TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1581
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....ken as a lead case wherein the relevant facts are that the assessee filed its return of income on 30/09/2009 declaring total income of Rs. 12,91,67,010/- under normal provisions of the Act and for the purpose of MAT liability under section 115JB of the Act, the book profit were declared at Rs. 48,92,35,027/-. Subsequently, the case of the assessee was selected for scrutiny and after calling for information and documentation, the assessment order was passed on 30/12/2011 under section 143(3) wherein the income under the normal provision was determined at Rs. 14,22,51,760/- and book profit as declared by the assessee at Rs. 48,92,35,027/- was accepted. 5. The assessee thereafter filed a rectification application under section 154 dt. 31/03/2016 stating that there was a mistake apparent on record relating to revenue expenditure incurred by the company amounting to Rs 35,67,94,891/- which is liable for deduction from book profits for the purpose of calculation of MAT liability and which has not been allowed while computing the book profits and in support, reliance was placed on the decision of Hon'ble Supreme Court in case of M/s Karnataka Soaps and Detergents Limited in Special Leave....
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....he assessee has challenged the findings of the Ld. CIT(A) wherein he has held that the decision of the Hon'ble Supreme Court in case of Karnataka Soaps & Detergents Ltd. was one of dismissal of SLP at the admission stage and the same cannot be construed as having interpreted the law or laid down the law and the same cannot be construed as Supreme Court's order to bring within the purview of CBDT Circular N. 68 dt. 17/11/1971. 12. In this regard, it was submitted that the Hon'ble Karnataka High Court in case of CIT Vs. Karnataka Soaps & Detergents Ltd. have passed an order dt. 13/10/2014 reported in (2015) 59 taxmann.com 43(Kar) in case of three matters and which has since attained finality as the SLP filed by the Revenue challenging the said order has been dismissed by the Hon'ble Supreme Court on 16/11/2015 disposing off two SLP and thereafter, on 14/12/2015 disposing off the third SLP. It was submitted that neither the Hon'ble Supreme Court nor any other Hon'ble High Court has passed any contradictory judgment in this regard till date which mean that the legal position laid down by the Hon'ble Supreme Court still holds good for all intents and purposes. 13. It was submitted tha....
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....the relevant year on Clinical Trial, new market launches, new product launches, dossier development, product registration, R&D expenses related to development of new product, patent registration, material consumed, consultancy charges, testing charges, travelling and other administrative expenses etc which is evident from S.No.15 read with Note in schedule- E of 'depreciation schedule' annexed with the audited balance sheet already on record (page 64 of Paper book). Due to the said revenue expenditure, profit of the company would have been very low if debited directly to the Profit & Loss account and in order to reflect more profit in the profit & loss account for the purpose of shareholders, this revenue expenditure was charged to Balance sheet as intangible assets under the head "Patents IPR Technologies" As such, this amount of revenue expenditure treated as Intangible asset was required to be reduced while calculating the Book Profit in terms of part II of schedule VI of Companies Act. Reliance in this behalf is placed on the decision of Hon'ble High Court of Karnataka in CIT Vs. Karnataka Soaps & Detergents Ltd where it has been held that it is the profit and loss ....
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....other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs". 17. It was submitted that a reading of the aforesaid circular explicitly demonstrates that a duty is cast upon the Assessing officer to assist and help the assessee in the matter of taxation. They are obliged to advise the assessee and guide them and not to take advantage of any error or mistake committed by the assessee on account of their ignorance. The function of the Assessing Officer is to administer the statute with solicitude for public exchequer with an inbuilt idea of fairness to taxpayers. It was submitted that this very issue is also covered by the decision of the Hon'ble Supreme Court in the case of Anchor Pressings Pvt Ltd. vs CIT (1986) 161 ITR 159 (SC) where, the assessee had not claimed relief u/s 84 and made the claim for the first time in the application u/s 154. It was observed by the Hon'ble Supreme Court that there is no bar on admitting the claim of the assessee for the first time u/s 154 of the Income Tax Act but placed a rider that there must be clear data before the Assessing officer suf....
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....35,67,94,891/-representing revenue expenses was not debited to the P&L account, although it was shown as deferred revenue expenses under the head "Patents IPR Technologies" and is reflected at S.No.15 in schedule- E of 'depreciation schedule' annexed with the balance sheet. However, later while realizing its mistake, which is apparent from the documents available on record, the assessee filed the rectification application u/s 154 of Income Tax Act, 1961, to rectify the said mistake. It was submitted that assessee is entitled to claim the same i.e. to rectify the mistake which is apparent from records, even in subsequent proceeding(s) as have also been observed by Hon'ble Bombay High Court vide its judgement dated 21.06.2012 in a case titled as "Commissioner of Income Tax, Central-1, Mumbai Vs Pruthvi Brokers & Shareholders". The Hon'ble Court has stated as under: "It is clear, therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. ....
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....affected employees covered by decision of High Court- Held :-It is not necessary for every affected person to approach the Court seeking an order in his/her favour once the matter has already been settled by the Court- The benefit of judicial pronouncement after the same attains finality is required to be given automatically to all such persons whose cases are covered by such decision." B. Constitution of India, Articles 16 and 14- Constitution of India, Article 141- Judicial pronouncements- Ratio decendi- Precedent- It is not necessary for every affected person to approach the Court seeking an order in his/her favour once the matter has already been settled by the Court- The benefit of judicial pronouncement after the same attains finality is required to be given automatically to all such persons whose cases are covered by such decision." 21. It was accordingly submitted that keeping in view the factual and legal submissions made herein-above, supported by aforesaid judgements, since all the relevant facts were available in the balance sheet and also in the assessment order passed u/s 143(3) dated 30.12.2011 forming part of the records, the claim of the assessee falls within th....
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....xman 471(SC) and Apollo Tyre Vs. CIT [2002] 122 Taxman 562(SC) that once accounts have been prepared as per the Companies Act, 1956 and certified by the statutory auditors then there is no adjustment that can be made for the purpose of Income Tax Act u/s 115JB except the changes enumerated therein. The confession that profits had been shored up for the consumption of its shareholders in the present case clearly implies that the same had been certified by the statutory auditors. There is nothing projected, on behalf of the assessee, to counter how the facts of its case don't attract adoption of the ratio laid down in the above cited cases by the Apex Court. Even if they did it would not, in any sense, be construed as a mistake apparent from record. 25. It was submitted that the reference to the decisions in the cases of ACIT vs Saurashtra Kutch Stock Exchange Ltd [2008] 173 Taxman 322(SC); CIT Vs Aruna Luthra 252 ITR 76(P&H); and Mepco Industries Ltd Vs CIT 319 ITR 208(SC) to drive home the point that rectification can be made on the basis of decision of Hon'ble Supreme Court, is misplaced and not tenable in light of the finding of the ld CIT(A) that the decision in the cas....
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....ve resulted in lower profits. It was however submitted that if book profit have to be determined in terms of profit/loss account as per Part II of Schedule VI of the Act, the whole of the Revenue expenditure have to be taken into consideration to arrive at the correct profit and basis which the tax liability under section 115JB of the Act has to be computed. In support, reliance has been placed on the decision of Hon'ble Supreme Court in case of Karnataka Soaps (supra) wherein the SLP filed by the Revenue against the order of the Hon'ble Karnataka High Court has been dismissed and the matter has attained finality and is no more debatable. 28. The relevant facts before the Hon'ble Karnataka High Court were that in three cases, the assessee has been brought to tax under section 115JA of the Act and the Assessing authority had refused to reduce the deferred revenue expenditure from the book profit while working out the MAT computation by observing that there is no provision under section 115JA of the Act to change the nature of expenses shown in the books of account. The assessee contended that neither the Income Tax Act nor Schedule-VI of the Companies Act contemplates the concept o....
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....ly because in the printed P&L Account for the purpose of showing to the share holders, the profit is made by the Company and the entire expenditure is not deducted and a portion is shown as deferred revenue expenditure, the assessee cannot be denied the benefit of actual expenditure incurred. It has been further held by the Hon'ble Karnataka High Court that when the assessee has actually incurred expenditure and tax liability is less when compared with the net profit arrived at after giving deduction to the actual expenditure, the tax payable is on that net profit and not on the fancy figure shown in the P&L Account for the purpose of showing profits to the share holders. It has been further held by the Hon'ble Karnataka High Court that for the purpose of determination of the net profit, one has to look into books of account maintained by the company and the P&L Account prepared on the basis of such books of account and what is shown in the printed balance sheet for the benefit of the share holders will not reflect the true state of affairs and cannot be made the basis for levying tax under this Act and accordingly, the findings of the Tribunal were confirmed. The relevant findings....
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....losing the expenses in respect of non-recurring transactions or transactions of an exceptional nature. 14. It is not in dispute that the assessee has incurred the expenses as stated above for the years 1999-2000, 2000-01 and 2006-07. The net profit could be determined only after deducting the aforesaid amount. The assessee is seeking for. deduction of the said amount which has actually incurred. However, in the P&L account which is printed for the purpose of showing it to the shareholders in order to show that they have earned some profits, they do not want to deduct the entire-amount. They want to defer these expenses for the subsequent years in which they intend-to earn profits because of the expenditure in those years. Therefore, the figure of profits shown in the printed balance sheet is more than the profit earned by the assessee/company in terms of the books of account maintained according to Part-H and Part-Ill of Schedule VI of the Companies Act. 15. The argument is even though they have incurred the entire expenditure as in the printed P & L account, the same is not shown and a portion of it is shown as deferred expenditure. That portion as deferred expenditure cannot ....
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....the benefit of the shareholders as it will not reflect the true state of affairs and that cannot be made the basis for levying tax under the Act. This is precisely what the Tribunal has held. Neither under the Companies Act nor under the Income Tax Act, this concept of deferred expenditure is recognized. That is a-pathology used by the chartered accountants to show to the shareholders that the company has made profit though it has not earned profits. In other words it is nothing but a window dressing and the authority should not be mislead or guided by this balance sheet which is prepared to satisfy the shareholders. It is the P & L account prepared on the basis of the books of account as contemplated in Part-II of Schedule VI which should form and assist to find out what is the profit earned and on that profit, tax is levied. 17. In that view of the matter, the order passed by the Tribunal cannot be found fault with. It is in accordance with law. Hence, the substantial questions of law are answered in favour of the assessee and against the revenue." 30. In the instant case, on perusal of the balance sheet, in particulars Schedule - E, we find that the assessee has incurred reve....
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....We therefore find that the facts of the present case are pari materia with the facts as well as the issue (Section 115JA has been substituted by Section 115JB) before Hon'ble Karnataka High Court and the application of the assessee seeking rectification under section 154 of the Act drawn support rightly from the decision of the Hon'ble Karnataka High Court. 32. There is no other contrary decision either of the jurisdictional High Court or any other High Court which has been brought to our notice therefore we find that the claim of the assessee seeking rectification under section 154 deserves to be accepted. None of the lower authorities or the Ld. CIT DR during the course of proceeding before this Bench could point out any distinguishing features in assessee's case vis a vis the case before the Hon'ble Karnataka High Court and the said decision is directly on the point raised in the present appeal. We therefore find that being the only decision on this subject which has been brought to our notice and which has attained finality in view of the dismissal of SLP by Hon'ble Supreme Court, we are clearly guided by the decision of Hon'ble Karnataka High Court even though the same is not....