BALMER LAWRIE VAN-LEER LTD, NAVI MUMBAI v. ADDL CIT RG 10(2), MUMBAI

ITA 1241/MUM/2010 | 2003-2004
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 124119914 RSA 2010
Assessee PAN AAACB2906R
Bench Mumbai
Appeal Number ITA 1241/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 1 day(s)
Appellant BALMER LAWRIE VAN-LEER LTD, NAVI MUMBAI
Respondent ADDL CIT RG 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 18-03-2011
Date Of Final Hearing 24-02-2011
Next Hearing Date 24-02-2011
Assessment Year 2003-2004
Appeal Filed On 16-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI B RAMAKOTAIAH ACCOUNTANT MEMBER I T A NOS: 1241/MUM/2010 AND 1242/MUM/2010 (ASSESSMENT YEARS: 2003-04 AND 2004-05) BALMER LAWRIE VAN-LEER LIMITED APPELLANT NAVI MUMBAI (PAN: AAACB2906R) VS ADDITIONAL COMMISSIONER OF INCOME TAX RESPONDENT RANGE 10(2) / INCOME TAX OFFICER 10(2)(1) MUMBAI APPELLANT BY: SHRI M SUBRAMANIAN RESPONDENT BY: SHRI PRADEEP HEDAW O R D E R R V EASWAR PRESIDENT: THESE TWO APPEALS ARE BY THE SAME ASSESSEE AND THE Y RELATE TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURE OF DRUMS CLOSURES AND PLASTIC DRUMS. 2. WE FIRST TAKE UP THE APPEAL FOR THE ASSESSMENT Y EAR 2003-04 WHICH ARISES OUT OF THE ASSESSMENT ORDER PASSED UND ER SECTION 143(3) OF THE INCOME TAX ACT 1961 ON 21 ST MARCH 2006. THE FIRST ISSUE TO BE DECIDED IS WHETHER THE CLAIM OF BAD DEB TS OF ` 3 81 661/- IS ALLOWABLE. THE ISSUE IS DEALT WITH A T PARAGRAPH 4 OF THE ASSESSMENT ORDER. THE CLAIM CONSIST OF THE FOL LOWING AMOUNTS:- ITA NO: 1241/MUM/2010 ITA NO: 1242/MUM/2010 2 VARIOUS OLD DEBTS WRITTEN OFF ` 1 28 002/- SALES TAX DUES ` 6 420/- WEST BENGAL SALES TAX ` 51 717/- PAY ROLL SOFTWARE PACKAGE EXPENSES ` 35 000/- DEBTORS OLD BALANCES ` 13 527/- OLD DUES OF EMPLOYEES 1996 ` 1 60 522/- TOTAL ` 3 95 188/- OUT OF THE ABOVE CLAIM THE ASSESSING OFFICER ALLOW ED THE DEBTORS OLD BALANCES OF ` 13 527/-. THE BALANCE OF ` 3 81 661/- WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE COULD NO T PROVE THAT THEY HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE A SSESSEES INCOME FOR THE RELEVANT PREVIOUS YEAR OR ANY OF THE EARLIER PREVIOUS YEARS AS REQUIRED BY SECTION 36(2)(I) OF THE ACT. ON APPEAL THE CIT(A) CONFIRMED THE DECISION OF THE ASSESSING OFFI CER AND HENCE THE FURTHER APPEAL. THE POSITION BEFORE US REMAINS THE SAME NAMELY THAT EVEN BEFORE US THE ASSESSEE IS UNABLE TO PROVE THAT THE DEBTS AMOUNTING TO ` 3 81 661/- HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR THE RELEVA NT PREVIOUS YEAR OR ANY OF THE EARLIER PREVIOUS YEARS. THUS SE CTION 36(2)(I) HAS NOT BEEN COMPLIED WITH. THEREFORE WE HAVE NO OPTI ON BUT TO UPHOLD THE DISALLOWANCE. WE DO SO. 3. THE SECOND ISSUE RELATES TO THE DISALLOWANCE OF THE CLAIM UNDER SECTION 80HHC OF THE ACT. WHILE COMPUTING TH E BOOK PROFIT UNDER SECTION 115JB OF THE ACT THE ASSESSING OFFIC ER DID NOT ALLOW THE DEDUCTION UNDER SECTION 80HHC AS CLAIMED BY THE ASSESSEE. ITA NO: 1241/MUM/2010 ITA NO: 1242/MUM/2010 3 THE ASSESSEE CLAIMED THE DEDUCTION AS PER ITS ACCOU NTS WITHOUT ADJUSTING THE UNABSORBED DEPRECIATION BROUGHT FORWA RD FROM THE EARLIER YEARS ARGUING THAT FOR THE PURPOSE OF SECT ION 115JB SUCH ADJUSTMENT CANNOT BE MADE TO THE COMPUTATION OF THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. APPARENTLY THE AS SESSEE WAS RELYING ON CLAUSE (IV) BELOW EXPLANATION 1 TO SECTI ON 115JB WHICH PROVIDED THAT THE BOOK PROFIT HAS TO BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTI ON (3) OR SUB- SECTION (3A) OF SECTION 80HHC AND SUBJECT TO THE CO NDITIONS SPECIFIED IN THAT SECTION. IT WAS THE ASSESSEES C ASE THAT HAVING REGARD TO THE ABOVE CLAUSE BELOW EXPLANATION 1 TO S ECTION 80HHC THE BROUGHT FORWARD UNABSORBED DEPRECIATION CANNOT BE ADJUSTED AGAINST THE PROFITS FOR THE YEAR BEFORE ALLOWING DE DUCTION UNDER SECTION 80HHC OF THE ACT. THE CIT(A) HELD THAT THO UGH THE ASSESSEES CONTENTION WAS SUPPORTED BY THE ORDER OF THE SPECIAL BENCH MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. SYNC OME FORMULATIONS (I) LTD. (2007) 106 ITD 193 (MUM) (SB) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AJANTA PHA RMA LIMITED (2009) 223 CTR 441 (BOM) HAS OVERRULED THE ORDER OF THE SPECIAL BENCH WITH THE RESULT THAT EVEN FOR COMPUTING BOOK PROFIT UNDER SECTION 115JB THE DEDUCTION UNDER SECTION 80HHC HA S TO BE COMPUTED AS PER THE NORMAL PROVISIONS OF THE ACT W HICH MEANS THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION HAS TO BE SET OFF AGAINST THE CURRENT YEARS PROFITS BEFORE ALLOWING THE DEDUCTION. IN THIS VIEW OF THE MATTER HE DECIDED THE ISSUE AGAINS T THE ASSESSEE. ITA NO: 1241/MUM/2010 ITA NO: 1242/MUM/2010 4 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE I SSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUD GMENT OF THE SUPREME COURT IN AJANTA PHARMA LIMITED VS. CIT (201 0) 327 ITR 305 (SC). THIS JUDGMENT REVERSES THE JUDGMENT OF T HE HONBLE BOMBAY HIGH COURT CITED SUPRA. IN THIS CASE IT WAS HELD THAT SECTION 115JB IS A SELF-CONTAINED CODE AND THE TRIB UNAL WAS RIGHT IN HOLDING THAT 100% OF THE EXPORT PROFITS EARNED BY T HE ASSESSEE AS COMPUTED UNDER SECTION 80HHC(3) WAS ELIGIBLE FOR RE DUCTION UNDER CLAUSE (IV) OF THE EXPLANATION 1 BELOW SECTION 115J B. IT HAS BEEN RECOGNIZED THAT FOR THE PURPOSE OF COMPUTATION OF B OOK PROFITS WHICH IS DIFFERENT FROM THE NORMAL COMPUTATION UNDER THE INCOME TAX ACT INCLUDING THE COMPUTATION UNDER CHAPTER VI-A THEREO F AND THEREFORE THE PROFITS CANNOT BE REDUCED BY THE BROUGHT FORWAR D UNABSORBED DEPRECIATION. RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE SUPREME COURT WE HOLD THAT THE ASSESSING OFFICER OUGHT TO H AVE REDUCED THE BOOK PROFIT BY THE DEDUCTION UNDER SECTION 80HHC CO MPUTED BEFORE ADJUSTING THE BROUGHT FORWARD UNABSORBED DEPRECIATI ON AGAINST THE ELIGIBLE PROFITS. THUS THIS ISSUE IS DECIDED IN FA VOUR OF THE ASSESSEE. 5. AS REGARDS THE ASSESSMENT YEAR 2004-05 ONE OF T HE ISSUES RELATES TO THE DEDUCTION UNDER SECTION 80HHC VIS-- VIS SECTION 115JB OF THE ACT. IN LINE WITH OUR DECISION FOR TH E ASSESSMENT YEAR 2003-04 ON THIS POINT WE UPHOLD THE ASSESSEES CLA IM AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION AS CLA IMED BY THE ASSESSEE. ITA NO: 1241/MUM/2010 ITA NO: 1242/MUM/2010 5 6. THE OTHER ISSUE RELATES TO THE DISALLOWANCE OF I NTEREST OF ` 2 53 157/- PAID IN RESPECT OF THE SALES TAX. IT AP PEARS THAT THE PAYMENT OF SALES TAX WAS DELAYED AND THE ASSESSEE H AD TO PAY INTEREST THEREON. ACCORDING TO PARAGRAPH 5.1 OF TH E CIT(A)S ORDER THE INTEREST WAS ON ACCOUNT OF SHORT PAYMENTS ARISI NG OUT OF NON- RECEIPT OF DECLARATIONS IN C FORMS FROM VARIOUS C USTOMERS. THERE IS NO ELEMENT OF PENALTY INVOLVED IN THE PAYMENT OF THE INTEREST. FURTHER AS HELD BY THE SUPREME COURT IN THE CASE O F MAHALAKSHMI SUGAR MILLS CO. VS. CIT (1980) 123 ITR 429 (SC) IN TEREST IS AN ADJUNCT OF TAX AND HAS TO BE CONSIDERED AS PART OF THE SALES TAX. IT IS THEREFORE ALLOWABLE AS A DEDUCTION. THE ASSESSI NG OFFICER IS DIRECTED TO ALLOW THE SAME. 7. IN THE RESULT THE APPEAL FOR THE ASSESSMENT YEA R 2003-04 IS PARTLY ALLOWED AND THE APPEAL FOR THE ASSESSMENT YE AR 2004-05 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH 2011. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 18 TH MARCH 2011 SALDANHA COPY TO: 1. BALMER LAWRIE VAN-LEER LIMITED D-195/2 TTC INDUSTRIAL AREA MIDC TURBHE NAVI MUMBAI 400 705 2. ADDL. CIT RANGE 10(2) MUMBAI 3. CIT-X MUMBAI 4.CIT(A)-21 MUMBAI 5.DR J BEN CH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI