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TMI Blog2012 (6) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee. - ITA No.840/Hyd/2011 - - - Dated:- 17-2-2012 - Chandra Poojari, Asha Vijayaraghavan, JJ. For Appellant: Shri K C Devadas For Respondent: Smt K Mythili Rani ORDER Per: Chandra Poojari: This appeal by the assessee is directed against the order of the CIT-III, Hyderabad dated 31.3.2011 for A.Y. 2006-07. The assessee also filed SA No. 188/Hyd/2011 and M.A. No. 253/Hyd/ 2011 for the same assessment year. Since all these include common issues, the same are clubbed together, heard together and are being disposed of by this common order for the sake of convenience. 2. The grievance of the assessee herein is with regard to direction of the CIT to consider the interest waived to be included in the computation of book profit u/s. 115JB of the Income-tax Act, 1961. 3. Brief facts of the issue are that the assessee filed return of income for A.Y. 2006-07 declaring income of Rs. 33,37,012. The assessee computed its book profit u/s. 115JB at 'nil' after reducing the amount of interest waived by bank on the ground that it is the amount withdrawn provision for interest to financial institutions debited to Profit and Loss A/c. in earlier year now credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the IDBI bank has waived the said interest the corresponding interest debited to Profit and Loss A/c. in earlier years is rightly credited to Profit and Loss A/c. this year. (c) Thus, it is evident that the book profit of the earlier years has not been increased by the interest whereas the same is added in the computation of income under normal provisions. For the purpose of computation of book profits, the assessee cannot reduce the interest which was debited to Profit and Loss A/c. earlier years under the pretext that a 'provision' is made. Accordingly, the assessee's claim of such adjustment under the explanation or explanation below the second proviso to section 115JA is misconceived and is accordingly rejected and the amount of Rs. 16,10,71,358 being the amount of interest waiver is to be included in the computation of the book profit u/s. 115JB. 4. We have heard both the parties and perused the material on record. The contention of the DR is that while computing book profit u/s. 115JB of the Act interest waiver amounting to Rs. 16,10,71,358 has to be added to the book profit. According to the AR there is no computation of book profit for the assessment year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of book profit since it was never allowed in the computation of book profit of the company in any of the earlier years since the company never had any book profit being sick industrial undertaking. It is an admitted fact that the provision for interest was made in earlier year as interest payable was added back to the income of the assessee as the liability was not paid in view of the provisions of section 43B while computing the regular income of the assessee. It is also an admitted fact that in the earlier years there is no computation of book profit ex consequentia, there was no assessment with regard to computation of book profit u/s. 115JB of the Act. It was held in the case of Narayanan Chettiar Industries vs. ITO (277 ITR 426) that in respect of remission of liability no addition can be made unless an allowance or deduction is allowed to the assessee in the previous year. Further in the case of Rayala Corporation Pvt. Ltd. vs. ACIT, 33 DTR 249 , wherein it was held that returns for earlier years have been found defective by the Assessing Officer and declared to be non-est, as the assessee had failed to rectify the defect in spite of notice issued u/s. 139(9) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced by the Legislature to take care of the phenomenon of prosperous zero tax companies which had continued but were paying no income-tax though they had profits and were declaring dividends. A minimum corporate tax was sought to be ensured on these prosperous companies. It was not the indention of the legislature to impose this minimum alternative tax on new projects that had just begun to make profits after some years of losses and also sick companies that have just turned the corner. The assessee company was in losses for a number of years and which could not meet the commitments for repayments towards loans and interest to various banks and financial institutions. It was a potential sick company. All the public financial institutions and public sector banks had come together and accepted a one-time settlement of liabilities to bail out the company and in the process waived substantial portions of the interest due to them. Thus taxing such a company under the provisions of s. 115JA was itself against the legislative intent. This was definitely not a prosperous company paying dividends. The first and foremost ground of the assessee was that the Assessing Officer co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t March, 1997 need not be adjudicated upon as it would only be an academic exercise having no bearing on the case for the reason that such power was not given under the Act. The second argument put forth by the assessee was that the waiver of interest and consequent reduction in liability is not income under the general law. The Revenue has taken only a part of total waiver 5.37 lakhs into consideration, the reason being the assessee has taken only that amount as its income in its P L a/c. The balance has been directly taken into the balance sheet by the assessee-company. The stand of the Revenue would have been consistent had it applied the same yardstick to the entire waiver of interest and not gone only by the amount credited by the assessee to the P L a/c. In the judgement of the Supreme Court in CIT vs. Bipinchandra Magan lal Co. Ltd. (1961) 41 ITR 290 (SC), though different on facts, the proposition is clearly laid down that there is a distinguishable relationship between the assessable income and the profits of business concern in a commercial sense. It was further held that computation of income for the purpose of income-tax assessment is based on a variety of art ..... X X X X Extracts X X X X X X X X Extracts X X X X
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