2024 (5) TMI 636 - AT - Income Tax

Revision u/s 263 by CIT - disallowance of provision for nonperforming assets (NPA) in computing books profits u/s 115JB - HELD THAT - We find that the Tribunal in the assessee s own case for Assessment Year 2008-09 and 2011-12 2020 (1) TMI 490 - ITAT KOLKATA as held that provision for Non-performing assets cannot be said to be provision for diminution in value of assets to attract disallowance as per clause (i) of Explanation 1 to sec. 115JB(2) of the Act. In other words, by making a provision for NPA, there will be no reduction in NPA. Hence, clause (i) of Explanation to Sec. 115JB(2) does not apply since there is no reduction in value of asset. Accordingly, this ground of the assessee is allowed and Assessing Officer is directed to delete addition in computing book profit u/s 115JB - Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised in Ground No. 4. Additional depreciation on windmill capitalized in Assessment Year 2012-13 - As decided in M/s. Rittal India Pvt. Ltd 2016 (1) TMI 81 - KARNATAKA HIGH COURT only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. Similar is the view taken in the case of Century Enka Ltd. vs. DCIT 2015 (5) TMI 647 - ITAT KOLKATA . Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue. Disallowance of short term capital loss claimed in the return for transfer of rights in land and building and in - exclusion of capital profits from computation of books profits u/s 115JB - need for referring the matter on account of short term capital loss to the file of the A.O. to verify the applicability of Sec. 50C - It is now settled law that if, while making the assessment, the AO examines the accounts and other details, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the ld. C.I.T., while exercising his power under sec. 263 of the Act, is not permitted to substitute his own view about the computation of income in place of the income assessed by the A.O., unless the order of the A.O. is patently unsustainable in law . The ld. D/R, could not controvert these submissions of assessee. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised - Assessee appeal allowed.

Summary

Issues Involved:

1. Non-addition of provision for NPA in computing book profits under section 115JB.
2. Short-term capital loss claimed for sale of land and building.
3. Claim of exclusion of Debt Redemption Reserve (DRR) reversed in computation of book profits under section 115JB.
4. Deduction of balance 10% additional depreciation on windmill capitalized in the assessment year 2012-13.
5. Reduction of income from long-term investment in VCF from PGBP and offer of net income in computation of total income as per form 64 issued by the fund.
6. Exclusion of capital profits from computation of book profits under section 115JB.

Summary:

Issue 1: Non-addition of provision for NPA in computing book profits under section 115JB
The Tribunal found that the issue is covered by its own decision in the assessee's case for Assessment Years 2008-09 and 2011-12, where it held that the provision for NPA is made as per RBI prudential norms and does not reduce the value of assets. Therefore, it cannot be added back under section 115JB. The ld. Pr. CIT erred in holding the assessment order as erroneous and prejudicial to the interest of the revenue on this issue.

Issue 2: Short-term capital loss claimed for sale of land and building
The Tribunal noted that the Assessing Officer had examined the computation of short-term capital loss (STCL) and its reconciliation with the computation of income during the original assessment proceedings. The Tribunal found that the Assessing Officer had taken a permissible view under the law, and hence, the order was not prejudicial to the interest of the revenue.

Issue 3: Claim of exclusion of DRR reversed in computation of book profits under section 115JB
The Tribunal observed that the Assessing Officer had dealt with the claim and agreed with the contentions of the assessee in his order under section 263/143(3) dated 24/12/2019. Therefore, the issue was not pressed by the assessee.

Issue 4: Deduction of balance 10% additional depreciation on windmill capitalized in the assessment year 2012-13
The Tribunal referred to the decision of the Hon'ble Karnataka High Court in CIT vs. M/s. Rittal India Pvt. Ltd., which held that the balance 10% additional depreciation can be claimed in the subsequent assessment year. The Tribunal also cited similar views from the ITAT Kolkata in the cases of Century Enka Ltd. and Birla Corporation Limited. Thus, the ld. Pr. CIT erred in holding the order as erroneous and prejudicial to the interest of the revenue on this issue.

Issue 5: Reduction of income from long-term investment in VCF from PGBP and offer of net income in computation of total income as per form 64 issued by the fund
The Tribunal noted that the Assessing Officer had dealt with this issue in the order under section 263/143(3) dated 24/12/2019, agreeing with the assessee's contentions. Therefore, the issue was not pressed by the assessee.

Issue 6: Exclusion of capital profits from computation of book profits under section 115JB
The Tribunal found that the Assessing Officer had conducted proper enquiries and taken a permissible view regarding the exclusion of capital profits from the computation of book profits under section 115JB. Citing the Tribunal's decision in J.L. Morrison (India) Ltd. vs. ACIT, it held that the ld. Pr. CIT erred in holding the order as erroneous and prejudicial to the interest of the revenue on this issue.

Conclusion:
The Tribunal quashed the order passed under section 263 of the Act and restored the assessment order dated 30/12/2016. The appeal of the assessee was allowed.