Income Tax Appellate Tribunal - Raipur
Jindal Power Limited, Raigarh vs Deputy Commissioner Of Income Tax, ... on 26 September, 2024
आयकर अपीलीय अिधकरण, रायपुर ायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी रिवश सू द, ाियक सद एवं ी अ ण खोड़िपया, लेखा सद के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
(आयकर अपील सं. / ITA No: 203/RPR/2017)
( नधारण वष Assessment Year: 2012-13)
Jindal Power Limited, V Dy. Commissioner of Income Tax,
Kharsia Road, Raigarh (C.G.) s Circle-1(1), Bilaspur (C.G.)
PAN: AABCJ4683J
(अपीलाथ /Appellant) . ( थ / Respondent)
.
िनधा रती की ओर से /Assessee by : Shri Salil Kapoor & Vibhu Jain, Advocates
राज की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR
सु नवाई की तारीख / Date of Hearing : 03 . 09 .2 0 24
घोषणा की तारीख/Date of Pronouncement : 26 . 09 .2 0 24
आदे श / O R D E R
Per Arun Khodpia, AM:
The captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeal), Bilaspur (in short "Ld. CIT(A)"), u/s 250 of the Income Tax Act, 1961 (in short "The Act"), dated 05.05.2017 for the Assessment Year 2012-13, which in turn arises from the order under section 143(3) of the Act, passed by the Dy. Commissioner of Income Tax, Central Circle-1(1), Bilaspur (in short "Ld. AO"), dated 20.02.2015.
2. The grounds of appeal raised by the assessee are as under:
2 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
1. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs 3,46,78,870/- to total income as per the provision of clause (ii) & (iii) of Rule 8D of IT Rules, and made addition u/s 14A of the Act and adding the same to book profit for calculating MAT u/s 115JB of Income Tax Act, 1961 and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
2. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of personnel and administrative expenses and other operational income amounting to Rs. 101,98,10,409/- and adding the same in income not eligible for deduction u/s 80 IA of the Act and confirmed by Ld. CIT(A), the same is against the facts & also against the law, hence may kindly be deleted.
3. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs. 92,00,60,410/- notionally to total income on account of lower rate of power tariff for sales to holding company and group companies and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
4. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of service charges of Rs. 3,70,342/- because of non-deduction of TDS and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
5. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of the expenditure of Rs 2,81,08,609/- incurred under Rehab Compensation Scheme and also adding the same to the book profit u/s 115JB of the Income Tax Act, 1961 and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
6. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of share issue expenses of Rs 7,91,74,836/- and also adding the same to the book profit u/s 115JB of the Income Tax Act, 1961 and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.3 ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
7. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of exchange fluctuation loss amounting to Rs 22, 51,00,000/- and also adding the same to the book profit u/s 115JB of the Income Tax Act, 1961 and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
8. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of Rs. 2,77,13,292/- on account of CSR expense and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
9. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law by treating investment income, under the head STCG amounting to Rs. 1,09,42,543/- generated from sale/ purchase of mutual funds, as business income and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
10. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of Rs. 85,77,903/- on account of employee welfare fund and Rs. 5,00,000/- notionally on account of interest thereon and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
11. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making disallowance of wealth tax amounting to Rs 74, 82, 551/- and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
12. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing credit of TDS amounting to Rs. 12,68,767/- and confirmed by Ld. CIT (A) the same is against the facts & also against the law, hence may kindly be deleted.
13. The appellant reserves its right to add, amend, or alter the grounds of appeals on or before the date: the appeal is finally heard for disposal.
4 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 2.1 The assessee also has submitted the applications for admission additional grounds u/r 11 of the Income Tax (Appellate Tribunal) Rules, 1963 dated 07.03.2022, 14.08.2024 and 21.08.2024, the same are extracted as under:
5 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 6 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 7 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 8 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
3. At the outset, during the hearing dated 03.09.2024, Shri Salil Kapoor, Adv., Authorized Representative of the assessee (for short "Ld. AR"), submitted that the amount equivalent to the additions / disallowances made by the Ld. AO in the regular assessment as per para 15.5 of the assessment order, have allowed u/s 80IA of the Act, therefore, apart from the addition / disallowance u/s 14A for Rs. 3,46,78,870/- which is added to the taxable income of the assessee while computing the taxable income u/s 115JB, all the remaining additions / disallowances mentioned in sub para (1)(ii) to (ix) have no tax impact in the relevant assessment year, thus, became only academic, as such the assessee wishes not to press the relevant grounds wherein such additions are challenged with the liberty to agitate and challenge the same if and when need arises.
3.1 Similar request is made qua the addition for Rs. 57,96,54,445/- (profit from non-eligible business and profession 101,98,10,409 - loss from non-eligible business and profession 44,01,55,964) on account of income from non-eligible business and profession for deduction u/s 80IA and Rs. 1,09,42,543/- on account of profit from sale - purchase of units of mutual funds.
9 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 3.2 Ld. AR submitted a letter dated 03.09.2024, stating the aforesaid prayer to not press the relevant grounds for aforesaid additions, the same is extracted as under:
10 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 3.3 Considering the aforesaid request by the Ld. AR, seeking liberty to not pursue the grounds relevant to additions made by the Ld. AO in para 15.5 part (1) sub-para (ii) to (ix) and part (2) under regular assessment, assailed in ground no. 2, 3, 4, 8, 9, 10 & 11 of the present appeal, for which no objection raised by the revenue, therefore, the permission is granted to withdraw the aforesaid grounds with the liberty to agitate and challenge the same as may be needed. Consequently, Ground No. 2, 3, 4, 8, 9, 10 & 11 of the present appeal filed by the assessee are rendered to be dismissed as not pressed.11 ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 3.4 Apropos, additional grounds raised by the assessee vide its letter dated 07.03.2022 & 14.08.2024, Ld. AR requested to not press the same and have signed against the said grounds to that effect. No objection was raised by the revenue, therefore, additional grounds sought to be not pressed are permitted to withdraw. Resultantly, additional ground dated 07.03.2022 & 14.08.2024 are dismissed as not pressed.
3.5 After the aforesaid concessions on behalf of the assessee to not press the aforesaid ground, the remaining grounds to be considered for adjudication are ground no. 1, 5, 6, 7, 12, 13 & Additional ground dated 21.08.2024. Our deliberations and decision to such grounds have been narrated as under:
4. Ground no. 1, 5, 6, 7: Regarding certain additions while calculating the book profit to arrive at Minimum Alternate Tax (MAT) u/s 115JB of the Income Tax Act, 1961.
4.1 The additions made by the Ld. AO, while calculating the book profit u/s 115JB are:
i Disallowance u/s 14A - Rs. 3,46,78,870/-
ii Disallowance on account of Rs. 2,81,08,609/-
'Rehabilitation Compensation'
12
ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
iii Disallowance on account of 'Proposed Rs. 7,91,74,836/-
share issue expenses'
iv Disallowance on account of 'Foreign Rs. 22,51,00,000/-
Exchange Loss'
4.2 To decide the above issue, as to whether additions made by Ld. AO
in computing the "book profit" for the purpose section 115JB are justified on the facts and as per the prescribed mandate of the law, the relevant provisions of section 115JB, are extracted as under:
Section 115JB (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 46[ 47 [2011] ], is less than 47a [ 48[ eighteen per cent]] of its book profit, 49[such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of 47a[ 48 [eighteen per cent] ].] (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI 50 to the Companies Act, 1956 (1 of 1956) :
Provided that while preparing the annual accounts including profit and loss account,--
(i ) the accounting policies;
(ii ) the accounting standards adopted for preparing such accounts including profit and loss account;
(iii ) the method and rates adopted for calculating the depreciation, 13 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) :
Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,-- (i ) the accounting policies;
(ii ) the accounting standards adopted for preparing such accounts including profit and loss account;
(iii ) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year.
Explanation [ 1].--For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by--
(a ) the amount of income-tax paid or payable, and the provision therefor; or
(b) the amounts carried to any reserves, by whatever name called [, other than a reserve specified under section 33AC]; or
(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d ) the amount by way of provision for losses of subsidiary companies; or (e ) the amount or amounts of dividends paid or proposed ; or (f ) the amount or amounts of expenditure relatable to any income to which [ section 10 (other than the provisions contained in clause (38) thereof) or [***] section 11 or section 12 apply; or] ( g) the amount of depreciation,] ( h) the amount of deferred tax and the provision therefor, ( i) the amount or amounts set aside as provision for diminution in the value of any asset, 14 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur if any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by,--]] ( i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account:
Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or (ii ) the amount of income to which any of the provisions of 59 [section 10 (other than the provisions contained in clause (38) thereof)] or 60[***] section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or ( iia) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); or (iib) the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or ( iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.
Explanation.--For the purposes of this clause,--
(a) the loss shall not include depreciation;
(b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or
(iv) to (vi) [***]
(vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 63 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses.
Explanation.--For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 64 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or ( viii) the amount of deferred tax, if any such amount is credited to the profit and loss account.] 15 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 4.3 At the outset Ld AR submitted that the aforesaid issue qua the adjustments to be made in net profits of the assessee company to arrive at the "Book Profit" for computing the tax under the provisions of section 115JB, has been dealt at length by the ITAT Delhi (Special Bench) in the case of ACIT Vs. Vireet Investments (P) Ltd., [2017] 82 taxmann.com 415 (Delhi - Trib.)(SB)
6. We have considered the submissions of both the parties and have perused the record of the case. There cannot be any quarrel with the submissions of ld. Sr. counsel for the assessee that section 115JB is a complete code in itself. Chapter XII-B provides alternate scheme for computing tax liability of certain companies, whose total income under normal provisions is below the threshold book profit as prescribed under Chapter XII-B. Under section 115JB this threshold limit is 18.5%. Thus, total income as computed under the normal provisions of the Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April 2012, is less than 18.5% of its book profit, such book profit shall be deemed to be the total income of the assessee and tax shall be payable on such total income @18.5%. Thus, the scheme of the Act is that the computation is first made under the normal provisions of Income-tax Act and, thereafter, under an alternate scheme provided u/s 115JB for computing total income as per the prescribed method. If the tax liability on the basis of total income as per MAT provisions is more than the tax computed under the normal provisions of the Act, then the former becomes the final tax liability of the assessee. The mode of computation of book profit has been prescribed under MAT provisions. The issue posed for our consideration is whether computation provisions prescribed for computation of total income under normal provisions with reference to section 14A can or cannot be taken into consideration while computing book profits under MAT provisions.
6.1 Section 14A has been inserted by the Finance Act, 2001 with retrospective effect from 1- 4-1962. The object for inserting section 14A, was to deny the expenditure relatable to the earning of exempt income being allowed as deduction against the taxable income. The purpose was to deny double deduction to assessee - firstly by claiming the entire income as exempt income and then again claiming the expenses incurred relatable to the exempt income against the taxable income. This would have resulted in reduction of the taxable income to the extent of the expenses relatable to exempt income. In order to overcome this anomaly, section 14A was inserted. Chapter XIIB has been inserted by the Finance Act, 1987 w.e.f. 1-4-1988 and the object was to make the companies which were not at all paying any taxes to pay the tax on the basis of book profits as per the deeming provisions contained in the Chapter. The computation of book profit has been specifically prescribed in the section itself and the starting point of the same is the net profit as shown in the P&L a/c prepared in accordance with 16 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur Schedule VI to the Companies Act, which is to be increased by various items contemplated in the explanation and also to be reduced by various items, mentioned in the explanation itself. The adjustments contemplated in the explanation are broadly the same as are being made while computing profits of business in case of companies under normal provisions of Act. Under this Chapter specific items have been prescribed for computation of book profit. The same have to be followed and the computation as contemplated under Chapter IV of the Income-tax Act for computation of business income cannot be imported in whole sum per se under this Chapter. However, the contention of Ld.CIT (DR) is that the provisions of clause
(f) to Explanation 1 to section 115JB requires the net profit as, shown in the P&L A/c to be increased by the amount or amounts of .expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply and as per clause (ii) of the explanation, the net profit is to be reduced by the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause-(38) thereof), or section 11 or section 12 apply, if any such amount is credited in the P&L A/c. Thus, the submission is that the provisions of clause (f) to Explanation 1 of section 115JB(2) are akin to section 14A.
6.2 Now the question before us is, whether the amount or amounts of expenditure relatable to exempt income as contemplated in clause (f) to Explanation 1 to section 115JB(2) could be arrived at by' resorting to provisions of section 14A or not. The submission of Ld. Principal CIT (DR) is that it cannot be disputed that the object of section 14A was only to determine the expenditure in relation to exempt income as noted earlier. His contention, therefore, is that the object of sec. 14A and clause (f) to Explanation 1 to Section 115JB(2) is same and, therefore, it cannot be disputed that section 14A can be resorted to for finding out the expenditure relatable to any income which is exempt. In this regard Ld. Principal CIT(DR) has referred to some of the well settled principles of statutory interpretation which are discussed hereunder.
6.3 When the question arises as to the applicability of similar provisions in different parts of the statute, then it is not only legitimate but proper to read both the provisions in their context. If context is same, different meaning cannot be assigned. It is to be found out that what mischief was intended to be remedied by inserting a particular section. The intention of the legislature once is manifested in a particular section in the statute then said intention cannot be given a different meaning, if a similar provision has been incorporated in a different section in the statute. The intention of the legislature must be found out by reading the statute as a whole.
6.4 Literal meaning cannot always be followed logically, because sometimes it tends to defeat the obvious intention of the legislature and results in producing a wholly unreasonable result. To achieve the obvious intention and to produce a reasonable result.
6.5 The Hon'ble Supreme Court in the case of N.B. Sanjana v. Elphinstone Spg. & Wvg. Mills Ltd. AIR 1971 SC 2039, examined Rule 10 under the Central Excise Act, 1944 observing, inter alia, as under:
"This rule relates to raising of demand for short-levy within a limit in cases where lesser amounts have been paid. The petitioners argued that where no payments had been made and where nil assessments have been made, there would be no application of this rule and no demand could be raised. The Supreme Court observed that we cannot take a literal interpretation in such a case. It should be an interpretation in the context which I mean 17 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur appropriately that the word "paid" would include "ought to have been paid" and assessments would cover 'nil' assessment. The machinery of the tax - system should be made workable and the clear intention should not be prevented."
6.6 In the case of Asstt. Collector of Central Excise v. National Tobacco Co. Ltd. AIR 1972 SC 2563, the Hon'ble Supreme Court has observed as under:
"This is a case under the Central Excises Act and Rules 1944 (as they 7 stood before 1-8-1959) where the Rules 10 and 10A have again come for further discussion even after it was settled in Sanjana's case (AIR 1971 SC 2039) that .while Rule 10 was for short-levy (for specified reasons), Rule 10A was for non-levy or short-levy or for reasons other than in Rule 10. Rule 10 covered cases of inadvertence, error, collusion, misconstruction and misstatement, In Sanjana's case the Supreme Court harmonised the two rules by indicating that Rule 10A which was residuary in character would be inapplicable if a case fell within a specified category of cases mentioned in Rule 10. Rule 10 is confined to cases where the demand is to be made for short-levy caused by the reasons in that Rule 10 itself so that an assessment has to be reopened. The High Court of Calcutta in this case had decided that the demand could not be raised under Rule 10 because it is a case of inadvertence. But the Supreme Court observed in this case that the High Court has called it a case of no assessment at all and in that case it falls under Rule 10A (which is for cases where there is no assessment, that is non-levy). Moreover, there are other circumstances such as insufficient information given by the petitioners which is not covered by Rule 10. That makes the demand valid under Rule 10A. If Rule 10 is interpreted very broadly as done by the Calcutta High Court then the Rule 10A would become useless. The Supreme Court, therefore, held the demand valid under Rule 10A which is where there has been no assessment or where there is short-levy due to reasons other than specified in Rule 10." Though Rule 10A was not mentioned in the demand, quoting a wrong rule does not make it invalid. The Supreme Court has elaborated the application of some fundamental principles of interpretation while setting aside the judgment of the Calcutta High Court.
First, the High Court considered the applicability of Rule 10 alone and not of Rule 10A since only Rule 10 was mentioned. The shutting out of the other Rule 10A, under which also demand could be valid, has been wrong. What the High Court followed was the maxim: Expressio unius est exclusio alteris. But this principle, observed the Supreme Court, is a valuable servant but a dangerous master. "The rule is subservient to the basic principle that Courts must endeavour to ascertain the legislative intent and purpose and adopt a rule of construction which effectuates rather than on that which may defeat these." The High Court ignored in this case the legislative intent in having Rule 10A. Rule 10A was for "special circumstances not foreseen by the framers of the Act or the Rules". The High Court did not consider at all whether the demand would fail under Rule 10A but merely interpreted broadly Rule 10 to conclude that the demand did not fall in that rule. That clearly goes against the legislative might . The Supreme Court therefore set aside the High Court order and upheld the demand under Rule 10A though that rule was not quoted in the demand doing so the Supreme Court upheld the basic principle of legislative intent and purpose. "
6.7 Again in the case of K.P. Varghese v. ITO [1981] 7 Taxman 13 (SC), while examining the true meaning of section 52(2), which enabled the revenue to charge tax on the capital gains deemed to accrue, wherever the declared value for transfer of property was less by 15% or more compared to the fair market value, the Hon'ble Supreme Court refused to accept the strict literal meaning, calling it absurd. The Hon'ble Court gave some examples on the basis 18 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur of strict interpretation and pointed out that it would be absurd and unreasonable to apply sec. 52(2) according to its strict literal construction. The Hon'ble Court further observed that -
"We must, therefore, give up literalness in the interpretation of sec. 52(2) and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless, of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation."
It was further observed that -
'It is now a well settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even "do some violence" to it so as to achieve the obvious intention of the legislature and produce a rational construction'.
6.8 Accordingly, Hon'ble Supreme Court held that a fair and reasonable construction would be that the revenue must show not only that the fair market value of the capital asset exceeds the declared value by 15% or more, and also that it is not a bona fide declaration and the assessee has actually received underhand payment apart from ..what has been actually declared by him.
6.9 In the case of Canada Sugar Refinery Co. v. R [1898] AC 735. at page 742, it was observed that every clause of a statute is to be construed with reference to the context and other clauses of the Act as far as possible to make a consistent enactment of the whole statute or series of statutes relating to the subject matter.
6.10 Thus, the submission of ld. CIT(DR) IS that when basic object and purpose of section 14A and clause (f) to Explanation 1 to section 115JB(2) is same, then it cannot be said that merely because section 14A has not been mentioned in clause (f), therefore, it has no application. The mode of computation with same purpose cannot be differently made merely because section 115JB creates a deeming section. The object of deeming provisions is to substitute the total income computed under normal provisions by that computed under MAT provisions. Submission of ld. CIT(DR) is that this cannot be extended to computation for same items under normal as well as MAT provisions. Under the provisions of section 14A, both direct and indirect expenses in relation to earning of exempt income are to be reduced. Therefore, different meaning cannot be ascribed in clause (f) and, therefore, the submission of Id. counsel for the assessee that only directly relatable expenditure is to be reduced, cannot be accepted.
6.11 Ld. CIT(DR) further submitted that the term "relatable to" used in clause (f) cannot be ascribed a restrictive meaning as compared to the term used "in relation to" in section 14A. Both terms are with the same purport and object.
6.12 Ld. counsel has submitted that the AO cannot go beyond audited financial statements of the assessee while computing book profits u/s 115JB. However, the submission of ld. CIT(DR) is that this argument is fallacious, because here the AO is not going beyond the audited accounts but is computing the expenditure debited in the P&L A/c, which is relatable to earning of exempt income. This is as per clause (f) itself.
6.13 Further reasoning advanced by ld. CIT(DR) is that section 14A has been incorporated much after the incorporation of Chapter XIIB in 1987. Section 14A was incorporated just after 19 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur section 14, which classifies the head of income for computation of total income. This section was made applicable with respect to determination of total income. The MAT provisions are for computation of income from business in case of specific companies. Therefore, it cannot be said that section 14A had no applicability to MAT provisions, which were existing when section 14A was introduced for the first time. Therefore, section 14A is applicable for all kinds of incomes, which are claimed as exempt by assessee in the Income-tax Act.
6.14 There cannot be any quarrel with the proposition that clause (f) of Explanation 1 to section 115JB(2) is in conformity to matching principles of accounting. Ld. counsel has submitted that matching principle of accountancy provides that expenses are debited in the P&L A/c only to the extent relatable to the accrual of the corresponding income and, therefore, only expenses debited to the P&L A/c which have direct and proximate nexus with the exempt income credited to the P&L A/c are to be added back.
6.15. Ld. CIT(DR), however, submits that this argument. cannot be accepted because if assessee has made provision in respect of expenditure accrued, a part of which is relatable to exempt income, then it does not imply that to that extent the expenditure should not be added back.
6.16 The submission of ld. CIT(DR) is, thus, that the phrase "in relation to" as used in section 14A and the expression "expenditure relatable to", as used in clause (f) of Explanation 1 to section 115JB(2), are in the same context and, therefore, have to be understood in the same sense.
6.17 Ld. Principal CIT(DR) has pointed out that the phrase "expenditure relatable to" as used in clause (f) of Explanation 1 to section 115JB(2) will take its color from the phrase in "in relation to", used in section 14A. The contention of ld. CIT(DR) is that if we apply principles of literal interpretation, then that would lead to an-anomalous situation, in which higher expenditure, to the extent of indirect expenses, will be charged towards the earning of exempt income u/s 14A, thereby reducing the exempt income as compared to expenditure charge while computing book profits u/s 115JB because no indirect expenditure will be allocated towards earning of exempt income. The submission is that obviously, this cannot be the intention of legislature. As per the provisions of section 115JB(1), a comparison of the total income computed under the normal provisions of the Income-tax Act is to be made with the book profits as computed u/s 115JB. This makes it clear that total income as contemplated under normal provisions is inextricably linked to book profits under MAT provisions and it is -wrong to suggest that both operate in entirely different fields. This interpretation overlooks the very object of insertion of MAT provisions. Therefore, the submission is that when we resort to comparison between computation under normal provisions of the Income-tax Act and MAT provisions, the comparison will not be on same footing. Submission of ld. CIT(DR) is that it cannot be denied that the legislative intent regarding disallowance of expenditure relating to earning of exempt income was same, whether under normal provisions or under the MAT provisions. Hence, the whole object of comparison between the total income under normal provisions and MAT provisions will get frustrated.
6.18 Ld. CIT(DR) submitted that the above interpretation, will ensure in arriving at the same figure of expenditure relatable to exempt income under normal provisions and also while computing the book profits u/s 115JB. If different modes of computation are followed u/s 14A and in clause (f) of Explanation 1 to section 115JB(2), then the comparison will not be on 20 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur same footing and will produce absurd results. He further clarified that even if we resort to plain meaning rule, the phrase "in relation to" used in section 14A and the phrase "expenditure relatable to earning of exempt income", under clause (f) of Explanation 1 to section 115JB(2), the word "relatable to" has wider connotation than the words "in relation to", where the proximate relationship is required and, therefore, the contention of ld. counsel for the assessee that, while computing book profit u/s 115JB, only those expenses which have direct nexus to the earning of exempt income have to be considered under clause (f) of Explanation 1 to section 115JB(2), cannot be accepted.
6.19 Ld. CIT(DR)'s aforementioned submissions are fortified by the decision of.Hon'ble Delhi High court in the case of Goetze (india) Ltd. (supra). Admittedly the decision is on the point in issue under consideration. The submission of Id. Senior Counsel is that the decision of Hon'ble Delhi High Court is by way of concession by assessee as they have recorded the statement of assessee's counsel to answer the question of law. Per contra the submission of ld. Principal CIT(DR) is that the decision is after due consideration of provisions of law. We find considerable force in the submission of ld. CIT(DR) that the decision cannot be said to be by way of concession more particularly when a substantial question of law and not question of fact was under consideration of Hon'ble High Court. In that case proceedings u/s 263 were initiated, inter alia, on the ground that the expenditure of Rs. 183.63 lacs, incurred for earning of exempt dividend income u/s 14A of the Act was not disallowed, though the assessee had earned dividend income of Rs. 157.85 lacs, which was exempt u/s 10(33) of the Act. The computation of income was made u/s 115JA and in that context the Hon'ble High Court, inter alia, observed as under:
"By order dated May 16, 2012, the following substantial questions of law were framed in the present appeals.
(i) Whether the Income-tax Appellate-Tribunal was right in holding that while computing the book profit under section 1I5JA (sic. Section 115JB) of the Income-tax Act, 1961, no disallowance under section 14A was required to be made?
(ii) Whether the Income-tax Appellate Tribunal was right in deleting interest under section 234D of the Income-tax Act, 1961?
Learned counsel for the respondent-assessee, during the course of hearing, has fairly conceded that the first question has to be answered in favour of the Revenue and against the assessee in view of the specific provisions in the Explanation 1 below section 115JB(2) clause
(f). The Assessing Officer it is stated had made an addition of Rs. 88,292 to the book profits towards expenditure incurred having nexus with dividend income, which were exempt under section 10(33). Recording the said statement, the first question is answered in favour of the appellant-Revenue and against the respondent-assessee."
6.20 Thus, it cannot be said that Hon'ble Delhi High Court has not considered this issue and merely allowed the revenue's appeal on concession. The substantial question of law framed by Hon'ble Delhi High Court clearly shows that the specific issue was whether disallowance u/s 14A was required to be made while computing book profit u/s 115JA/ 115JB. The Hon'ble 21 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur Delhi High Court has not only recorded assessee's plea of merely not contesting the issue in view of specific provisions but has recorded that the counsel fairly conceded. The expression "fairly" implies that Hon'ble High Court was also of the view that the provisions of section 14A were applicable with full force to the corresponding provisions u/s 115J.
6.21 Ld. Principal CIT(DR) has, in this regard, referred to the decision of Hon'ble Supreme Court in the case of K.Y. Pilliah & Sons (supra), wherein in para 10, it has been observed as under:
'10. The form of the second question needs some explanation. The Income-tax Officer worked out the gross profit on the estimated turnover of Rs. 12 lakhs at 6.5% and that the profit amounted to Rs. 78,000. The assessees had by their return disclosed a gross profit of Rs. 36,858. Inadopting the rate of 6.5% on the estimated turnover, the Income-tax Officer added to the income returned Rs. 41.142 been the additional profit, and levied tax thereon.
It was not suggested that there were any other admissible outgoings which could not debited against that amount. The question whether Rs. 41,142 were liable to be taxed .. falls to be. determined under the first question. The second question only relates to the amount of Rs. 7,000 which was the cash credit item which represented an unexplained entry in the books of account of the assessees. In respect of that amount, the Income-tax Officer held that the explanation of the assessee was untrue and the Appellate Assistant Commissioner and the Tribunal agreed with the view. The Income-tax Appellate Tribunal is the final fact finding authority and normally to should record its conclusion on every disputed question raised before, it setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department. The criticism made by the High Court that the Tribunal had "failed to perform its duty merely affirming, the conclusion of the Appellate Assistant Commissioner" is apparently unmerited. On the merits of the claim for exclusion of the amount of Rs. 7,000, there is no question of law which could be said to arise out of the order of the Tribunal. The assessees had credited Sampangappa with two sums of Rs. 6,000 and Rs. 1,000 in the months of November and December, 1950, respectively. It was clear that Sampangappa had not advanced at the material time any amount to the assessees. The explanation of the assessees was, therefore, untrue.' Thus, it is evident that in every case it is not necessary that long drawn reasoning should be given before arriving at any conclusion more particularly when both the parties are agreed on certain provision of law. We, therefore, reject the assessee's contention that the decision of Ho'nble jurisdictional High Court in Goetze (India) Ltd's. case (supra) does not constitute a binding precedent more particularly in respect of subordinate courts including Tribunal functioning within its jurisdiction.
However. Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:--"ITA 593/2015
PR. CIT ..........Appellant Through: Mr. N.P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate.22 ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur versus BHUSHAN STEEL LTD Respondent Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate.
ORDER
29.09.2015
** ** **
1. ** ** **
7. Question No. 6 concerns deletion of addition of Rs. 89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax ('MAT') under Section 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs. 89,00,000 was not justified. The view taken by the 1TAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273 (SC) which held that "the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J." The Court declines to frame a question on the above issue."
Thus, this decision is also on the same issue taking contrary view. Under such circumstances the issue before us is as to follow which decision.
Ld. CIT(DR) in course of hearing filed the decision of Tribunal in the case of Goetze (India) Ltd. (supra) and referred to para 6 of the said decision which is reproduced hereunder:--
"6. Coming to the sustenance of disallowance of Rs.88,290/- u/s 115JB, the Commissioner of Income-tax (Appeals) has upheld the disallowance under clause (f) of Explanation to section 115JB(2) of the Act. Under section 115JB of the Act, the assessee is required to pay tax on its book profit subject to certain conditions. The books profit is to be determined u/s 115JB(2) as per Part II & III of Schedule VI to Company's Act, 1956. Explanation (I) to section II5JB(2) defines the expression "book profit" and means the net profit as shown in the P&L A/c for the relevant previous year prepared under sub-section (2) as increased by the amounts specified in clause (a) to (h) of the Explanation I. Clause (f) of the Explanation 1 refers to the amount or amounts or expenditure retable to any income to which section 10 (other than provisions contained in clause 38 thereof or section 11 or section 12 apply. For applying the provisions of clause (f) of Explanation to section 1I5JB(2), there should be nexus between the amount of expenditure relatable to the income exempt u/s 10 of the Act. The dividend income is exempt u/s 10(33) for assessment year 2001-02. Since the expenditure incurred has not been identified and no nexus has been established with the dividend income, the expenditure could not be disallowed under clause (f) of the Explanation. As per the decision of Hon 'ble Supreme Court in the case of Apollo Tyres Ltd., the Assessing Officer is not entitled to tinker with the book profits as determined as per provisions of Company's Act unless the amount is specified in clauses (a) to (h) of the Explanation. The amount of Rs.88,290/- has not been established to have nexus with the dividend income. The amount of Rs.88,290/- has been estimated at 1% of the income. In our view, no disallowance could be made. Accordingly, we direct the Assessing Officer to delete the amount of Rs.88,290/- from the bookprofit."23 ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur Thus, he submitted that the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 122 Taxman 562 was duly considered by Tribunal before taking contrary view in the matter. But Hon'ble Delhi High Court did not accept the Tribunal's reasoning Ld. CIT(DR) further submitted that the decision in the case of Bhushan Steel has been rendered without taking into consideration the decision in the case of Goetze (India) Ltd. (supra) of co- ordinate bench of equal strength as both sides had not, brought to the notice of the Bench the said decision in the case of Goetze (India) Ltd. (supra) and, therefore, does not constitute binding precedent. Ld. CIT(DR) vehemently contended that when decision in Bhushan Steel Ltd's case (supra) was rendered, the issue was no more res-integra in view of Goetze (India) Ltd's. case (supra). Ld. CIT(DR) submitted that Revenue had filed Review Petition before Hon'ble High Court in the case of Bhushan Steel Ltd. (supra) which has been dismissed in- limine at the threshold on the ground of delay in filing the said Review Petition and, therefore, does not constitute a binding precedent. In support of his contention he has relied on the commentary of Kanga & Palkhivala, vol. I, Vllth Edn.,page 43 which is reproduced hereunder:--
43. Circumstances that Destroy or Weaken the Binding Force of Precedent.
A precedent losses all or some of its binding force in the following circumstances:
(i) if it is reversed or overruled by a higher court - reversal occurs when the same decision is taken on appeal and is reversed by the higher court, while overruling occurs when the higher court declares in another case that the earlier case was wrong decided;
(ii) when it is affirmed or reversed on a different ground, depending on the circumstances of such affirmation or reversal;
(iii) when the legislature enacts a state that is inconsistent with the precedent;
(iv) when it is inconsistent with the earlier decisions of a higher court or a court of the same rank;
(v) if it is a precedent sub silentio or not fully argued; (vi) when it is rendered per incuriam, i.e., in ignorance of a statutory provision or binding
precedent - however, the rule of per incuriam is of limited application, and if the provision of the Act was noticed and considered, then the judgment cannot be ignored as being per incuriam merely on the ground that it has erroneously reached the conclusion; and
(vii) when it is an erroneous decision, i.e, a decision conflicting with the fundamental principles of law.
Ld. Principal CIT(DR) further relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 wherein hon;ble court while summarizing the general principles with regard to precedents, inter-alia, observed as under:-
(iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions.
Ld. Principal CIT(DR) has also relied on following decisions :-
- CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom.) 24 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
- Indian Oil Corpn. Ltd. v. State of Bihar [1987] 167 ITR 897 (SC)
- Kunhayammed v. State of Kerala [2000] 245 ITR 360/113 Taxman 470 (SC) Ld. Principal CIT(DR) has submitted following written submissions in this regard :-
'The assessee had filed a compilation of case laws on 20/04/2017 and the Deptt. had to reply to the above.
The reply of the Deptt. is as follows:--
1. The decision of the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna v. State of Maharashtra and another AIR 2014 SC 1745 has held as follows in para 12 of the judgment :-
2.
"if the third sentence of para 48 is discordant to Niranjan Singh, the view of the co-ordinate bench of earlier vintage must prevail, and this discipline demands and constrains as also to adhere to Niranjan Singh, ergo, we reiterate............"
Again in para 15 of the judgment it has been stated as follows.:-
15 "It cannot be over - emphasized that the discipline demanded by a precedent or the disqualification or dimunition of a decision on the application of the per incuriam rule of great importance, Since without it, certainity of law, consistency of rulings and comity of courts would become a costly casualty A decision or judgement can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgement can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgement of a co-equal or larger Bench, or if the decision of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the 'ratio decidendi' and not to 'obiter dicta'. It is often encountered in High Courts that two are more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of 'per incuriam'.
Thus, both paras 12 and para 15 cited above, in the Supreme Court judgement in Sandeep Kumar Bafna 's case (supra) hold very clearly that the earlier decision is to be followed and not the later one of co-qual bench - when given in ignorance of the earlier decision -which in the present case - makes it very clear that the decision rendered in the case of Goetze should be followed and not the later decision given in the case of Bhushan Steel.
Further, the Hon'ble Supreme Court in the case of Mamaleshwar Prasad v. Kanhaiya Lal (Dead) AIR 1975 SC 907 observed as follows :-
"Certainity of the law, consistency of rulings and comity of Courts all flowering from the same principle converge to the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule that, in exceptional instances where by obvious inadvertence or over sight a judgement fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the sway of binding precedents. It should be a glaring case, an obtrusive omission. "
Although the above observations are not 'ratio' but then as held in the case of (1) Kharawala v. ITO 147 ITR pages 67, 85 :-
25 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur The observation of the Supreme Court on the true interpretation of sub-section (1) cannot, therefore, be regarded as mere passing observations. At the highest, they may be treated as an obiter dictum, that is to say the expression of opinion on a point which it was not necessary for the decision of the case. Even if they are conceivably regarded as obiter dictum it is settled that if an opinion is expressed by the supreme court on the interpretation of a section after careful consideration and such opinion is deliberately and advisedly given, the opinion would be binding on the High Court See Mohandas Issardas v. A.N. Sattanathan [1955] 56 BLR 1156; AIR 1955 Bom 113. Under these circumstances, were are unable to accede to this submission made on behalf of the Revenue.
(2) CIT v. AP Riding Club 168 ITR pages 393, 404 It is now-settled that even the obiter dictum of their Lordships of the Supreme Court is binding on the High Courts under article 141 of Constitution of India.
The 'obiter dicta' of Supreme Court has to be followed.
Hence, both the cases of Sandeep Kumar Bafna and Mamaleshwar Prasad v. Kanhaiya Lal - make it very clear that the earlier decision constitutes the 'binding precedent' and should be followed in preference . to the later decision given in ignorance of the earlier decision of co- equal strength.
Hence, it is requested that the Hon 'ble Special Bench may kindly follow the earlier decision of Goetze in preference to the later decision of Bhushan Steel.' Per contra, Ld. Senior Counsel, without prejudice to his submission that the decision in the case of Goetze (India) Ltd. (supra) on this issue was by of concession, submitted that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the decision being later in point of time is binding on the lower courts. In support of this proposition of law he has relied on following decisions :-
1. Bhika Ram v. Union of India [1999] 238 ITR 113 (Delhi).
2. Govindanaik G. Kalaghtigi v. West Patent Press Co. Ltd.: AIR 1980 Kar 92 (FB).
3. Vasant Tatoba Hargude v. Dikkaya Muttaya Pujari : AIR 1980 Bom. 341.
4. Peedikkakumbhi Joseph v. Special Tahsildar : 2001 (1) KLT 747 (FB).
5. Datamatics Financial Services Ltd. v. Jt. CIT [2005] 95 ITD 23 (Mum. - Trib.) The second proposition advanced by Ld. Senior Counsel is that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the lower Court shall follow the judgment which appears to it to state the law more elaborately and accurately, in this regard he has relied on following decisions :-26 ITA No. 203/RPR/2017
Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
1. Indo Swiss Time Ltd. v. Umrao AIR 1981 Punj. & Har. 213
2. Amar Singh Yadav v. Shanti Devi AIR 1987 Pat 191
3. T.P.Naik v.Union of India AIR 1998 MP 83 Third proposition advanced by Ld. Senior Counsel is that a lower authority/Court cannot declare a judgment of a higher Court as per incurium. In this regard he has relied on following decisions:-
1. Cassel & Co. Ltd. v. Broome [1972] 1 All ER 801 (HL)quoted in ITO v. Modern International ITA No. 1253/Kol/2011.
2. CIT v. B.R. Constructions [1993] 202 ITR 222/[1994] 73 Taxman 473 (AP) (FB).
Thus, we are pitted against two decisions of Hon'ble jurisdictional high court taking divergent views and, under such circumstances we have to decide which decision to follow. We find from the decisions relied upon by Ld. Senior Counsel more particularly in the case of Bhika Ram (supra) that later pronouncement by a bench of co-equal strength should be followed even if earlier decision was not considered. We are not convinced with the submission of ld. Senior Counsel that Tribunal can decide which decision state the law more elaborately and accurately. We are of the view that decision in the case of Cassel & Co. Ltd. v. Broome (supra) should guide the course of action wherein it has been observed as under:--
"Though a judgment rendered per incuriam can be ignored even by a lower court, yet it appears that such a course of action was not approved by the House of Lords in Cassell & Co. Ltd. v. Broome [1972] 1 All ER 801,wherein the House of Lords disapproved the judgment of the Court of Appeal treating an- earlier judgment of the House of Lords as per incurium. Lord Hailsham observed (at page 809) :
'It is not open to the Court of appeal to give gratuitous advice to judges of first instance to ignore decisions of the House of Lords in this way'.
It is recognized that the rule of per incuriam is of limited application and will be applicable only in the rarest of rare cases. Therefore, when a learned single judge or a Division Bench doubts the correctness of an otherwise binding precedent, the appropriate course would be to refer the case to a Division Bench of Full Bench, as the case may be, for an authoritative pronouncement on. the question involved as indicated above. The above-said two questions are answefed as indicated above. "
In such a scenario, in our humble opinion, proper course would be to follow the decision of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In this case the facts were like this. The relevant assessment year was 1960-61. In that regard the Income-tax Officer issued a notice under section 22(2) of the Indian Income-tax Act, 1922 on June 1, 1960, served on assessee on June 13, 1960, requiring the assessee to submit its return on or before July 18, 1960. Assessee sought extension of time for submitting its return which was extended by ITO for two months with rider for no further extension. The assessee failed to furnish the Return of Income within the extended time. Thereafter, a notice under section 28(3) of the 1922 Act was served on the assessee on January 16, 1961. On the very next day, 27 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur viz., January 17, 1961, the assessee filed its return for the assessment year in question. The assessment was completed by ITO on October 31, 1962. Meanwhile, on April 1, 1962, the Income-tax Act, 1962( came into force. As under the provisions of section 297(2)(g) of the Act the proceedings for the imposition of the penalty had to be initiated and completed under the Act, a fresh notice was served on the assessee. The ITO determined the tax due from the assessee for the assessment year at Rs. 1,25,512,10, and on that basis, the penalty payable by the assessee was fixed at Rs. 12,734.10. It may be pointed out that on February 2, 1961. a provisional assessment was made by the ITO under section 23B of the 1922 Act. Immediately thereafter , the assessee deposited Rs. 92,294.55. In determining the penalty due from the assessee, the ITO took into consideration not the amount demanded under section 156 of the Act but the amount assessed under section 143 of the Act. In the back drop of these facts the controversy before Hon'ble Supreme Court was whether the penalty was to be levied on the tax assessed under section 143 or as demanded under section 156 being tax assessed minus the amount paid under the provisional assessment order. Hon'ble Supreme Court before resorting to the interpretation of term in addition to the amount of the tax, if any, payable by him as appearing in section 271(l)(a)(i) observed as under:--
"On the other hand, it two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognized by this court in several of its decisions. "
Hon'ble Supreme Court held as under: -
'We must first determine what is the meaning of the expression "the amount of the tax, if any, payable by him" in section271(l)(a)(i). Does it mean the amount of tax assessed under section 143 or the amount of tax payable under section 156. The word "assessed" is a term often used in taxation law. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax "assessed". A tax payable is not the same thing as tax assessed. The tax payable is that amount for which is a demand notice is issued under section
156. In determining the tax payable, the tax already paid has to be deducted. Hence, there can be no doubt that the expression "the amount of the tax, if any, payable by him" referred to in the first part of section 271(1)(a)(i) refers to the tax payable under a demand notice.' We have ; therefore, to follow the later decision of Ho'nble Delhi High Court in the case of Bhushan Steel (supra).
6.22 In view of above discussion, we answer the question referred to us in favour of asssessee by holding that the computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.
4.4 Based on aforesaid decisions in the case of ACIT Vs. Vireet (supra). Ld AR submitted that the Ld AO had added the disallowance for U/s 14A as computed under the provisions of Rule 8D of the act, whereas 28 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur the computation under clause (f) of explanation 1 to section 115JB(2) should have been made without adhering to such provisions. It is further the contention on behalf of assessee that the disallowance under the regular provision is to be restricted to Rs. 12,50,000/- being the exempt income earned by the assessee during the year under consideration.
4.5 Contradicting the aforesaid conditions of the Ld AR, Ld CIT-DR on the other hand has vehemently supported the orders of revenue authorities and requested them to sustain.
4.6 We have considered the rival submissions, perused the material on record and decision of ITAT Delhi (SB) in the case of ACIT Vs. Vireet (supra). As the issue is squarely covered by the decision of ITAT, Delhi (SB) and no other judicial pronouncement to dislodge the same or any distinguishing feature in the present case could have been brought to our notice by the revenue. As, we find substance in the pleadings of Ld AR, thus, are of the considered opinion that the book profit of the assessee qua the expenditure covered by clause (f) of Explanation 1 to section 115JB(2) cannot be computed as contemplated u/s 14A read with Rule 8D, therefore, per analogy described by the ITAT, Delhi (SB) in the case of ACIT Vs, Vireet (supra), Ld AO is therefore directed to follow the same. Resultantly ground no 1 of the present appeal is decided in favour of the assessee.
29 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
5. Apropos, ground 5,6,7 regarding adding the additions / disallowance on account of :
ii Disallowance on account of Rs. 2,81,08,609/-
'Rehabilitation Compensation'
iii Disallowance on account of 'Proposed Rs. 7,91,74,836/-
share issue expenses'
iv Disallowance on account of 'Foreign Rs. 22,51,00,000/-
Exchange Loss'
5.1 It is the submission by Ld AR that, such additions are not mandated
under the provisions of section 115JB, wherein the Ld AO is empowered to make certain adjustment in profit of the assessee company, emerging from its profit and loss account for the relevant previous year prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). It is further contended that the additions made while computing the book profit under MAT in terms of provisions of section 115JB in the present case are out of the realm of the said section. Ld AR placed his reliance on the Judgment in the case of Apollo Tyres Ltd. v. Commissioner of Income-tax, [2002] 122Taxman562 (SC), wherein Hon'ble Apex Court while deliberating on the relevant question of law, has held as under:
(i) Can the Assessing Officer while assessing a company for income-tax under section 115J of the Income-tax Act question the correctness of the profit and loss account prepared by 30 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 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 Schedule VI to the Companies Act ?
"The assessee-company while determining its net profit for the relevant accounting year has provided for arrears of depreciation in its profit and loss account which according to the revenue is not in accordance with Parts II and III of Schedule VI to the Companies Act, 1956 ('the Act'). Hence, the Assessing Officer while considering the case of the assessee- company under section 115J of the Income-tax Act, 1961, recomputed the said profit and loss account of the company so as to exclude the provisions made for arrears of depreciation. The said action of the Assessing Officer in questioning the correctness of the accounts maintained by the company was challenged by the company before the Tribunal which, among other things, held that the Assessing Officer has no authority to reopen the accounts of a company which are certified by the auditors of the company as having been maintained in accordance with the provisions of the Companies Act and which accounts have been accepted in the general meeting of the company as well as by the Registrar of Companies. This view of the Tribunal was not accepted by the High Court which held that the Assessing Officer has the authority to examine whether the accounts of the company have been maintained in accordance with the requirement of sub-section (1A) of section 115J and in that process if he finds that the accounts of the company are not in accordance with the provisions of the Companies Act, he could make the necessary changes before proceeding to assess the company for tax under the Explanation to section 115J.
The relevant part of section 115J reads as follows :
"115J. Special provisions relating to certain companies.--(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 but before the 1st day of April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit.
(1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956).
Explanation.--For the purposes of this section, 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by--
31 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
(a) the amount of income-tax paid or payable, and the provision therefor; or
(b) the amounts carried to any reserves other than the reserves specified in section 80HHD or sub-section (1) of section 33AC, by whatever name called; or
(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary companies; or
(e) the amount or amounts of dividends paid or proposed; or
(f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; or
(g) the amount withdrawn from the reserve account under section 80HHD, where it has been utilised for any purpose other than those referred to in sub-section (4) of that section; or
(h) the amount credited to the reserve account under section 80HHD, to the extent that amount has not been utilised within the period specified in sub-section (4) of that section;
(ha) the amount deemed to be the profits under sub-section (3) of section 33AC;
if any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by,--
(i) the amount withdrawn from reserves (other than the reserves specified in section 80HHD) or provisions, if any such amount is credited to the profit and loss account :
Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or
(ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or 32 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
(iii) the amounts as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (i) and (ii) attributable to the business, the profits from which are eligible for deduction under section 80HHC or section 80HHD; so, however, that such amounts are computed in the manner specified in sub-section (3) or sub-section (3A) of section 80HHC or sub-section (3) of section 80HHD, as the case may be; or
(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-
section (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable.
(2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub- section (3) of section 74A or sub-section (3) of section 80J."
4. For deciding this issue, it is necessary for us to examine the object of introducing section 115J which can be easily deduced from the Budget Speech of the then Finance Minister of India made in the Parliament while introducing the said section which is as follows :
"It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so-called 'zero-tax' highly profitable companies deserves attention. In 1983, a new section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will have to pay a 'minimum corporate tax' on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30 per cent of its book profit. In other words, a domestic widely held company will pay tax of at least 15 per cent of its book profit. This measure will yield a revenue gain of approximately Rs. 75 crores."
5. The above Speech shows that the income-tax authorities were unable to bring certain companies within the net of income-tax because these companies were adjusting their accounts in such a manner as to attract no tax or very little tax. It is with a view to bring such of these companies within the tax net that section 115J was introduced in the Income- tax Act with a deeming provision which makes the company liable to pay tax on at least 30 per cent of its book profits as shown in its own accounts. For the said purpose, section 115J makes the income reflected in the companies' books of account as the deemed income for the purpose of assessing the tax. If we examine the said provision in the above background, we notice that the use of the words 'in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act' was made for the limited purpose 33 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur of empowering the assessing authority to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, an Assessing Officer under the Income-tax Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinised and certified by statutory auditors and will have to be approved by the company in its General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. In spite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the revenue that it is still open to the Assessing Officer to rescrutinise the accounts and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the revenue on sub-section (1A) of section 115J in support of the above contention is misplaced. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the Income-tax Act for the limited purpose of making the said account so maintained as a basis for computing the company's income for levy of income- tax. Beyond that, we do not think that the said sub- section empowers the authority under the Income-tax Act to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of section 115J, then it should be that income which is acceptable to the authorities under the Companies Act. There cannot be two incomes one for the purpose of Companies Act and another for the purpose of the Income-tax Act both maintained under the same Act. If the Legislature intended the Assessing Officer to reassess the company's income, then it would have stated in section 115J that 'income of the company as accepted by the Assessing Officer'. In the absence of the same and on the language of section 115J, it will have to held that view taken by the Tribunal is correct and the High Court has erred in reversing the said view of the Tribunal.
Therefore, we are of the opinion that the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increase and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J.
34 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 5.2 In terms of aforesaid judgment, it was the submission by Ld AR that the additions made by Ld AO qua (i) Disallowance on account of 'Rehabilitation Compensation', (ii) Disallowance on account of 'Proposed share issue expenses' and (iii) Disallowance on account of 'Foreign Exchange Loss, are not the items prescribed to be added in the audited profit and loss of the assessee company for the relevant year worked out under the provisions of Companies Act to compute the book profit for the purpose of section 115JB. Further, the Ld. AO have the limited powers to increase or decrease the profit of the assessee as provided in the explanation 1 to section 115JB(2). Backed by such assertions it was prayer by Ld AR that aforesaid additions made by Ld AO and sustained by Ld CIT(A) are bad in law, thus the same are liable to be deleted.
5.3 Ld CIT-DR was confronted with the aforesaid contentions by the Ld AR supported with judgment in the case of Apollo Tyres Ltd. v.
Commissioner of Income-tax (supra), to which he sought some time to go through provisions of act and the head / nature of the additions ./ disallowances, to look into that whether the same are permissible u/s 115JB or not. The matter is thus passed over. After some time when the matter was again took up for hearing, Ld CIT-DR, fairly conceded that the 35 ITA No. 203/RPR/2017 Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur additions made by the Ld AO qua are not listed in the explanation 1 to section 115JB(2).
5.4 After a thoughtful consideration of the aforesaid conditions / submissions by both the parties, on perusal of material available on record and judicial p[pronouncement relied upon. We observe that the Ld AO has surpassed the mandate of law conferring him with limited powers to make certain increase or decrease in profit of assessee company. In present case Ld AO added the amount pertaining to additions / disallowance (i) Disallowance on account of 'Rehabilitation Compensation', (ii) Disallowance on account of 'Proposed share issue expenses' and (iii) Disallowance on account of 'Foreign Exchange Loss, which can be a subject matter of regular assessment, but not while computing the book profit for the purpose of MAT as per explanation 1 to section 115JB(2) (extracted supra). Under such facts and circumstances, respectfully following the jurisprudence accorded by Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. Commissioner of Income-tax (supra), the additions made by Ld AO, confirmed by CIT(A), challenged by the assessee company in ground of appeal no 5, 6 and 7 of the present appeal cannot upheld.
36 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur 5.5 Resultantly, Ground no. 5, 6 and 7 of the present appeal of the assessee are allowed.
6. Ground no. 12: Regarding disallowance of credit of TDS amounting to Rs. 12,68,767/-
6.1 This issue is restored back to the file of Ld AO for verification of the facts and if the credits of taxes so pursued by the assessee are legitimately available to it as per records, the same shall be granted.
6.2 The issue is therefore restored to the files of AO for fresh adjudications, with the direction to afford reasonable opportunities of being heard to the assessee.
6.3 In result Ground No 12 of the assessee's appeal partly allowed for statistical purposes.
37 ITA No. 203/RPR/2017Jindal Power Limited Vs. DCIT, Circle-1(1), Bilaspur
7. Ground 13 : This ground is general and academic in nature thus does not warrant separate adjudication.
8. Resultantly, appeal of the assessee is allowed / partly allowed for statistical purposes.
Order pronounced in the open court on 26/09/2024.
Sd/- Sd/-
(RAVISH SOOD) (ARUN KHODPIA)
ाियक सद / JUDICIAL MEMBER लेखा सद / ACCOUNTANT MEMBER
रायपुर/Raipur; िदनां क Dated 26/09/2024
Vaibhav Shrivastav
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. थ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A),
4. The Pr. CIT, Raipur (C.G.)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT,
Raipur
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER,
//True copy//
(Senior Private Secretary)
आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur