9911796707
TMI Blog2012 (10) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... 47, 675/- under Section 115-J of the Act. The Deputy Commissioner of Income Tax (Assessment), Special Range, Meerut by his order dated 20.2.1992 computed net profits as per profit and loss account at Rs. 10, 08, 78, 955/-. After allowing depreciation and misc. deferred revenue expenses the net profit was calculated at Rs. 8, 97, 55, 440/-. The inadmissible expenses were computed at Rs. 1, 32, 07, 321/- and after allowing deductions of the claim of bad debts, custom duty, excise duty, duty disallowed in the previous year, Section 35D and depreciation and taking into account the brought forward loss at Rs. 6, 90, 92, 303/-, the appellant assessee was assessed at Nil income. 3. The assessee-appellant preferred an appeal, which was allowed on 14.7.1992. 4. The Deputy Commissioner of Income Tax (Assessment) Special Range-I, Meerut filed an appeal against the appellate order, which was partly allowed on 23.7.1999. The assessee has preferred this appeal on the following substantial questions of law:- "1. Whether the Tribunal was right in law in holding that the appellant was not entitled to claim of investment allowance under Section 32-A of the Act with reference to the actual cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bench of the Tribunal in the case of Lakhanpal International vs. ITO, 69 ITR 9 in which the decision of Andhra Pradesh High Court in CIT vs. Windsor Foods Ltd 99 Taxman 355 was followed. 6. Shri Jain has relied upon a Full Bench decision of Gujarat High Court in CIT v. Gujarat State Fertilizers 259 ITR 526 (Guj) (FB); CIT v. Gujarat Siddhi Cement Ltd 307 ITR 393 (SC). He submits that the provisions of Section 32-A do not provide that investment allowance cannot be allowed beyond the object of acquisition/installation/first put to use, where the actual cost stands modified due to the application of Section 43-A. The Scheme of Section 32-A goes to show that an assessee can claim deduction of a higher amount of investment allowance on fulfillment of statutory conditions prescribed. The scheme of Section 32-A did not envisage relating back to the year of acquisition/installation/first user, but has provided for creation of reserve and allowance in a subsequent year, being aware of the settled legal position that reopening of accounts is unknown to income tax. Section 43-A overrides other provisions of the Act. It operates on an event, which happens after the deduction of acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 35A." 7. Shri Jain also relies upon CIT v. Gujarat Siddhi Cement Ltd (supra) in which the Supreme Court held as follows:- "8. On a bare reading of the provision i.e. Section 43A(1) the position is clear that it relates to the fluctuation in the previous year in question. If any extra benefit is taken the same has to be taxed in the year when the liability is reduced as provided in terms of Section 41(1)(a) Explanation 2. Therefore, whenever there is fluctuation in any previous year, Section 43A (1) comes into play. Section 43A(1) as it stood at the relevant point of time reads as follows: "43A. Special provisions consequential to changes in rate of exchange of currency- (1) Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange at any time after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or a part of the cost of the asset or for repayment of the whole or a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid, be computed with reference to the rate of exchange specified therein." 10. After the substitution by Finance Act, 2002 w.e.f. 1.4.2003 the position is quiet different." 8. Shri Shambhu Chopra appearing for the revenue submits that Section 43-A of the Act restricts the grant of investment allowance on the increased cost of assets due to foreign exchange fluctuation. He submits that the assets, in respect of which fluctuation had taken place, were already installed and put to use in earlier years, and thus there was no question of allowing the investment allowance subsequently in the relevant previous years. 9. We respectfully agree with the reasoning of the Full Bench of Gujarat High Court based on the clarificatory letter dated January 4, 1967 issued by Ministry of Finance, and the judgment in CIT v. Arvind Mills (1992) 193 ITR 255, in which it was held that the increase or decrease in liability arising on account of fluctuation in the foreign exchange rate should be taken into account to modify to figure of actual cost and that such adjustment should be made in the assessment year in which the increase or decrease in the liability arises on account of fluctuations i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HC as provided under Section 80AB was valid and proper. The Tribunal relied on a judgment of Supreme Court in Mettur Chemical and Industrial Corporation Ltd vs. Commissioner of Income Tax 217 ITR 768, which was rendered in the context of Section 84 of the Act, without appreciating that the same was not applicable to Section 115-J which has overriding effect vis-a-vis other provisions of the Act. 13. Shri Jain has relied on C.B.D.T. Circular No. 680 dated 21.2.1994 published in 206 ITR (25) 297 and the opinion of Supreme Court in Ajanta Pharma Ltd vs. Commissioner of Income Tax (2010) 327 ITR 305 (SC) in which it was held that Section 115-JA was a self-contained code, and applied notwithstanding any provision in the Act. Section 115JB is the successor section to section 115JA which also continues to remain a self-contained code. The Supreme Court held that all assessable entities were not eligible for deduction under Section 80HHC (1B). Similarly, only eligible goods were entitled to such special deduction under section 80HHC (1). Section 80HHC (3) was obligatory to exports, whereas the levy under Section 115JB, was on the deemed income. The object was to exclude export profits fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over section 80AB or over any other provisions of the Act. Section 80HHC would thus be governed by section 80AB. 16. In Commissioner of Income-Tax v. Bhari Information Tech. Sys. P. Ltd. (2012) 340 ITR 593 (SC) the Supreme Court upheld the order of the Tribunal which had come to the conclusion that deduction claimed by the assessee under Section 80 HHE has to be worked out on the basis of adjusted book profits under Section 115JA and not on the basis of the profits computed under the regular provisions of law applicable to the computation of profits and gains of business. 17. In this case the AO determined the profit of the year at Rs. 6,90,92,303/- under the normal provisions of the Act, before setting out the brought forward losses and other allowances. The book profits under Section 115J were worked out at Rs. 2, 56, 10, 184/-. The AO while adopting the book profit under Section 115J as the total income allowable to tax, reduced the profit for the year amounting to Rs. 6, 90, 92, 303/- to Nil after setting out the brought forward losses/allowances to that extent. The balance brought forward allowance was carried forward to the subsequent years. In appeal it was held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in a position to estimate its profits of the current year prior to the end of the financial year on 31st March. In this connection the assessee placed reliance on the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT reported in (2000) 243 ITR 519 and, according to the Karnataka High Court, the profit as computed under the Income Tax Act, 1961 had to be prepared and thereafter the book profit as contemplated under Section 115-J of the Act had to be determined and then, the liability of the assessee to pay tax under Section 115-J of the Act arose, only if the total income as computed under the provisions of the Act was less than 30% of the book profit. 10. According to the Karnataka High Court, this entire exercise of computing income or the book profits of the company could be done only at the end of the financial year and hence the provisions of Sections 207, 208, 209 and 210 (predecessors of Sections 234-B and 234-C) were not applicable until and unless the accounts stood audited and the balance sheet stood prepared, because till then even the assessee may not know whether the provisions of Section 115J would be applied or not. The Court, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
