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TMI Blog2010 (9) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. Vijay Mehta for the Respondent. ORDER Per R.S.Syal (AM) : This appeal by the Revenue emanates from the order passed by the Commissioner of Income-tax (Appeals) on 15.10.2009 deleting the penalty imposed by the Assessing Officer u/s.271(1)(c) of the Act in relation to the assessment year 2002-2003. 2. Briefly stated the facts of the case are that the assessee filed its return declaring income at Rs. Nil and u/s.115JB at Rs.12,70,234 and tax liability of Rs.95,268 thereon. The assessee claimed deduction on account of diminution in the value of investments of Rs. 3,87,110. Further the assessee claimed deduction for interest amounting to Rs. 16,93,077. On being show caused, the assessee stated that it invested in share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/Mum/2006. However, the addition on account of diminution of value of shares under the regular provision was not pressed by the assessee before the Tribunal. Insofar as the addition on account of disallowance of interest paid to IREDA amounting to Rs.16.93 lakhs u/s.43B is concerned, the same was upheld by the Tribunal in this order. There is no material to indicate that the tribunal order has been overturned or modified by the Hon ble High Court. The sum and substance of the quantum proceedings is that these two additions made by the AO in the computation of total income under the regular provisions of the Act have been upheld, but the addition made to the net profit on account of diminution in the value of investments for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s determined by making an addition on account of diminution in the value of investment, which finally stands deleted by the Tribunal. Thus the basis of assessment under the regular provisions of the Act is no more relevant because of the Assessing Officer finally computing income u/s.115JB pursuant to the order passed by the Tribunal. Thus the above referred two additions, which were made in the original assessment as per the regular provisions of the Act, have become academic inasmuch as they have not entered in the final computation of total income made by the A.O. Neither the total income has been boosted up with such additions nor loss has scaled down. At this juncture it may be relevant to take stock of the provisions of section 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO, who chose to consider the shares as `Investment rather than stock in trade. If the shares are held as stock in trade, naturally such stock is to be valued at cost of market price, whichever is less. If there is some decline in the value of stock as at the end of the year, the same has to be given effect in the annual accounts. The assessee claimed such deduction by making complete disclosure in this regard. The AO took a different view of the such transactions and considered them as `investments and resultantly made the addition. Coming to the second addition on account of interest, we find that a possible view was existing allowing deduction on conversion of interest into loan, treating the same as equal to payment of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee availed tax credit in respect of tax paid on deemed income in this year which was available to it in the subsequent years. He referred to the provisions of section 115JAA(1A) as per which credit in respect of tax paid u/s.115JB(1) shall be allowed to the assessee in accordance with the provisions of this section. When the attention of the learned Departmental Representative was drawn towards the fact that sub-section (1A) has been inserted by the Finance Act, 2005 with effect from 01.04.2006 and hence would be inapplicable to the assessment year 2002-2003 under consideration, he put forth that the provisions of sub-sections (4) and (5) of section 115JAA, as relevant at the material time, would support his case as at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5JAA provide for allowing tax credit paid u/s 115JB as well, then the provisions of sub-section (1A) shall become otiose in asmuch as there would not have arisen any need to provide for tax credit u/s 115JB in new sub-section (1A). As there is no warrant for allowing tax credit paid by the assessee u/s.115JB prior to assessment year 2006-2007, the same cannot be adjusted in accordance with the provisions of sub-section (4). What sub-section (4) provides for is that the tax credit under sub-section (1) shall be allowed to be set off in a year when tax becomes payable u/s.115JA or 115JB of the Act. Thus prior to insertion of sub-section (1A) to section 115JAA, the amount of tax paid u/s.115JA(1) could be set off against the tax becoming p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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