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TMI Blog2018 (11) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Thus, we note that the assessee has clearly explained that this income was not accounted for in the books of account due to uncertainty. The accounts were duly audited. However, due to abundant caution it was offered in the computation of the normal income. The assessee has further explained that there was uncertainty so it was not accounted for in the books of account which was also accepted by the auditors. Hence, the assessee has not offered the same under MAT provision of section 115JB. From the above, it is amply clear that in the computation of income, the issue was apparent and upon that computation of income, the A.O. has passed the assessment order. Hence, on these facts, it cannot be said that the A.O. has not applied his mind. A.O. has duly applied his mind and accepted the income offered u/s.115JB which did not include this interest accrued amount as it was not provided in the books of account. Moreover the ld. CIT(A)’s opinion that the book profit needs to be reworked and the impugned amount added to book profit is not sustainable. - Decided in favour of assessee. - I.T.A. Nos. 7135, 7136/Mum/2017 And 7137/Mum/2018 - - - Dated:- 2-11-2018 - SHRI SHAMIM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest by way of abundant caution in the computation of income under normal provisions with the rider not considered in the books of Accounts cannot be the ground for revision of Book Profit computed based on audited financial statements prepared as per the applicable Accounting Standards. Further, the learned Pr. CIT erred in insisting on a mention in the Notes to Accounts of the audited financial statement, which is just a form and ignoring the substance by way of rider in the computation of income. The Appellant prays that the impugned order passed by the learned Pr. CIT under section 263 of the Act be stuck down as being bad in law and the adjustment made to the Book Profit in relation to interest income of INK 12,80,00,000 be deleted. 3. Since the facts are common, we are referring to facts and figures from the assessment year 2012-13. 4. In this case, the ld. CIT(A) issued the following notice u/s. 263 of the Act : The assessee has offered the interest to tax at ₹ 12,80,00,000/- being 8% receivable from International Amusement Ltd on advance of ₹ 160 crores given to them, under the normal provision of the income-tax act, 1961. However, the same was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts and also the same is not covered in any of the items listed in the Explanation to 1 section 115JB, it was not considered in the books profits for MAT purpose and was not offered to tax under provisions of section 115JB. However, out of abundant caution, such notional interest @ 8% i.e of INR 12.80 Crores on the advance given to IAL was separately offered to .ax under the normal provisions of the Act. During the assessment proceedings, the Assesing Officer ('the AO') accepted the treatment of the interest income under the normal provisions as well as under MAT provisions. Revision proceedings have been initiated und r section 263 on the ground that since such interest is lot added in the computation of MAT profits, the Assessment order is erroneous and prejudicial to the interest of the revenue. 6. The ld. CIT(A) further noted the submissions of the assessee in this regard as under: (a) Assessment Order passed by the AO is not 'erroneous' and hence revision proceedings under section 263 cannot be invoked In order to give jurlsdiction to the Commissioner under section 263, two limbs have to be satisfied cumulatively viz. 1} the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ratio decidendi laid down by the Apex Court in case of Apollo Tyres (supra) fully applies to the facts of the case and has also been upheld by Jurisdictional Bombay High Court in case of Adbhut Trading (supra) and the order of Bombay High Court is binding on the OT. Accordingly we request your Honour to respectfully follow the JurisdictionsHC ruling and drop the 263 proceedings. (c) Purposive interpretation of section 115JB The purpose of introducing section 115JB was to levy minimum alternate tax on Corporates who recognizes substantial profits in its annual accounts yet by resorting to various exemptions and deductions paid very little or no tax (popularly known as zero tax companies') It is pertinent to note that in facts of this case, the Assessee has on the contrary offered higher income by offering notional interest income while computing taxable income under normal provisions of the Act, even though such interest was not recognized irj its books of accounts. The issuance of impugned notice attempts to modify audited accounts based on item of income offered to tax under the normal provision of the Act, which is not permitted. C. Cases laws referred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in Section 115J. The principle laid down in he landmark decision of the Apex Court in case of Apollo Tyres (supra) has been upheld b] following decisions: CIT v/s. HCL Comnet Systen s Services Ltd [2008] 305 ITR 409 (SC) Malayala Manorama Co. Lid. v/s. CIT[2008] 300 ITR 251 (SC) CIT V/s. Adbhut Trading Co (P.) Ltd. [2012] 338 ITR 94 (Bombay HC) CIT v/s. Binani Cement Ltd, 2016] 384 ITR 457(Calcutta HC)475(Calcutta HC) 7. The ld. CIT(A) was not convinced with the above reply. The reason submitted by the assessee was that there was no likelihood of the recovery and receipt of interest and the assessee has duly followed Accounting Standard-9 of the Institute of Chartered Accountants of India and therefore the interest income has not been recognized. The same was rejected by the ld.CIT(A) by observing that this matter was not disclosed anywhere in the notes to the account in annual report. By only this logic, he held that the reasons given by the assessee is not tenabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res on the advance given to IAL was separately offered to tax under the normal provisions of the Act. 10. Thus, we note that the assessee has clearly explained that this income was not accounted for in the books of account due to uncertainty. The accounts were duly audited. However, due to abundant caution it was offered in the computation of the normal income. The assessee has further explained that there was uncertainty so it was not accounted for in the books of account which was also accepted by the auditors. Hence, the assessee has not offered the same under MAT provision of section 115JB. From the above, it is amply clear that in the computation of income, the issue was apparent and upon that computation of income, the A.O. has passed the assessment order. Hence, on these facts, it cannot be said that the A.O. has not applied his mind. To support this proposition, we may refer to the decision of the Hon'ble jurisdictional High Court in the case of State Bank of India vs. Asst. CIT (in Writ Petition No. 271 of 2008 vide order dated 15.06.2018). Although this decision was in the context of section 147, the exposition by the Hon ble High Court is very much relevant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the satisfaction of the Assessing Officer. Thus, it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings. Thus, issuing the impugned notices on the above ground would, prima-facie, amount to a change of opinion. 11. We find that the proposition laid down in the above case law is fully applicable. The A.O. has duly applied his mind and accepted the income offered u/s.115JB which did not include this interest accrued amount as it was not provided in the books of account. Moreover the ld. CIT(A) s opinion that the book profit needs to be reworked and the impugned amount added to book profit is not sustainable. In this regard we note on this very issue, the Hon ble Apex Court has given a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the matter, the distinction brought on record by the ld. CIT(A) is totally unsustainable in law. 14. We further note that similar view was again taken by the Hon'ble jurisdictional High Court in the case of Pr. CIT vs. Bhagwan Industries Ltd. (in ITA No.436 of 2015 vide order dated 18.07.2017) which reads as under: ( i) The learned counsel for the Appellant submits that Tribunal was not justified in not accepting the reworking of the book profits by the Assessing Officer as per the provisions of Section 115JB of the Income Tax Act. The Assessee had directly credited the profit of ₹ 2,84,84,000/ arising from sale of land to Capital Reserve Account in the balance sheet rather than routing it through Profit and Loss Account in the manner provided as per Part II and Part III of Schedule VI to the Companies Act, 1956. ( ii) Tribunal while passing the impugned Order observed that while computing the book profit under Section 115JB of the Income Tax Act, the Assessing Officer added the sum of ₹ 2,84,84,000/in the book profit. The Commissioner of Income Tax (Appeals) deleted the addition. The Tribunal referring to the Judgment of the Apex Court in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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