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TMI Blog2016 (12) TMI 1812X X X X Extracts X X X X X X X X Extracts X X X X ..... as includible in the computation of 'book profit' under section 115JB despite it being a non-chargeable capital receipt for the purposes of normal provisions of the Act. 3.0 In the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding levy of interest u/s. 234B without appreciating that provisions were not attracted as high pitched additions made by the A.O could not have been anticipated by the assessee. By way of additional legal claim not put forth before the lower authorities, it is submitted that the levy of interest under section 234B is not warranted also for the reason that the assessee had returned income under section 115JB (MAT provisions) and in terms of decisions of Supreme Court in CIT vs. Kwality Biscuits Ltd (284 ITR 434)(SC) and Bombay High Court in the case of Snowcem India Ltd vs. DCIT (2009-TIOL-39-HC-MUM-IT), the provisions of advance tax chapter including section 234B are not at all attracted in a case where income is assessed under MAT provisions. 4.0 Your appellant craves leave to add to, amend, alter, delete and/or modify the above grounds of appeal on or before the final date of hearing." 3. The grounds ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) or by the AO who has gone by the reasoning it is a colourable device either in the case of K, even in the case of F and o the issue has not been examined properly. In the absence of any proper material and record to come to such a finding, matter restored to the AO to examine it afresh. CIT vis Cosmo Films Ltd., (2011) 245 CTR (Del.) 23; Indusind Bank vis ACIT, (2012) 135 ITD 165 (Murn.).. relied on." 6. We have gone through the order of the Tribunal and found that under similar facts, assessee's claim of depreciation was restored back to the file of the AO. In an appeal filed by Revenue before the Hon'ble Bombay High Court vide order dated 08/08/2016, we found that following question of law has been accepted by the High Court. (c) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in setting aside the issue of deprecation claimed in respect of assets involved in sale & lease back transactions entered during the year, to the file of the AO by relying on the decision of the Hon'ble Delhi High Court in the case of Cosmo Films (2011) 338ITR 266 (Delhi), without appreciating that the finding of this case is clearly distingu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the decision of the Delhi High Court in CIT v/s. Cosmo Films Ltd., 338 ITR 266. (iv) Mr. Kotangle, learned Counsel appearing for the Revenue has not even attempted to show us as to why the decision of the Delhi High Court in Cosmo Films Ltd., (supra) should not be taken into consideration while determining the nature of the transactions entered into by the Respondent-Assessee with its three lessee on examination of the sale and lease agreements. We find that the decision of Delhi High Court in Cosmo Films (supra) is on an identical fact situation and mere taking of security deposits from the lessee in that case is not a distinction which would make it inapplicable to the present facts. (v) In view of the above, the question (c) as formulated for our consideration does not give rise to any substantial question of law. Hence not entertained. 8. In view of the above, respectfully following the order of the Tribunal which has been confirmed by the Hon'ble High Court, we restore the matter back to the file of the AO for deciding afresh in terms of direction given by the Tribunal in its order dated 22/05/2013. 9. Assessee is also aggrieved for confirming addition of remis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . V/so Jackson (16 TC 570) (HL). In this case, the assessee used to purchase raw material from a supplier who was also the promoter of the company. Thus, the transactions between two companies were in the regular course of business. The debtor creditor relationship was established between the parties in the course of business transactions. At a later date, there was remission or waiver of indebtedness [including indebtedness which arose due to supplies effected during the year of remission]. The release from liability was not regarded as a trading receipt. The Court held "how on earth the forgiveness in that year of a past indebtedness can add to those profits, I cannot understand". This decision has been consistently followed by the Indian Courts including in the case of Bombay High Court in Mohsin Rehman' s case (16 ITR 183 )(Bom) which has incidentally been approved in Supreme Court decision in CIT V Is. Karala Estate (161 ITR 155). 3) CIT V/so Karala Estate Moorad Chalapuram (161 ITR 155)(SC) This case was decided by the Supreme Court under agricultural Income tax Act which ( did not contain fiction parallel to the fiction contained in section 41 of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidate the above position. In Comfund Financial Services (I) Ltd. vls. DCIT (67 ITD 304(Bang), the assessee was non banking financial company and was in the fund based activity of securities. It used to have business dealings with its own parent companies viz. Deutsche Bank (DB). There were loan transactions with the parent company. There was write back of the principal amount of the loan. The loan tranc tions were regarded on capital account and the waiver or remission of such liability was considered as a non chargeable capital receipt. The Court held that in relation to remission of principal amount, the provisions of Section 41(1) cannot be held applicable. The tribunal also rejected applicability of section 28(iv) of the Act. In APR Ltd vs DCIT (87 ITD 618)(Hyd), there was loan advanced by a Swedish parent company to the Indian company. The parent company (as in the case of the appellant company) wanted to divest itself of the shares. There was renunciation of interest free unsecured loan. The tribunal, after duly considering Apex Court decision in the case of T.V. Sundaram Iyengar and sons Ltd., took a view that, in respect of an amount like security deposit or lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the decision of Prism Cement's case. 4.17. In a recent decision of the Bangalore Tribunal in the 'case of Manipal Finance Corporation Ltd vs. DCIT (2008- TIOL-245-ITAT-BANG), the assessee was a NonBanking Finance Company (NBFC) engaged in finance business by accepting deposits from depositors. In view of financial crisis and losses, it was unable to reimburse the deposits to the depositors in full and hence it entered into a compromise with the depositors whereby a portion of the principal amount of the deposits and accrued interest thereon were foregone by the depositors. The issue before the Tribunal whether the principal amount of deposits foregone by the depositors was liable to tax as income. The Tribunal relied upon the decision of the Bombay High court in the case of Mahindra & Mahindra vs. CIT (261 ITR 501) and held that waiver of principal amount of loan is not income and provisions of section 41 (1) cannot be applied since it does not represent cessation of trading liability. The Tribunal observed as follows :- "After considering the rival submissions in our opinion, the following undisputed facts emerge out. The balance amount of deposit which could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was not concerned with a capital receipt. 4.20 As stated before, the above cases have been duly considered in some of the cases relied upon by the appellant and the courts have consistently come to a view that remission of loan liability is not chargeable to tax. I am bound by the decisions of the jurisdictional Tribunal and High Court and respectfully following the same, I hold that the impugned sum of Rs. 114.98 cr. is not chargeable to tax u/s. 41 (l) of the Act. The sum of Rs. 114.98 cr. is also not chargeable u/s. 28(iv) of the Act. As rightly pointed out by the A.R's, the said section was introduced to tax, perquisites enjoyed by businessmen and professionals in the course of carrying on their business or profession. As held by Bombay High Court in the case of Mahindra & Mahindra (supra), provisions of section 28(iv) cannot apply in relation to an item which is measurable in terms of money; it is restricted in its application to non cash or an item in kind. As held by the Bangalore Tribunal in the case of Comfund Financial Service (I) Ltd vs. DCIT (67 ITD 304), "Sec. 28(iv) deals with the extended definition of business income. However, for the purpose of applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set" in terms of sec. 2(14)(iii) of the Act, i.e., the same is not located within the municipal limits or within the notified limits. As submitted by the Ld. AR, we notice that, an identical issue has been decided in favour of the assessee by the Co-ordinate Bench of the ITAT in the assessee's own case relating to the assessment year 2007-08 (referred supra). For the sake of convenience, we extract below the operating portion of the above said order passed by the Tribunal. "3. We have heard the parties, and perused the material on record. The Revenue's stand is that profit or loss on the disposal of an asset is to be duly incorporated in the Profit & Loss Account of a company prepared in accordance with Parts II & III of Schedule VI to the Companies Act, 1956, the net profit per which is to be adopted by it for computing the `book profit' under the MAT provisions, including s. 115JB. As such, there is no basis for excluding the profit derived on the sale of its agricultural land by the assessee. Further, there is no question of the same being eligible for deduction on account of sec. 10 of the Act, which makes no reference to the said income. The assessee, on the other hand, reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred above, has expressed the following view:- "The provisions of Chapter XII-B of the Act do not, in our view, operate to extend the scope of `total income' per section 5 on which the charge to tax u/s. 4 is attracted, but is only toward providing an alternative basis for computing the same." Accordingly, we are of the view that the profit from sale of agricultural land, which is not a "Capital Asset", cannot be included for the purpose of computing book profit u/s 115JB of the Act. Accordingly, we uphold the decision taken by Ld CIT(A). 14.In view of the above judicial pronouncements, we restore the matter back to the file of the AO for deciding afresh after applying the proposition of law laid down in above judicial pronouncements to the facts of the instance case. We direct accordingly. 15. Assessee is also aggrieved for charging of interest u/s.234B where income is assessed u/s.115JB of the Act. We have considered rival contentions and found that exactly similar issue has been dealt in the following judicial pronouncements. * Alok Industries Ltd., (ITA No.8340/Mum/2010) dated 20th February 2015 * Rockline Developers Pvt. Ltd., (ITA No.6382/Mum/2013) dated 21s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax of MAT in view of the decision of the Hon'ble Supreme Court as well as various decisions of the Hon'ble High Court. The assessee had the bonafide reason to believe that advance tax was not payable in respect of MAT u/s 115JB as it was settled law laid down by the Hon'ble Supreme Court and Hon'ble High Court which hold good till the subsequent decision of Hon'ble Supreme Court in case of JCIT Vs Rolta India Ltd. (supra). Therefore, prior to the decision of Hon'ble Supreme Court in case of JCIT Vs Rolta India Ltd. (supra) settled proposition of the law on the point was that no advance tax was payable on MAT computed u/s 115JB and accordingly, the interest u/s 234B and 234C cannot be levied for non-deposit of advance tax on MAT for the year under consideration. Hence, we delete the levy of interest u/s 234B and 234C in this case." 16. Being in agreement with the above findings of the co- ordinate bench, this issue is decided accordingly and the interest levied u/s 234B/234C is accordingly ordered to be deleted." 17. The facts and circumstances during the year under consideration are parimeteria, therefore, respectfully following the order of the Co-ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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