, direct the Assessing Officer to delete the levy of interest under section 234 B in respect of MAT liability under section 115JB. The assessee gets the relief accordingly.
13. Ground No. 3 is thus allowed.
14. In the result, appeal of the assessee is partly allowed in the terms indicated above.
15. We now take up the appeal filed by the Assessing Officer i.e. ITA No. 4977/Mum/07.
16. Grievances raised by the Assessing Officer are as follows:
On the f acts and circumstances of the case and in law, the learned CIT(A) erred in law by treating the custom duty draw back, on plant and machinery, received as capital receipt as against the business receipt.
On the f acts and in the circumstances of the case and in law, the learned CIT(A) erred in taking the general interpretation of law instead of section 28(iiic) of the Income Tax Act in respect of refund of custom duty drawn on re-export of plant and machinery of Rs 4,33,04,141 and allowing it to the extent of Rs 3,36,70,771 as part of sales consideration.
On the f acts and circumstances of the case and in law, the learned CIT(A) erred in treating the receipt of custom duty draw back on plant and machinery as deemed sale proceeds.
17. All these grievances are interconnected, and, therefore, being taken up together for disposal. The relevant material facts are like this. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that 'other income', disclosed in the profit and loss account, included custom duty drawback/ refund of Rs 4,33,04,141. It was then submitted by the assessee that due to oversight this amount has not been added to sale ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 6 of 7 consideration received by the assessee on sale of its assets, and that, with a view to rectify this mistake, the Assessing Officer may reduce the short term capital loss claimed by the assessee on sale of its assets by Rs 4,33,04,141. The Assessing Officer required the assessee to furnish the reasons of not offering Rs 4,33,04,141, being refund of custom duty drawback, and evidence of the fact that the custom duty was not claimed as a deduction earlier. It was submitted by the assessee that the custom duty paid on imported machines was capitalized, as reflected by the audited accounts, and that it was never claimed as a revenue deduction. However, the assessee expressed inability to furnishing details so as to " co-relate the amount of custom duty drawback of Rs 4,33,04,141 with the amount capitalized the respective years i.e. AY 1999- 00 to AY 2001-02" as records of the assessee were damaged in 26 July 2005 rains. In the absence of these details, the Assessing Officer disallowed the claim of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) and also submitted all the necessary details regarding correlating the custom duty payments. Based inter alia on the submissions so filed, and having noted that the Assessing Officer, in his remand report, has not raised any specific objections on this correlating the custom duty payments, the CIT(A) deleted the impugned disallowance. The Assessing Officer is aggrieved and is in appeal before us.
18. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
19. In our considered view, and particularly having regard to the fact that the assessee had expressed inability to furnish necessary details at the assessment stage, we deem it fit and proper to remit the matter to the file of the Assessing Officer for fresh adjudication after giving assessee yet another opportunity of furnishing necessary details. The assessee has simply bypassed the Assessing Officer by not providing requisitioned details, and an opportunity to properly examine the claim of the assessee has been lost for ITA No.: 4250 and 4977/Mum/07 Assessment year: 2003-04 Page 7 of 7 the Assessing Officer. Let all the relevant details be placed before the Assessing Officer, and let assessee make all the submissions before him. The Assessing Officer will then dispose of the matter afresh in accordance with the law, by way of a speaking order and after dealing with the contention of the assessee. It was so announced in the open court during the course of hearing of this appeal also. We, therefore, remit this issue to the file of the Assessing Officer in the above terms.
20. The appeal filed by the Assessing Officer is thus allowed for statistical purposes in the terms indicated above.
21. To sum up, the appeal of the assessee is partly allowed and the appeal of the Assessing Officer is allowed for statistical purposes. Pronounced in the open court today on 30 th day of November, 2010.
Sd/- sd/- (N V Vasudevan) (Pramod Kumar) Judicial Member Accountant Member Mumbai; 30 th day of November, 2010. Copy forwarded to : 1. The appellant 2. The respondent
3. The Director of International Taxation , Mumbai
4. The Commissioner (Appeals) , Mumbai
5. Departmental Representative, L bench, Mumbai
6. Guard File True Copy By Order etc. Assistant Registrar Income Tax Appellate Tribunal Mumbai benches, Mumbai