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TMI Blog2024 (9) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit for the purposes of MAT - As seen from the extract of submissions filed by the appellant there is a table indicating that for AYs 2022-23 to AY 2023-24, the assessee has disclosed a total income for the two assessment years. It is clear that whatever is the system of accounts being followed by the assessee, it is very much possible to determine profits and losses or to put it in the language of the Companies Act, 2013 and Section 115JB of the Act, preparing a statement of profit and loss which would lead to computation of MAT. This fact would be an additional factor against the appellant when he claims that because of the provisions of Companies Act, 2013/1956, he is unable to work out book profits for determining MAT liability. Appeal filed by the assessee is dismissed. - Sri Rajpal Yadav, Vice-President And Sri Sanjay Awasthi, Accountant Member For the Assessee : Sanjay Bhattacharaya, FCA For the Department : Subhendu Datta, CIT DR ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER: Before spelling out the contentious issues in this case, it is necessary to mention a brief chronology regarding the proceedings before Income Tax Authorities, as also the proceedings of voluntary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond limb of fact regarding the peculiar status of the appellant company, the same may be briefly summarized in the following manner: A) It deserves to be mentioned that the appellant is a wholly owned company of the Govt. of India, with its entire share capital being held by the Hon'ble President of India and her seven nominees. Considering poor financial performance, in accordance with the directions of the Ministry of Finance, Govt. of India, at an Extraordinary General Meeting (in short EGM ) of the shareholders on 05.09.2012, it was decided in accordance with Section 484 of the Companies Act, 1956 (Section 304 of the Companies Act, 2013) to go in for voluntary winding up. Consequent upon the adoption of this special resolution for winding up, it became a case of Members voluntary winding up after which the company has not been carrying on any business activity other than realizing its assets and discharging its statutory liabilities. Here it needs to be mentioned that the voluntary winding up was authorized when the Companies Act, 1956 was still in force and thus, in a number of places in the appellant s submission this particular Act has been mentioned, with corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that there had not been any scope in the prescribed Return Form (ITR-6) for computing any Book Profit u/s 115JB(2), the appellant could not have computed any Book Profit u/s 115JB(2) and thus the Ld. Principal Commissioner of Income-tax erred in holding the Assessment Order dated 22/02/2021 passed u/s 143(3) as allegedly erroneous in so far as it was allegedly prejudicial to the interest of Revenue. 3. That without prejudice to the contentions raised in Grounds Nos. 1 and 2 above, the Ld. Principal Commissioner of Income-tax was wrong in directing the Assessing Officer to reframe the assessment afresh through an Order passed u/s 263. 4. That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal before or at the hearing of the appeal. 2. Before us, a paper book has been filed along with written submissions. In the paper book, apart from the brief narration of the issues under consideration, extracts from Companies Act, 1956 and Companies Act, 2013 have been placed for our consideration. To begin with, the appellant has contended that as per the requirement of Section 115JB of the Act, book profits are required to be computed as per Section 115JB(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en below: Sl. No. Assessment Year Business Income of the Year Set off of B/f Business Loss Total Income Tax Paid Rs. Rs. Rs. Rs. 1. 2019-10 21,88,80,431 21,88,80,431 NIL NIL 2. 2020-21 28,88,78,415 28,88,78,415 NIL NIL 3. 2021-22 26,20,37,997 26,20,37,997 NIL NIL 4. 2022-23 22,86,58,450 NIL 22,86,58,450 5,75,48,759 5. 2023-24 21,89,92,930 NIL 21,89,92,930 5,51,16,141 On the basis of the above facts it may kindly be appreciated that as soon as the Brought forward losses got set off and/or lapsed, the appellant commenced payment of due income-taxes. (9) In respect of all the Assessment Years prior to the Assessment Year 2018-19 and also in respect of all the Assessment Years subsequent to the Assessment Year 2018-19, the Income-tax Department accepted the fact that there had not been any MAT liability u/s 115JB for the appellant. On the basis of the facts stated hereinabove at SI. Nos.(i) to (8), it is submitted on behalf of the appellant that there being no scope of preparation of Profit and Loss Account in the case of the appellant for the Financial Year 2017-18 (relevant for the Assessment Year 2018-19), there could not have been any computation of Book Profit u/s 115JB for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es (Court) Rules, 1959. As per section 115JB (5A) of the Act, the concept of book profit is applicable to all domestic companies except for the Life Insurance Business and the companies who exercised to be taxed u/s 115BBA and 115BAB. Also, the provisions of Section 551 of the Company Act do not have an overriding effect over provision of sec. 115JB of the IT Act. Nothing is mentioned in section 115JB of the IT Act that a company under voluntary winding up is not required to pay tax on book profit. Therefore, the assessee company is required to prepare quarterly statements of receipt and payment as required u/s 551 of the Companies Act, 1956 and at the same time prepare its statements of profit and loss account as per provision of Schedule-Ill to the Companies Act, 2013. Maintaining of quarterly statements of receipt and payment is only a procedural matter in the case of company under voluntarily winding up and the said provision of Company Act does not give blanket exemption to the company from preparing its statement of profit and loss account, from which book profit can be ascertained. 2.2. During the course of oral arguments, the ld. A/R repeatedly emphasized on the inability t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental principles have been summed up as under: (i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the does not agree. If cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 TTJ 428 (Delhi)-Para.5. (xii) Ahalya Trading (P.) Ltd. v. CIT [2008] 22 SOT 68 (Mum.)- Para.6. Apart from this, it is interesting to note that the order passed by the Bombay Bench of ITAT in the case of Mrs. Khatiza S. Oomerbhoy (supra) has been referred to in more than 20 other orders passed by Tribunal Benches and in a few decisions passed by High Court Division Benches. Thus, it is useful for the purposes of determining the applicability of section 263 of the Act in the present case. 3.2. Applying the tests contained in the case of Mrs. Khatiza S. Oomerbhoy (supra) it is seen that the ld. Pr. CIT has recorded a satisfaction regarding the ld. AO s order being erroneous and prejudicial to the interests of the Revenue. Secondly, there is an incorrect assumption of facts, coupled with an incorrect application of law in this case, in as much as the ld. AO has not even considered the applicability of the provisions of Section 115JB of the Act. Thirdly, since this issue was not enquired into at the stage of assessment proceedings, then this is not a case of change of opinion which could have vitiated the said proceedings. In light of the facts and circumstances of the case and consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of profit and loss] for the relevant previous year in accordance with the provisions of [Schedule III] to the [Companies Act, 2013 (18 of 2013)]; or (b) being a company, to which the [second proviso to sub-section (1) of section 129] of the [Companies Act, 2013 (18 of 2013)] is applicable, shall, for the purposes of this section, prepare its [statement of profit and loss] for the relevant previous year in accordance with the provisions of the Act governing such company:] Provided that while preparing the annual accounts including [statement of profit and loss], (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including [statement of profit and loss]; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including [statement of profit and loss] and laid before the company at its annual general meeting in accordance with the provisions of [section 129] of the [Companies Act, 2013 (18 of 2013)]: Provided further that where the company has adopted or adopts the financial year under the [Companies Act, 2013 (18 of 2013)], which is differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 462 apply.] (2) When the statement is filed in [Tribunal] [ Substituted by Act 11 of 2003, Section 107, for Court .] under clause (a) of sub-section (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company. (2A) Where a statement referred to in sub-section (2) relates to a Government company in liquidation, the Liquidator shall forward a copy thereof,- (a) to the Central Government, if that Government is a member of the Government company; or (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government company.] 3.4. It is seen that in a number of places consequential amendments have been affected in this provision in line with words and phrases adopted in the Companies Act, 2013, when there was changeover from the earlier Companies Act, 1956. The noteworthy point here is that in Section 115JB(2)(a) of the Act the phrase profit and loss account has been changed to the phrase statement of profit and loss by the Finance Act, 2017. Several other changes are vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for computation of profit Net profit Profit Explanation 1 providing for computation of profit Profit and loss account wherever they occur Statement of profit and loss Explanation 1(k) providing for an adjustment for computation of profit Profit or loss account Statement of profit and loss Explanation 3 providing for preparation of profit and loss account in certain cases Proviso to sub-section (2) of section 211 of the Companies Act, 1956 Second proviso to sub-section (1) of section 129 of the Companies Act, 2013 Profit and loss account Statement of profit and loss Part II and Part III of Schedule VI to the Companies Act, 1956 Schedule III to the Companies Act, 2013 This narration illustrates the fact the section under consideration has kept pace with any changes in the Companies Act and more importantly, has given due weightage to any aspect contained therein which needs to have a bearing on the computation of Book Profit u/s 115JB of the Act. Extrapolating this reasoning further it needs to be assumed that in case any aspect of the Companies Act, 2013/1956 would have an overriding effect on the MAT provision of Income Tax Act then that should also have been specifically mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f levy of MAT u/s 115JB of the Act. In fact, at this stage, it also needs to be mentioned that as per the Section 178(6) of the Act in cases of a company in liquidation, the provisions of IBC, 2016 shall override the provisions of Income Tax Act. This fact is merely mentioned to illustrate, at the cost of repetition, that wherever necessary, the provisions of Section 115JB of the Act have been relaxed for giving effect to the operation of other statutes and the overriding provisions of any other Act have been duly recognised in various places within the Income Tax Act. To come to the issue at hand, it is clear that there is no indication whatsoever in Section 115JB of the Act that a company under voluntary liquidation would be exempt from any of the provisions of the Income Tax Act, including Section 115JB of the Act. Importantly, the provisions governing preparation of accounts as per the Companies Act, 2013/1956 are nowhere taken cognizance of with any view towards granting exemption from the provisions of Section 115JB of the Act. 3.7. It is also necessary to advert to another line of argument advanced by the Ld. AR through which it has been averred that since there is a specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Government company in liquidation, the Company Liquidator shall forward a copy thereof (a) to the Central Government, if that Government is a member of the Government company; (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government company. 3.9. A plain reading of this provision reveals that it merely provides for a mechanism for filing an audited statement and does not in any way give the provisions primacy over any of the provisions of Income Tax Act, including Section 115JB of the Act. 3.10. Considering the discussion above, it is clear that any assessee covered under the provisions of Section 115JB of the Act will necessarily have to compute book profit for the purposes of MAT, until and unless such assessee is exempted specifically within the said provision itself. Clearly, this appellant s case does not fall within any of the exceptions contained in the said section and thus, the applicability of Section 115JB of the Act is clearly applicable in the present case and to this extent, the action of ld. Pr. CIT is upheld and ground no. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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