TaxTMI 
TaxTMI 
2025 (9) TMI 1318
X X X X Extracts X X X X
X X X X Extracts X X X X
....together. 2. Tax Case Appeal No.187 of 2016 was admitted on 20.02.2017 on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the addition made on account of VRS expenditure and the expenditure towards newly launched products was not proper? 2. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee was permitted to have two set of accounts one for the purpose of shareholders and another for the purpose of computation of book profits under Section 115JA of the Income Tax Act? and 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee deferred sales-tax liability which was assigned to another entity was not assessable under Section 41(1) of the Income Tax Act?" 3. Tax Case Appeal No.188 of 2016 was also admitted on the same day, i.e., 20.02.2017 on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the addition made on account of VR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent years, the CIT(A) accepted in part the claim of the assessee. Accordingly, the appeals filed by the assessee were partly allowed. (d). The revenue challenged the orders passed in both the appeals in ITA No.777/Mds/2008 and ITA No.710/Mds/2009. In ITA No.710/Mds/2009, the assessee filed an application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963, [hereinafter referred to as 'the ITAT Rules'] supporting the order passed by CIT(A) on the ground that the reassessment was erroneous, which was raised by him before the CIT(A). The ITAT dismissed the appeals filed by the Revenue and in ITA No.710 (supra) held that the reassessment was invalid as it was only a change of opinion. The revenue aggrieved by the common order of the ITAT in the two appeals, has filed the instant appeals. 5. The learned counsel for the appellant/revenue submitted as follows: (i) (a) As regards the first question of law, the learned counsel for the appellant/revenue submitted that the CIT(A) and the ITAT, ought not to have accepted the assessee's case for deleting the addition made by the Assessing Officer for computing the book profit towards Voluntary Retir....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order. He relied upon the judgment of the Bombay High Court in Commissioner of Income Tax-4 v. Jamnadas Virji Shares & Stock Brokers (P) Ltd., reported in [(2012) 21 taxmann.com 27 (Bom.)], the judgment of Punjab and Haryana High Court in Self Knitting Works v. Commissioner of Income Tax, Central Circle, Ludhiana, reported in [(2014) 51 taxmann.com 137 (Punjab & Haryana)] and the judgment of Delhi High Court in Commissioner of Income Tax, Central-II v. Divine Infracon (P.) Ltd., reported in [(2015) 64 taxmann.com 472 (Delhi)], in support of his submissions. (v) As regards the fifth question of law in TCA No.188 of 2016, the learned counsel for the appellant/revenue submitted that having held that the reassessment was bad in law, the ITAT ought not to have confirmed the finding of CIT(A) on merits and relied upon the judgment of this Court in Rajam Chettiar Mahasivarathiri Kattalai v. Special CIT and Commr. of Agrl. IT, Chepauk, Chennai-5 reported in [(2000) 241 ITR 794 (Mad)] and in Commissioner of Income Tax v. Matrix Intel P Ltd., reported in [(2007) 294 ITR 257 (Mad)]. 6. Per contra, the learned counsel for the respondent/assessee made the following submissions: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 332 (Del)] and the order of this Court in the assessee's own case [TCA No.452 of 2009 - Commissioner of Income Tax v. Indian Cements Ltd. Dated 04.03.2020] for another assessment year, which was held in favour of the assessee as regards the issue of the applicability of Rule 27 of the ITAT Rules. 7. We have considered the rival submissions and perused the records. 8. In respect of appeal viz., ITA No.710/Mds/2009 (impugned in TCA No.188 of 2016), wherein the assessee invoked Rule 27 of ITAT Rules and submitted that reassessment was invalid, the ITAT held that the reopening was made four years from the end of the Assessment Year; that there was nothing on record to show that the assessee had failed to disclose fully and truly all the particulars of the income; that the Assessing Officer ought not to have reopened the assessment as it was only a change of opinion and accordingly, set aside the reassessment. The ITAT also held that the findings of the CIT(A) are confirmed in accordance with Rule 27 of the ITAT Rules. 9. The fourth question of law in T.C.A.No.188 of 2016 pertains to this aspect. We would deal with the same first. 10. Rule 27 of the ITAT Rules reads as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rule 27 of the ITAT Act in the absence of any appeal challenging that finding. In that case, there were two issues and the decision in one issue was not dependent on the decision on the other issue. However, it is not so in this case. 15. This issue came up for consideration earlier before the Division Bench of this Court in Abdul Rahman Sait's case (supra) The relevant portion of the said judgment reads as follows: "Incidentally, an attempt was also made on behalf of the Revenue that the Tribunal ought not to have held that the reopening of assessment was not in order, as the finding of the Commissioner that reopening of assessment was held to be in order remain unchallenged by the assessee. But, in our considered opinion, Rule 27 of the Income Tax Rules, which provides that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him, takes care of the right of the assessee to sustain the order of the Commissioner." The above observations squarely apply to the facts of this case. 16. In fact, the Delhi High Court in Sanjay Sawhney's case (supra) had gone to the extent of observing that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under Rule 27 of the ITAT Rules, pertaining to issues relating to the assumption of jurisdiction and the validity of the reassessment proceedings under Section 153C of the Act." 17. From the above, it would be clear that an assessee in an appeal filed by the revenue before the ITAT is entitled to defend the order of the CIT(A) on any of the grounds rejected by CITA(A) by invoking Rule 27 of the ITAT Rules. In fact, the Rule does not specify any particular format in which the said grounds can be raised before the Tribunal and hence, an oral application is also permissible. However, it is desirable that a written application be made which would give an opportunity to the revenue to respond. The assessee cannot, however, raise a totally new ground before the Tribunal that was not raised by him before the CIT(A) by virtue of this provision. 18. In this case, as submitted earlier, the respondent/assessee had raised the ground with regard to the validity of the reassessment before the CIT(A). The assessee had filed a written application before the ITAT under Rule 27 of the ITAT Rules, seeking to sustain the order passed by the CIT(A) also on the validity of reassessment. The ITAT w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the expenses, the fact that the assessee had incurred expenses towards advertisement charges and incentives to dealers cannot be ruled out. It is not the revenue's case that the assessee had not spent any money towards advertisement and payment of incentive to dealers. However, the ITAT held that the entire expenditure claimed cannot be allowed and restricted it to 10% of the claim. (i) (d). The findings of the CIT(A) and the ITAT would indicate that the assessee had actually incurred expenses, which has not been disputed by the revenue. It is only in the quantum that there is a dispute. The ITAT's order in restricting the expenditure to 10% of what was claimed by the assessee, though, is without basis, cannot be said to be unjustified or perverse in the facts and circumstances of this case. In the absence of definite evidence on either side with regard to quantum, we are not inclined to interfere with the factual finding of the ITAT. Hence, the first substantial question of law is answered in favour of the assessee. (ii) (a). As regards the second question of law, it is the assessee's case that the company in its books of account has treated VRS exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lance sheets - one for the purpose of income tax and another for the purpose of showing it to the share holders under the Income Tax Act and therefore, it was contended that the order passed by the Tribunal is incorrect. 16. As is clear from Section 115JA of the Act, it deals with the 'deemed income'. In other words it is not the actual income earned by the assessee. The object behind it is to prevent the assessee from adjusting the accounts or manipulating the accounts so as to avoid payment of tax on the ground that they have not earned any profit at all. Therefore, the said provision was introduced insisting of preparation of profit and loss account for the relevant previous year in accordance with the provisions of Part-II and III of Schedule-VI to the Companies Act, 1956. Once such an account is prepared and certified by the auditors, the same becomes the basis for levying tax on book profit. When once the assessee has incurred an expenditure and it is deducted in terms of Part-II of Schedule-VI of the Companies Act and the profit is arrived at, merely because in the printed P & L account for the purpose of showing to the shareholders that a profit is made by the Comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the appellant's claim with regard to expenditure cannot be rejected as rightly held by CIT(A) and the ITAT. Therefore, the second substantial question of law is also answered in favour of the assessee. 22. The third substantial question of law relates to the Taxability of the discounted value of the deferred Sales-Tax Liability. The assessee had set up a new undertaking in the State of Tamil Nadu. The State under a Scheme to attract investments permitted the Sales Tax collected by the new undertakings to be converted as a loan and payable after twelve years. In the instant case, the assessee had a liability of Sales Tax of Rs. 31.75 Crores treated as a loan payable after twelve years. The assessee had assigned this outstanding future liability of Rs. 31.75 Crores to another company for a consideration of Rs. 5,94,20,288/- (Rs.5.94 Crores) being the Net Present Value of Rs. 31.75 Crores payable after twelve years. The assessee in this case had offered the difference of Rs. 25,81,17,000/- as income for computing tax liability. The revenue sought to include the difference amount i.e. Rs. 5.94 Crores also as income, considering it to be a cessation of liability. It is the asse....