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TMI Blog2020 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee did not upload Form No. 29B (Report u/s 115JB for computing the book-profits) for AYs 2013-14 & 2014-15. The same is also not available in the respective assessment folders. The Ld. Authorized Representative for Assessee (AR), during the course of hearing, submitted copies of Form No.29B for AYs 2012-13 & 2014-15. Both the forms are dated 01/01/2020. No form has been submitted for AY 2013-14. Form No. 29B is the report u/s 115JB for computing the Book Profits of the company. In the said report, the Book Profits for both the years have been reflected as Nil. Upon perusal of report submitted by the revenue, it could be observed that Form No.29B has been filed by the assessee only for AYs 2017-18 & 2018-19. The assessee's computation of income for AYs 2013-14 & 2014-15 would also reveal that no computations have been made by the assessee u/s 115JB. The perusal of assessment order for AY 2012-13 dated 18/03/2015, as placed on record, would reveal that no computations have been made by Ld. AO u/s 115JB. In the above background, we take up appeals for AY 2013-14 simultaneously. ITA No. 2709/Mum/2019, AY 2013-14 2.1 Aggrieved by the order of Ld. Commissioner of Income Tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) on 18/03/2016. The assessee is stated to be engaged in the business of plastic processing machines. It was declared as a sick company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Hon'ble BIFR sanctioned the rehabilitation scheme for assessee on 21/09/2010 with directions for implementation for revival of the assessee. The copy of the same has been placed on record. The cut-off date has been taken as 31/03/2009. The Scheme envisages various reliefs and concessions from various agencies as a part of rehabilitation Scheme. As per the Scheme, the rehabilitation period was from 01/04/2009 to 31/03/2017. The Clause 11.4 of the Scheme envisages certain tax concessions for the assessee and the same reads as under: - 11.4 CBDT To consider to exempt / grant relief to the company from the provisions of Section 41, 72, 43-B and 115JB of the Income Tax Act for a period of eight years from the cut-off date except for the prosecution and criminal proceedings. As evident, the CBDT has been directed to consider granting of relief to the assessee u/s 41, 72, 43B and 115JB of the Act for a period of 8 years from the cut-off date. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was allowed by the BIFR for the rehabilitation period. However, it appears that the said application has remained to be dealt-with by DIT(Recovery). 2.5. In the above factual background, during assessment proceedings, it was noted by Ld. AO that while computing income under normal provisions, the assessee claimed deduction of various items pertaining to AY 2011-12 aggregating to Rs. 19.71 Crores. The same are tabulated in para-3 of quantum assessment order. The assessee explained that it had claimed relief from taxation by praying that the provisions of Sec. 28 / Sec. 41 should not be applied to AY 2011-12 which was principally accepted by BIFR. However, DIT(Recovery), while passing the order did not specifically grant the relief under Sec.28 as well as under Sec.41. No relief was granted in this respect for AY 2011-12. The assessee filed necessary application before DIT(Recovery) in this regard but the same remained to be dealt with by DIT(Recovery) till date. Since the date of filing the revised return for AY 2011-12 expired on 31/03/2013, the assessee thought it appropriate to claim the deduction of these items while filing return for AY 2013-14 which was to be filed subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided under those provisions of Sec. 115JB was available to all sick companies without the order of BIFR. Reliance was placed on the decision of Hon'ble Bombay High Court in the vase of Ballarpur Industries Ltd. 398 ITR 145 and also on other decisions, which have already been mentioned in the impugned order. A plea was also raised that non-grant of relief would adversely affect the cash flow position of the company. 3.2 In the alternative, the assessee also submitted that amount credited to Profit & Loss Account in respect of waiver of loans as per the orders of BIFR, would even otherwise have no character of income and therefore, beyond the scope of levy of Income Tax. Therefore, the same should be excluded for the purpose of computations u/s 115 JB. 3.3 Another alternative ground was that accumulated debit balance in Profit & Loss account was adjusted from time to time against the credit balance in Capital Reserve and Share Premium account viderestructuring account . The said set-off should not prejudice or affect assessee's claim for set-off of book-losses or depreciation, which ever is less, as per the books of accounts. 3.4 The Ld. CIT(A) noted the directions given in BI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has stated that applying of provisions of Section 115JB (2) (vii) defeats mandate of BIFR as the appellant is covered under SICA as well as BIFR. 5.6 At this point it is necessary to recapitulate the appellant's application in BIFR and the results thereof. The appellant had approached the BIFR and the BIFR vide its order dated 21/09/2010 vide Para 11.4 stated as under: "To consider to exempt / grant relief to the company from the provisions of Section 41, 72, 43B and 115JB of the Income Tax Act for a period of eight years from the cut-off date except for the prosecution and criminal proceedings" 5.7 From the above it is noted that the BIFR vide its order had directed CBDT To CONSIDER to exempt grant of relief to the appellant from the provisions of a number of sections including 115JB for the period of 8 years from cut off date, which is 01.04.2009 to 31.03.2017. The BIFR has not given any directions to the CBDT regarding the exemptions / reliefs to be granted to the Appellant. The DIT (Recovery) considered the order of the BIFR and relief u/s 115JB of the Act was allowed for up to 2010-11 only and no relief u/s 115JB was allowed to the company from AYr 2011-12 onwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Hon'ble Supreme Court rendered in Apollo Tyres Ltd. V/s CIT (122 Taxman 562) and finally the submissions were rejected. It is quite discernible that the assessee's specific plea regarding adjustment of accumulated Profit & Loss Account throughrestructuring account were not dealt with. 4.3 Aggrieved, the assessee is under appeal with following grounds of appeal: - I Reduction of Book Profit by lower of Unabsorbed Depreciation or Business loss, whichever is less without setting off of amounts written back as per order of B1FR 1. The Id. CIT(A) erred in law and on facts by rejecting the claim of the appellant for reduction of Book Profit on account of the recomputed/ revised amounts representing the lower of the Unabsorbed Depreciation or Business Loss as per clause (iii) of Explanation to s.115JB(2) of the Act to be arrived at by ignoring the credits on account of write backs due to relief given by BIFR. 2. Your appellant submits that the company was granted certain reliefs by BIFR in repayment of its liabilities which amount of relief was credited to Profit & Loss A/c and as a consequence this balance in unabsorbed losses and depreciation accounts were reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case laws cited during the course of hearing has been deliberated upon. The written submissions have duly been considered. Our adjudication to the subject matter of present appeals would be as given in succeeding paragraphs. Applicability of Sec.115JB(2), Expl.1(vii) vis-à-vis BIFR orders 5.2 Upon perusal of factual matrix as enumerated by us in preceding paragraphs, it is undisputed position that the assessee's net worth has turned positive as on 31/03/2011. It is settled legal position that the manner of computation as provided in Sec.115JB would be complete code in itself and the computations were to be made strictly in the manner as provided therein. Explanation-1 (vii) envisages reduction of profit of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company u/s 17(1) of Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Going by these provisions, the assessee is ineligible to claim the deduction of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it & Loss Account on account of waiver of loan would not partake the character of income and hence should not form part of Book Profits u/s 115JB; (ii) Adjustment in accumulated debit balance of Profit & Loss Account through Restructuring Account was to be disregarded for the purpose of computation of brought forward losses in terms of Explanation-1 (iii) to S. 115JB (2). As noted by us in para 4.2, the appellate order does not specifically deal with these issues rather Ld. CIT(A) has placed reliance on the decision of Hon'ble Apex Court in Apollo Tyres Ltd. V/s CIT (supra) to support the stand of Ld. AO. 6.2 In support of stated submissions, Ld. AR has relied upon various binding judicial precedents, the copies of which has been placed on record. After going through the same, we find certain substance in the same. Further, as per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitled for deduction of amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It is also evident that the assessee has claimed lower of depreciation and book loss while computing Book Profits u/s 115JB for AY 2012-13 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would show that a draft of the present order was prepared and sent through postal authorities vide receipt no. EM045083040IN dated 20/03/2020 for approval of Hon'ble Judicial Member at Ahmedabad. The package containing the draft orders was delivered at destination on 23/03/2020. It is quite evident that the order was well drafted before the expiry of 90 days and sent for approval of the other member immediately. However, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the draft order could not reach Hon'ble Judicial Member for approval despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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