9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (5) TMI 479 - AT - Income TaxMAT provisions - addition of deferred tax liability in book profit but not excluding the amount of deferred tax assets included brought forward loss - Held that - From the plain reading of the provisions of this section 115JB of the Act, it is clear that the amount of loss brought forward or unabsorbed depreciation whichever is less as per books will be reduced from the amount of book profit. So in the instant case the plea of the assessee that the amount of the deferred tax assets included in the brought forward loss should be excluded from the said amount is not tenable. We are also relying in the decision of Hon ble Supreme Court in the case of Apollo Tyres Ltd. 2002 (5) TMI 5 - SUPREME Court and Kinetic Motor Co. Ltd. v. DCIT 2003 (1) TMI 47 - BOMBAY High Court held that the AO does not have the jurisdiction to go beyond the net profit shown in the audited Profit and Loss Account which was accepted by shareholders and filed with Registrar of Companies, except to the extent provided in explanation to Sec. 115JB of the Act. The accounts of the taxpayer were duly certified by the auditors and the same was accepted by shareholders in the Annual General Meeting which was filed with Registrar of Companies and as per the decision of the Hon ble Supreme Court in the case of Apollo Tyres Ltd. (supra) and Hon ble Bombay High Court in the case of Kinetic Motor Co. Ltd. the AO cannot make any adjustments to the book profits of the taxpayer once it was certified by the auditors. - Decided against assessee. Not allowing the expenditure disallowed u/s 14A of the Act while reducing the dividend income for the MAT - Held that - From the plain reading of the provisions of this section 115JB of the Act, it is clear that the expenditure incurred in relation to dividend income then the book profit as per section 115JB will stand increased by that amount. However the assessee submitted that the Rule 8D of the IT Rules, 1962 came in force from 24.03.2008 so disallowance under section 14A is not applicable for the year under consideration. However we disagree with the view of ld. AR in terms of the provisions of section 115JB of the Act which are self explanatory. Accordingly in our considered view we find no infirmity in the decision of the ld. CIT(A)- Decided against assessee. Applicability of provisions of Section 234B and 234C - Held that - As relying of Emami Ltd. Vs. CIT case 2011 (6) TMI 163 - CALCUTTA HIGH COURT we direct the AO not to charge any interest under section 234B & 234C of the Act on account of retrospective amendment in clause (h) & (i) to explanation 1 of section 115JB of the Act )- Decided against revenue. Disallowance of deferred revenue expenses - Held that - The assessee has incurred expenses prior to the commencement of business and classified as deferred revenue expenditure. The assessee started claiming those expenses after the commencement of business 1/5th over the period of 5 years. However, the lower authorities disallowed the same on the ground that there is no provision under the Act to claim the deferred revenue expenses. From the facts of the case we observe that the AO is not skeptical about the genuineness of the expenses incurred. The whole amount of ₹ 154.64 million has been incurred in connection of business prior to the commencement of commercial production. Any expense incurred in connection to the business is an allowable expenditure. From the above explained citations of the cases denying the non existence of deferred revenue expenditure term in the act is not reasonable and tenable. In our considered view, all the expenses incurred prior to the commencement of production should be capitalized with the fixed assets of the assessee and depreciation should be allowed thereon accordingly as per law. We are also relying in the guidance note issued by the Institute of Chartered Accountant of India on treatment of expenditure during construction period where it was recommended that the indirect expenditure incurred during the construction period should be capitalized as part of indirect construction cost to the extent to which the expenditure is indirectly related to construction or if incidental thereto.- Decided against revenue. Disallowance of consultancy expenses - Held that - From the records we find that WBIDC is a state level financial institution and engaged in providing equity capital and project financing to industrial units being set up in the state of West Bengal. We further find that the payment has been made to the government organization and the AO has not exercised his power under section 133(6) of the Act for the clarification by issuing show cause notice to the party before making the disallowance. We also find that the order of the AO is silent about the deduction of TDS from the payment of the consultancy charges to the party. Accordingly in the interest of Justice and fair play we re inclined to the restore this file to the AO for fresh adjudication as per law after giving opportunity to the assessee. We also direct the AO to issue show cause notice to WBIDC under section 133(6) of the Act for the necessary details and clarification as required under the provisions of law. - Decided in favour of assessee for statistical purpose. Disallowance u/s 14A r.w.r 8D - Held that - Rule 8D of the IT Rules came into effect from 24.03.2008 and the instant case before us is for AY 2005-06. Therefore, the provisions of Rule 8D of the IT Rules is not applicable in assessee s present case. We further find that prior to insertion of Rule 8D of the IT Rules various courts have held that the disallowance in terms of provision of Sec. 14A of the Act should be restricted @ 1% of dividend income - Decided in favour of assessee partly Addition on account of year end adjustment in loss on foreign exchange account due to revaluation of sundry creditors and SBI MMD account - Held that - AO treatment to difference arising on account of foreign exchange in the value of sundry creditors as notional loss and contingent liability which the assessee has not incurred so it was disallowed is strongly disagreed on the ground that this year and adjustment was made by the assessee in terms of AS 11 issued by ICAI and in pursuance of mercantile system of accounting as notified u/s 145 of the Act.- Decided against revenue. Addition of freight expenses - Held that - The question of disallowance of freight expenses in connection with the stock transfer does not arise. This freight expense has direct connection with the business of the assessee. For other freight expenses, the reason given by the AO for the disallowance is not tenable as the AO has not pointed out any reasonable reasons for the same. There is no doubt that the assessee had made short recovery from the customers but the reasons for the same were duly explained by the assessee. Accordingly the Ld. CIT(A) has given the relief to the assessee and on this point of view Ld. DR has not brought anything on record contrary to the findings of the Ld CIT(A) in deleting the addition - Decided against revenue. Addition on account of claimant in accounting method - Held that - the duty benefit under the scheme was available to the assessee only on receipt of this certificate issued by the Director-General of foreign trade. Prior to the year, assessee was recognizing the income on the completion of export but that really does not entitle the assessee for the duty exemption unless the certificate is received by the assessee. In view of above, we find no infirmity in the order of Ld CIT(A) in deleting the addition - Decided against revenue. Acceptance of revised return - Held that - Proof of filing the audited financial statements with the Ministry of corporate affairs were also placed of the supplementary paper book. The financial statements duly audited along with audit report by the auditor of the company were placed. In view of above we do not find any reason to interfere in the order of learned CIT(A). - Decided against revenue. Addition in the computation of book profit on account of doubtful advances and debts - Held that - AO has treated the provision created against the doubtful debts and advances as the provision for unascertained liability. Therefore for computing the book profit under the provisions of MAT deduction for such provisions was disallowed and added to the book profit. However in our considered view the provision for Sec. 115JB speaks for the provisions created for unascertained liabilities therefore we disagree with the view of the AO. See CIT vs. HCL Comnet Systems and Services Ltd (2008 (9) TMI 18 - SUPREME COURT ) - Decided against revenue.
Issues Involved:
1. Assessment under section 115JB of the Income Tax Act. 2. Assessment under the normal provisions of the Income Tax Act. 3. Applicability of sections 234B and 234C. 4. Disallowance of deferred revenue expenses. 5. Disallowance of payment to WBIDC. 6. Disallowance under section 14A as per Rule 8D. 7. Revaluation of sundry creditors. 8. Freight expenses. 9. Change in accounting method. 10. Acceptance of revised return. 11. Addition in computation of book profit on account of doubtful advances and debts. Issue-wise Detailed Analysis: 1. Assessment under section 115JB: - The assessee contended that the CIT(A) erred in confirming the AO's addition of deferred tax liability to book profit without excluding deferred tax assets from brought forward loss. The CIT(A) upheld the AO's decision, citing clause (h) of Explanation 1 to section 115JB, which mandates adding deferred tax to book profit. The Tribunal found no infirmity in this decision, emphasizing the clear provisions of section 115JB and relevant judicial pronouncements. 2. Assessment under normal provisions: - The CIT(A) disallowed deferred revenue expenses amounting to ?154.64 million, rejecting the alternative plea to include these expenses in the actual cost of assets for depreciation purposes. The Tribunal held that such expenses should be capitalized and allowed depreciation accordingly, relying on the Supreme Court's decision in Challapalli Sugars Ltd. v. CIT and ICAI guidance. 3. Applicability of sections 234B and 234C: - The Tribunal ruled that interest under sections 234B and 234C is not applicable due to the retrospective amendment of section 115JB, following the jurisdictional High Court's decision in Emami Ltd. v. CIT. 4. Disallowance of deferred revenue expenses: - The Tribunal allowed the capitalization of deferred revenue expenses incurred before commercial production, directing depreciation to be allowed as per law, based on the Supreme Court's decision in Challapalli Sugars Ltd. v. CIT and ICAI guidance. 5. Disallowance of payment to WBIDC: - The Tribunal restored the issue to the AO for fresh adjudication, directing the AO to issue a show-cause notice to WBIDC under section 133(6) for necessary details and clarification, considering the payment was made to a government organization. 6. Disallowance under section 14A as per Rule 8D: - The Tribunal held that Rule 8D is not applicable for AY 2005-06, directing the AO to disallow 1% of dividend income as per jurisdictional High Court's decision in CIT v. M/s R.R.Sen & Brothers (P) Ltd. 7. Revaluation of sundry creditors: - The Tribunal upheld the CIT(A)'s decision to allow the deduction of foreign exchange loss on sundry creditors, citing AS 11 and the Delhi High Court's decision in CIT v. Woodward Governor India Private Limited. 8. Freight expenses: - The Tribunal upheld the CIT(A)'s decision to allow freight expenses, finding the AO's disallowance untenable as the expenses were incurred wholly and exclusively for business purposes. 9. Change in accounting method: - The Tribunal upheld the CIT(A)'s acceptance of the change in accounting policy for recognizing custom duty benefits under the target plus scheme on receipt of the license, finding it bona fide and consistent with AS 9. 10. Acceptance of revised return: - The Tribunal found no reason to interfere with the CIT(A)'s acceptance of the revised return, supported by necessary documents proving the adoption of financial statements. 11. Addition in computation of book profit on account of doubtful advances and debts: - The Tribunal upheld the CIT(A)'s decision to exclude provisions for doubtful advances and debts from book profit computation under section 115JB, relying on the Supreme Court's decision in CIT v. HCL Comnet Systems and Services Ltd. Conclusion: - The assessee's appeal was partly allowed for statistical purposes, and the Revenue's appeal was dismissed. The Tribunal provided detailed reasoning for each issue, ensuring adherence to relevant legal provisions and judicial precedents.
|
