TaxTMI 
TaxTMI 
2016 (8) TMI 1467
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....ome for AY 2009-10 on 30/09/2009 declaring total income at Rs. 3,67,678/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Act vide order dated 23/12/2011 wherein the total taxable income was determined at Rs. 4,19,740/- and book profit u/s.115JB of the Act was determined at Rs. 5,36,62,677/-. Since the income-tax payable on the total income was less than 10% of the book profits, book profit u/s.115JB of the Act was deemed to be total income of the assessee. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 28-08-2012 (in Appeal No. CAS.I/285/2011-12) dismissed the appeal of the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised following ground:- 1. On facts and circumstance of the case and in law, the learned CIT(A) erred in confirming the action of the LAO of making addition of Rs. 4,37,67,477/- being provision for bad debts debited to profit and loss account for calculating book profit u/s.115JB (MAT). 2.2. Subsequently, assessee vide letter dated 27/06/2016 has raised additional ground which read a....
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....llant it is noticed that appellant has shown this amount as "Bad Debt" and not as "Provision for Bad and Doubtful Debt". In the P&L Account of e-return, it has been shown it at Sr. No. 37 and not at Sr. No.38. However, in audited accounts it is shown as "Provision for Bad Debt". From a perusal of the audit report, grounds of appeal and submission of the appellant it is established and undisputed fact that it is a provision only. There are no inventories, no sales or no receipts except share income from firms, Dividend income, interest income on FDRs and LTCG (becomes loss after indexation) MAT income has been shown at Rs. 98,42,382/-. Provision for Bad Debts pertains to 8 parties of loans & advances and 3 parties of share application money. Break-up of the same is an under: Share application money 1,54,00,000 Loans & Advances 2,83,64,477 4,37,64,447 10. From a perusal of the above facts it is apparent that appellant has reduced "Loans and Advances" and "Share Application Money" by provision for bad debts. However, share application Money is in fact not a debt at all. It is an investment. The "Loans and Advances" have been given by appellant to vari....
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....d. In this case the Hon'ble HC examined the applicability of clause V to explanation 1 below section 115 JB(2) and upheld that the said cause V is not applicable for 'provision of doubtful or bad debts' as it is in the nature of 'diminution in the value of an asset'. The Hon'ble HC did not discuss the provisions of clause (i) to explanation 1 below section 115 JB(2). The only reference to clause (i) comes in the form of arguments of the counsel for the Revenue (para 7 of the order). However, the decision of the Hon'ble HC then deals with only clause 'c' of explanation 1, under which the amount was added by the A.O. in the case of Yokogawa India Ltd. (Supra). In the observations of the Hon'ble HC reference to clause (i) comes only in following sentence in para 8 of the order: "Realising the fatality of the said argument, it is contended now that item (i) can not amount to satisfaction as provision for diminution in the value of asset is substituted, in case of the assessee falls under item (c)." From the language of the above reference it cannot be Interpreted that Hon'ble HC gave any specific finding on clause (....
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....the decision of the Apex Court in the case of M/s Vijaya Bank which was in the context of section 36(l)(vii). The explanation introduced with retrospective amendment referred to in the judgement of the Apex Court refers to Explanation introduced below section 36(1)(vii) by Finance Act, 2001 with retrospective effect from 01.04.1989 and not the Explanation l(i) introduced below section 115JB(2). (b) As against the above judgement of Hon'ble Karnataka High Court which did not given any specific decision regarding clause (i) to Explanation 1 below section 115JB(2), there is a direct decision of Hon'ble High Court of Punjab and Haryana dated 30.05.2011 in the case of Steriplate (P.) Ltd. reported in 338 ITR 547 which has specifically discussed the provision of clause (i) to Explanation 1 below section 115JB(2) and held that such provision would be added to Book Profit u/s 115JB. (c) The ITAT Mumbai in its decision dated 09.03.2011 in the case of TCFC Finance Ltd. (Supra) held that provision for diminution in the value of investment being unquoted share (similar to Share Application Money in the present appeal) is to be added to book profit under clause (i) to ....
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....y to the decision of ITAT Ahmedabad. Moreover, the decision of Hon'ble Karnataka High Court is the case of Yokogawa India Ltd. does not discuss the issue of clause (i) of Explanation 1 below section 115JB(2), except mentioning it as revenue's arguments. On the other hand, the decision of Hon'ble Punjab and Haryana HC (Supra), though available on the date the Hon'ble IT AT Ahmedabad gave its decision, has not been considered by ITAT. 14.2. In this context an issue arises that whether the CIT(A) should follow the decision of ITAT Ahmedabad in the case of Vodafone (Essar) Gujarat or the decision of a Superior Court i.e. Punjab and Haryana High Court which has passed a speaking order on this issue. Another issue involved is that the Apex Court in the case of HCL Comnet Systems & Services Ltd. reported in 292 ITR 299 has held that 'provision for bad and doubtful debt amounted to "provision for diminution in the value of assets". After that decision clause (i) to Explanation 1 below section 115JB(2) has been added which provides that 'provision for diminution in the value of asset' is to be added u/s 115JB. This means that there is a specific provisio....
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....f assessee has to be adopted and for this proposition, he relied on the decision of Hon'ble Apex Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. With respect to the additional ground about non-levying of interest u/s.234B of the Act he submitted that in the present case, the interest u/s.234B of the Act cannot be charged in view of the retrospective amendment to the Act and for this proposition he relied on the decision in the case of Dy. CIT v. Uttam Sugar Mills Ltd. [2012] 20 taxmann.com 223 (Delhi). Ld. Sr. DR, on the other hand, supported the orders of AO and ld.CIT(A) and further submitted that in the decisions relied upon by the assessee the facts were different as it was not a case where clause (i) of Explanation-1 to section 115JB of the Act was considered. He further submitted written submissions which read as under:- "2. In this case, during the hearing ld.Counsel for the assessee has made submission that the issue of adjustment of provision of bad and doubtful dates u/s.115JB is covered in assessee favour by citing following decisions: (a) CIT v. Kirloskar Systems Ltd.(220 Taxman 1) (Kar.) ....
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....34B of the Act, the ld. Sr.DR submitted that assessee was well aware about the assessee's liability for payment of advance tax while filing the return of income and therefore assessee could not take the shelter of the aforesaid decision. 5. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to adjustment to be made to the book profits u/s 115JB of the Act and the alternate contention of charging of interest u/s 234B of the Act. 5.1. It is an undisputed fact that during the year assessee had debited Rs. 4,37,67,477 on account of bad debt provision to the profit and loss account but while calculating the book profits u/s 115JB the same was not added to the Net profits. Ld.CIT(A) has noted that the provision on account of bad debts which has been debited to the profit and loss account by the assessee is not on account of bad debts but is on account of loans and advances which are treated as investments by the assessee and the investments. The aforesaid finding of Ld CIT(A) has not been controverted by the Ld AR. S.115JB is a special provision for payment of tax by certain companies and stipulates payment of....
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....(Kar.) have held that in view of insertion of clause (i) to Explanation 1 to s. 115JB, with retrospective effect, amount set aside as provision for diminution in value of assets is to be added back for computation of book profits u/s 115JB of the Act. In view of the fact that the provision made by the assessee is covered by the clause (i) to Expln.1 to s.115JB of the act and in view of the various decisions of Hon'ble High Courts cited herein, we are of the view that no interference to the order of CIT(A) is called for and thus we dismiss this ground of Assessee. 5.3. As far as the additional ground of charging of interest u/s 234B is concerned, we find that the assessee had filed the return of income on 30th September 2009 whereas the amendment to clause (i) to Explanation was made by Finance (No 2) Act 2009 with retrospective effect from 1st April 2001 meaning thereby that at the time of filing of return of income, the amendment(had already come into force and that the assessee was aware about it. In such a situation, we are of the view that the ratio of decision in the case of Uttam Sugar Mills Ltd. (supra) would not be applicable to the facts of the present case because ....
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....vide order dated 28/08/2012 (in Appeal No. CAS.I/285/2011-12) upheld the levy of penalty by observing as under:- "14.1. In the above order of jurisdictional ITAT, the ITAT did not follow the decision of ITAT (SB) in the case of Bharti Shipyard Ltd, which is of binding nature for all benches of ITAT, for the reason that one decision of Hon'ble High Court, though not a jurisdictional High Court, is contrary to that. In the present case also the decision of Hon'ble Punjab and Haryana High Court (supra) is contrary to the decision of ITAT Ahmedabad. Moreover, the decision of Hon'ble Karnataka High Court is the case of Yokogawa India Ltd. does not discuss the issue of clause (i) of Explanation 1 below section 115JB(2), except mentioning it as revenue's arguments. On the other hand, the decision of Hon'ble Punjab and Haryana HC (supra), though available on the date the Hon'ble ITAT Ahmedabad gave its decision, has not been considered by ITAT. 14.2. In this context an issue arises that whether the CIT(A) should follow the decision of ITAT Ahmedabad in the case of Vodafone (Essar) Gujarat or the decision of a Superior Court i.e. Punjab and Haryana ....
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.... and independent, it is not necessary that on every addition made, penalty u/s.271(1)(c) is leviable. Ld. Sr.DR, on the other hand, supported the orders of the lower authorities. 9. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that a case for levy of penalty for concealment of income has to be evaluated in terms of provisions of Explanation 1 to Section 271(1)(c), as per which if in relation to any addition in the assessment, the assessee offers no explanation or offers explanation which is found to be false or is not able to substitute the explanation and is also not able to prove that the explanation is bona fide, the addition made would amount to concealment of particulars, of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/....