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2021 (9) TMI 444
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.... The Appellant therefore submits that the order passed by the CIT (A) confirming the order under section 154 of the Act shall be vacated 2. The learned CIT (A) erred in confirming the action of the AO of adding interest on income tax refund of Rs. 17,19,28,805 to the book profit of the appellant u/s 115JB of the Act. The appellant submits that since the interest on income fax refund was not credited to profit and loss account as per the accounting policy consistently followed by the appellant, the learned CIT{A) erred in confirming the action of the AO in making adjustment to the book profit, which is not enumerated in clause (a) to (k) of Explanation 1 to section 115JB of the Act. The CIT (A) ought to have deleted the addition of interest on income tax refund to the book profit u/s 115JB of the Act. 3(a) The learned CIT (A) erred in confirming the action of the AO of adding pre-operative income of erstwhile RPL of Rs. 23,80,33,573 to the book profit of the appellant u/s 115JB of the Act. The appellant submits that since the pre-operative income was not credited to profit and loss account by the appellant, the learned CIT (A) erred in confi....
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....assessee electronically filed a revised return on 23.03.2011 declaring total income of Rs. 2905,36,58,6047- under normal provisions and Rs. 10634,55,98,256/- under section 115JB of the Act. The Assessment u/s 143(3) of the Income Tax ,1961 was completed determining the total assessed income at Rs. 3714,73,24,1977- as per normal provision of the Act and Rs. 10735,83,89,2607- u/s 115JB of the Act. 5. Thereafter, the Deputy Commissioner of Income-tax, LTD, Mumbai {hereinafter referred to as DCIT} had issued a notice u/s. 154 of the Act on 21.05.2018 proposing to increase the book profit u/s 115JB of the Act by rectify the following mistakes i.e. adding the following income not credited to profit and loss account of the appellant. (i) Interest on income tax refund of Rs. 17,19,28,805/- (ii) Pre-operative income of erstwhile RPL of Rs. 23,80,33,573/- 6. In response, the assessee filed its reply vide letter dated 12.09.2018 that there was no mistake apparent form records which can be rectified u7s.154 of the Act. However, the DCIT rejected the submissions of the assessee and passed a rectification order u/s 154 of the Act dated 30.11.2018 and added the above amoun....
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....rofessional fees paid and recomputation of deduction u/s 10B to exclude other income 31-03-2017 3 154 23-04-2013 To withdraw consequential deduction allowed u/s 10B in view of relief by. CIT(A) depreciation and sales lax incentive claim, 4 154 06-03-2017 To withdraw allowance of mark to market loss on account of derivatives pursuant to ITAT order of AY 2008-09 5 154 30-11-2018 Impugned order making addition of interest on Income Tax refund and pre operative income u/s 115JB 12. Further submissions on this issue are as under:- 10. From the notice under section 154 issued on 21-05-2018 (pg 155 of the FPB) and the order passed on 30-11-2018 (pg 153-154 of FPB), it can be noted that the AO sought to amend the rectification order passed on 06-03-2017. When one refers to the order under section 154 dated 06-03-2017 (pg 148 of the FPB), it can be seen that the said order was passed to withdraw the allowance of mark to market loss on account of derivatives pursuant to ITAT order of AY 2008-09 where said losses were held to be allowable. Thus there was no discussion / reference to the issues listed in para 3 ab....
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....(A) allowed certain relief to the assessee and a consequential order was passed. Thereafter, several rectification orders were passed to rectify different types of mistakes. Later on, the AO issued notice under section 154(3) seeking to rectify the last rectification order in respect of deduction under section 10B and then passed the rectification order. On appeal against the rectification order, the CIT(A) held that since matter of exemption under section 10B was not dealt with in any of the intervening orders passed by the AO under section 154 and that issue was before the AO only in the original assessment order, impugned rectification order was barred by limitation and hence invalid and void ab initio. In the department appeal before the ITAT, the ITAT upheld the view of the CIT(A). While holding so, the ITAT also considered the decision of the SC in the case of Hind Wire Industries Ltd (supra) and followed the later decision in case of Waldies Ltd v CIT 223 ITR 163 (SC) * Similar view is also taken by the Jodhpur Tribunal in the case of A K Modi v DCIT 4 SOT 473 (pg 54-56 of LPB II). 12. In view of the above, it is submitted that in the appellant's case b....
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....istently been followed by the Appellant year after year for preparation of its books of accounts. The books of accounts has been certified by the Independent Auditor as depicting the True and Fair view and same has been adopted by the Shareholders in its Annual General Meeting. The book profit u/s 115JB of the Act was assessed by the AO. after fully considering the fact that both the aforesaid incomes have not been added to book profit, though the same have been considered while assessing the income under normal computation of the Act. In fact, post filing the Return of Income and offering interest on income tax refund of Rs. 17,19,28,805 to tax under normal provisions, the interest pertaining to AY 2004-05 was reduced from Rs. 13,44,22,401 to Rs. 6,43,41,230, thus interest of Rs. 7,00,81,171 was withdrawn. Following the order of SB of ITAT in the case of Avada Trading Co (P) Ltd, the AO accepted the appellant's claim and reduced the interest on income tax refund by Rs. 7,00,81,171 under normal provisions in the order under section 143(3). (pi refer relevant para of the order at pg no 94-95 of the FPB). This shows that there is no certainty of receipt of income being interest o....
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.... 23-30 of LPB I) In this landmark decision, the SC has held that AO does not have jurisdiction to go behind the net profit shown in profit and loss account as prepared under Companies act except to the extent provided in Explanation to Section 115J. * PCIT v Bhagwan Industries Ltd ITA No 436 of 2015 (Bom) (Pg 31-32 of LPB I) In this case, the assessee had directly credited the profit on sale of land to Capital Reserve Account in the balance sheet rather than routing it through the Profit and Loss account. The Tribunal following the decision of SC in case of Apollo Tyres Ltd (supra) and Bombay HC decision in case of Akshay Textiles Trading and Agencies Pvt Ltd 304 ITR 401, held that book profits cannot be reworked under section 115JB of the Act and profit on sale of land cannot be brought to tax. Said conclusion of the Tribunal was affirmed by the High Court. * DCIT v Dune Leasing & Finance Ltd 126 ITD 255 (Del Trib) (Pg 33-37 of LPB I) In this case, interest income and interest expenses related to certain loans were not provided in the books of accounts, though same were claimed under normal provisions in computation of income. On facts,....
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....from records but are debatable in nature and the SC and HC have held that no addition to book profits can be made except to the extent provided in Explanation 1 to Section 115JB of the Act Ground of Appeal No 2 and 3(a) 22. Vide ground of appeal no 2 and 3(a), the appellant has challenged the additions made on merits. For this in addition to relying on the para 16 to 18 above, appellant would further like to state as under: 23. The Appellant submits that section 115JB of the IT. Act is a special provision for payment /of tax by certain companies based on book profit. Section 115JB is in itself a code for computing tax payable under that section. It is submitted that the Book Profit under section 115JB has to be computed on the basis of net profit disclosed as per the Profit & Loss account prepared under the provisions of Part II and III of schedule VI to the Companies Act - 1956 and laid before the Company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act - 1956. Once the accounts have been prepared in the manner aforesaid and adopted at the annual general meeting of the company, the net profit disclosed i....
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....ere was no certainty with the quantum of interest on income tax refund as the appellant as well as the department is in appeal on multiple issues before the ITAT/HC/SC. Thus, no finality has been obtained with respect to assessment and consequential interest. This can also be seen from the fact that post filing the Return of Income and offering interest on income tax refund of Rs. 17,19,28,805 to tax under normal provisions, the interest pertaining to AY 2004-05 was reduced from Rs. 13,44,22,401 to Rs. 6,43,41,230, thus interest of Rs. 7,00,81,171 was withdrawn. Following the order of SB of ITAT in the case of Avada Trading Co (P) Ltd, the AO accepted the appellant's claim and reduced the interest on income tax refund by Rs. 7,00,81,171 under normal provisions in the order under section 143(3). (pi refer relevant para of the order at pg no 94-95 of the FPB). For this reason, the interest on income tax refund was not credited to Profit and Loss Account as per the policy consistently followed by the Appellant which is also in accordance with the Accounting Standard - 9 issued by ICAI. Similarly, the Appellant has earned Pre-Operative income of Rs. 23,80,33,5737- being in....
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....o submit that it is the duty of the AO and appellate authorities to assess correct income of the assessee and hence this deduction should have been allowed following the analogy of taxing the pre-operative interest income. For this proposition we rely on the CBDT Circular No 14(XL-35) of 1955 dt. 11-04-1955 and also below decisions: * Nirmala L Mehta v CIT 269 ITR 1 (Bom) * Balmukund Acharya v DCIT 310 ITR 310 (Bom) 30. In any case, the fact of non-claiming of pre-operative expenses of Rs. 3,308 crs was brought to the attention of the AO in the response dated 12-09-2018 to notice issued under section 154. (pi refer pg 156 to 161 of FPB @ pg 160-161) Ground of appeal no. 3(c) 31. Vide ground of appeal no 3(c), without prejudice to contentions raised in ground of appeal no 3(a) and 3(b), the appellant contends that in the event pre-operative income is taxed under book profits, same shall be added to cost of assets in subsequent year and depreciation for the book profits shall be computed accordingly. Ground of appeal no. 4 32. Vide ground of appeal no 4, the appellant has challenged levy of interest under section 234D and....
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....he assessee that the rectification order passed by the AO in this case, which is dated 30.11.2018 is time barred inasmuch as section 154(7) provides that no order u/s. 154 shall be passed after expiry of four years from the end of the financial year in which the order sought to be amended was passed. 15. Now, we note that in the rectification order passed, AO has sought to rectifying the following mistakes. i) Interest on income tax refund. ii) Pre-operative income of erstwhile RPL It is undisputed that in the chart of assessment orders passed in this case referred hereinabove except for the final order dated 30/11/2018, these issues where never subject matter or any of the orders passed be it under 143(3) and 154. It is not the case of the revenue that in the reassessment order passed in the rectification order passed and the intervening periods, there was a proposal for the rectification on these issues. Hence, it is undisputed that this rectification is being sought to be made with reference to the assessment order passed u/s.143(3) of the Act, which is dated 26/12/2011. As noted above, the intervening reopening was done for disallowance deduction for pro....
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.... the book profit of the appellant u/s 115JB of the Act. The appellant submits that since the interest on income tax refund was not credited to profit and loss account as per the accounting policy consistently followed by the appellant, the learned CIT (A) erred in confirming the action of the AO in making adjustment to the book profit, which is not enumerated in clause (a) to (k) of Explanation 1 to section 115JB of the Act. The CIT (A) ought to have deleted the addition of interest on income tax refund to the book profit u/s 115JB of the Act. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 18. The assessee has also raised following additional grounds:- On the facts and in circumstances of the case and in law, the order passed u/s 154 of the Act is liable to be quashed as same is passed beyond the time limit prescribed u/s 154(7) of the Act. 19. We note that the additional ground in this case is on the same footings as for A.Y. 2009-10 dealt by us hereinabove. Our above orde....