2016 (9) TMI 1482 - HC - Income Tax

Income accrued in India - profit of the assessee branch in USA viz. Birla consultancy software Services taxability in India - deduction in respect of taxes on income paid in USA - Held that - Nothing is available on record to indicate any challenge by the Revenue to the order of the Tribunal for Assessment Years 1996-97 and 1997-98 before any higher forum. It therefore follows that the orders of the Tribunal on the above issue for the Assessment Years 1996-97 and 1997-98 have been accepted by the Revenue. Therefore the Revenue can have no grievance with the impugned order of the Tribunal as it merely follows its earlier orders which have been accepted. Further no distinguishing features in the present Assessment Year from that existing in the Assessment Years 1996-97 and 1997-98 have been brought to our notice which would justify our taking a different view on this issue for the subject Assessment Year. Profit from power generated are eligible for deduction for the purpose of book profit u/s 115JA - Held that - Revenue has accepted the order of the Tribunal for the Assessment Year 1998-99. The impugned order merely follows its order of Assessment Year 1998-99. Therefore in the absence of any special circumstances being pointed out by Revenue such as different facts etc. in the subject Assessment Year from those in earlier Assessment Year i.e. 1998-99 there is no warrant for taking a different view. Fresh claim of expenditure on account of subway and power lines not claimed in the return of income filed - Held that - The aforesaid questions do not arise from the impugned order of the Tribunal. These questions were not urged/raised for the first time in appellate proceedings as suggested in the questions framed. In fact the claim of expenditure by M/s. Indian Rayon & Industries Ltd. prior to the date of merger with the Respondent Assessee was a subject of consideration during the Assessment proceeding leading order dated 18 March 2002. Expenditure on subway and power line though the said expenditure was not incurred by the assessee but by Indian Rayon & Industries Ltd. prior to the date of scheme of merger - Held that - As the impugned order of the Tribunal has merely followed its order for Assessment Years 199495 and 1998-99 which has been accepted by the Revenue there is no basis for the Revenue being aggrieved by it. This is particularly so as no distinction in facts or law is shown in the subject Assessment Year from those in Assessment Years 199495 and 1998-99. Therefore the question as proposed does not give rise to any substantial question of law. Therefore not entertained. Provision made on account of gratuity and leave salary not to be added to arrive at book profits under Section 115JA - Held that - The grievance of Revenue before us is that Echjay Forgings Pvt. Ltd. 2001 (2) TMI 56 - BOMBAY HIGH COURT will not apply as in that case the liability is debited to the profit and loss Account to arrive at the book profits unlike in this case it is urged by the Revenue is not correct as in this case also the amount has been debited to arrive at the book profits. The distinction between debiting to profit and loss Apportion Account and profit and loss account is of no significance in this case as the proposed addition on the basis of the Explanation 1 to Section 115JB can only be made if the amounts are debited to profit and loss Account to arrive at the book profits. Therefore no distinguishing feature which would warrant our taking a view different from one taken in Echjay Forgings (supra) arises. Sales tax exemption claim - Held that - The issue raised herein was an additional issue raised by the Respondent Assessee before the Tribunal. The impugned order of the Tribunal without considering the merits of the Respondent Assessee s additional claim has restored the issue to the Assessing Officer to examine the claim of the Respondent Assessee as the same was not subjected to any examination earlier. We are unable to understand the grievance of the Revenue. The view of the Tribunal is unexceptionable. This additional ground was raised before the Tribunal for the first time. In that view it was restored to the Assessing Officer to examine and decide on the facts.

Issues:
1. Taxability of profit from the assessee branch in the USA.
2. Eligibility of profit from power generation for deduction under Section 115JA.
3. Fresh claim of expenditure on subway and power lines.
4. Tribunal's powers in comparison to the original authority.
5. Allowance of expenditure on subway and power lines incurred by another entity.
6. Deduction of gratuity and leave salary from profit computation under Section 115JA.
7. Application of Echjay Forgings case on gratuity and leave salary deduction.
8. Restoration of sales tax exemption issue to the Assessing Officer.

Analysis:

1. Taxability of Profit from USA Branch:
The Tribunal's order was challenged regarding the taxability of profit from the USA branch. The Court noted that the Revenue had not challenged similar orders for previous assessment years, leading to the dismissal of the appeal as no distinguishing features were presented to justify a different view.

2. Deduction for Power Generation Profit:
The Tribunal dismissed the appeal on this issue based on its previous order for the Assessment Year 1998-99. As the Revenue had not raised this issue in the previous appeal, and no special circumstances were highlighted, the Court did not find a substantial question of law to entertain the matter.

3. Fresh Claim of Expenditure:
Questions regarding fresh claims of expenditure not raised during appellate proceedings were deemed irrelevant. The Court pointed out that the expenditure in question had been considered during previous assessment proceedings, leading to the dismissal of these questions.

4. Tribunal's Powers and Original Authority:
The Tribunal's exercise of powers was questioned, citing a Supreme Court case. However, the Court found the Tribunal's actions unobjectionable, as it had referred an additional issue raised by the assessee back to the Assessing Officer for examination, without any constraints.

5. Allowance of Expenditure by Another Entity:
The Tribunal's decision to allow expenditure incurred by another entity was upheld based on past orders and the acceptance of those orders by the Revenue. The Court found no basis for the Revenue to be aggrieved by this decision.

6. Deduction of Gratuity and Leave Salary:
The Tribunal's decision to allow deduction of gratuity and leave salary from profit computation under Section 115JA was supported by the Court. The Court relied on a previous decision and concluded that the provision for these liabilities, based on actuarial calculations, did not fall within the scope of the relevant section.

7. Application of Echjay Forgings Case:
The Court addressed the application of the Echjay Forgings case on the deduction of gratuity and leave salary. It clarified that the distinction between debiting to different accounts was not significant in this case, and the issue was concluded in favor of the assessee based on the previous decision.

8. Restoration of Sales Tax Exemption Issue:
An additional issue raised by the assessee regarding sales tax exemption was restored to the Assessing Officer by the Tribunal for examination. The Court found the Tribunal's decision appropriate and dismissed the appeal without costs.

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