DCIT, Circle - 1, Kolkata, Kolkata v. M/s. Stone India Ltd., Kolkata

ITA 1254/KOL/2010 | 2006-2007
Pronouncement Date: 07-01-2011

Appeal Details

RSA Number 125423514 RSA 2010
Assessee PAN MARCH2001H
Bench Kolkata
Appeal Number ITA 1254/KOL/2010
Duration Of Justice 6 month(s) 20 day(s)
Appellant DCIT, Circle - 1, Kolkata, Kolkata
Respondent M/s. Stone India Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 07-01-2011
Assessment Year 2006-2007
Appeal Filed On 17-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH B KOLKATA () BEFORE . . . . . . . . SHRI B.R.MITTAL JUDICIAL MEMBER. ! ! ! ! /AND . .. .'# '#'# '#. .. . $% SHRI C.D. RAO ACCOUNTANT MEMBER !& !& !& !& / ITA NOS. 1254/KOL/2010 '( )* / ASSESSMENT YEARS : 2006-07 ( - / APPELLANT ) DCIT CIRCLE-1 KOLKATA - ' - - VERSUS - (/0 -/ RESPONDENT ) M/S. STONE INDIA LTD. (PAN:AAECS 4155K) - 1 2 $/ FOR THE APPELLANT: SMT. A. MUKHERJEE /0 - 1 2 $ / FOR THE RESPONDENT : SHRI D.S.DAMLE $3 / ORDER ( . .. .'# '#'# '#. .. . ) $% PER SHRI C.D.RAO A.M . THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE C.I.T.(A)-I KOLKATA DATED 07.04.2010 FOR THE ASSESSMENT YEAR 20 06-07. 2. THE ONLY EFFECTIVE GROUND TAKEN BY THE REVENUE IN THIS APPEAL IS RELATING TO REDUCTION OF NET PROFIT BY RS.1 30 53 000/- BY THE LD. CIT(A) BEING PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT FOR THE PURPO SE OF BOOK PROFIT UNDER SECTION 115JB. 3. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHILE D OING THE SCRUTINY ASSESSMENT IT WAS NOTICED BY THE AO THAT WHILE THE COMPUTATION OF INCOME UNDER NORMAL PROVISION WAS STARTED WITH THE NET PROFIT OF RS.8 70 11 000/- AS PER PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31. 03. 2006 BUT THE COMPUTATION OF BOOK PROFIT U/S. 115JB WAS STARTED WITH AN AMOUNT OF RS.7 39 58 000I- AFTER EXCLUDING EXCEPTIONAL ITEM FOR RS. 1 30 53 000/- RELATED TO WRITE BACK OF PROVISION FO R DIMINUTION IN THE VALUE OF INVESTMENT AS PER SL. NO. (IX) OF SCHEDULE 20 TO THE ACCOUNTS WHICH IS INADMISSIBLE. THEREAFTER A NOTICE UNDER SECTION 143(2) DATED 24. 09.2009 WAS ISSUED TO THE ASSESSEE. 2 IN RESPONSE TO THE NOTICE THE ASSESSEE SUBMITTED A WRITTEN EXPLANATION STATING AS UNDER: IN THE PROFIT AND LOSS A/C. FOR THE YEAR ENDED 31.0 3.2001 THE ASSESSEE HAD DEBITED RS.7 05 73 000/- BEING PROVISION FOR DIMINU TION IN THE VALUE OF INVESTMENT. IN COMPUTATION OF BOOK PROFIT U/S. 115J B OF THE ACT FOR THE ASSESSMENT YEAR 2001 - 02 THE SAID PROVISION FOR DI MINUTION IN THE VALUE OF INVESTMENT WAS ADDED BACK TO THE BOOK PROFIT. IN OT HER WORDS IN COMPUTING BOOK PROFIT FOR THE ASSESSMENT YEAR 2001 - 02 NO DE DUCTION WAS ALLOWED IN RESPECT OF PROVISIONS MADE FOR DIMINUTION IN THE VA LUE OF INVESTMENT. OUT OF THE SAID PROVISION MADE IN THE ASSESSMENT YE AR 2001-02 THE ASSESSEE WROTE BACK RS.1 30 53 000/- IN THE ACCOUNTS FOR THE YEAR ENDED 31. 03. 2006. CLAUSE - (I) OF EXPLANATION U/S. 115JB(2) PROVIDES THAT THE BOOK PROFIT SHALL BE REDUCED BY THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISIONS IF ANY SUCH AMOUNT IS CREDITED TO THE P&L A/C. IN THE PRESENT C ASE THE ASSESSEE CREATED THE PROVISION FOR DIMINUTION IN THE VALUE OF INVEST MENT BY DEBITING TO THE P&L A/C AFTER 1ST. APRIL 1997 & OUT OF THE SAID PROVISI ON AMOUNT WAS WITHDRAWN AND CREDITED TO THE P&L. A/C. IN VIEW OF CLAUSE - ( I) OF EXPLANATION TO SECTION 115JB THE AMOUNT WRITTEN BACK OUT OF THE SAID PROVI SION WAS RIGHTLY REDUCED IN THE COMPUTATION OF BOOK PROFIT. THE QUESTION WHETHER PROVISION FOR DIMINUTION IN TH E VALUE OF INVESTMENT WAS DEDUCTIBLE IN COMPUTATION OF BOOK PROFIT WAS DEBATA BLE QUESTION. HOWEVER THE FINANCE ACT 2009 AMENDED SECTION - 115JB WITH RETR OSPECTIVE EFFECT. AS PER NEW PROVISO PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT IS NOT TO BE ALLOWED AS DEDUCTION IN COMPUTING BOOK PROFIT. AS I S COROLLARY ANY AMOUNT WRITTEN BACK OUT OF SUCH PROVISION IS ALSO NOT INCL UDED IN THE BOOK PROFIT. AS SUCH THERE IS NO MISTAKE IN COMPUTATION OF BOOK PRO FIT U/S. 115JB FOR THE ASSESSMENT YEAR 2006-07 . 3.1 THE AO CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE AND CONCLUDED THAT IN THE FINANCE ACT 2009 SECTION 115JB HAS BEEN AM ENDED AND AS AMENDED PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT SHALL NOT BE ALLOWABLE TO BE ADJUSTED FROM. THE NET PROFIT TO ARRIVE AT BOOK PROFIT. THIS AMEND MENT IS ALSO MADE EFFECTIVE RETROSPECTIVELY FROM 01. 04. 2001. THUS THE SUBMIS SION OF THE LD. A/R IS NOT ACCEPTABLE. THE SAID AMOUNT OF RS.1 30 53 000/- IS ADDED IN COMPUTING THE BOOK PROFIT. 4. ON APPEAL THE LD. CIT(A) HAS DISALLOWED THE ADD ITION BY OBSERVING THAT I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF THE A/RS A S WELL AS THE AOS REASONING FOR MAKING ADDITIONS TO THE BOOK PROFIT AMOUNTING TO RS .I 30 53 000/-. THE FACTS ON RECORD 3 ESTABLISH THAT THE ASSESSEE IN ITS PROFIT & LOSS A/ C FOR THE YEAR ENDED 31 ST MARCH 2001 HAD DEBITED SUM OF RS.7 05 73 000/ UNDER THE HEAD PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT. FROM THE COMPUTATION OF TOTAL INCOME FILED FOR THE A.Y. 2001- 02 IT WAS ASCERTAINED THAT IN COMPUTING BOOK PROFI T FOR THE PURPOSE OF SEC. 115JB THE APPELLANT HAD NOT CLAIMED DEDUCTION FOR THE PROVISI ON FOR DIMINUTION IN VALUE OF INVESTMENT DEBITED IN THE PROFIT & LOSS A/C FOR TH E YEAR ENDED 31 ST MARCH 2001. THE COMPUTATION OF BOOK PROFIT MADE IN A.Y. 2001-02 WAS IN CONFORMITY WITH SEC. 115JB WHICH CAME TO BE AMENDED RETROSPECTIVELY FROM 1 ST APRIL 2001. OUT OF THE PROVISION CREATED IN THE F.Y. 2000-01 THE APPELLANT WROTE BAC K RS.1 30 53 000/- TO ITS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006. SINCE THE AMOUNT WRITTEN BACK WAS PART AND PARCEL OF THE PROVISION OF RS.7 05 73 000/ - CREATED IN F.Y. 2000-01 FOR WHICH NO DEDUCTION WAS ALLOWED; (IN THE YEAR OF ITS WRITE BACK) THE AMOUNT COULD NOT ONCE AGAIN BE INCLUDED IN THE BOOK PROFIT. THIS PROPOSIT ION IS SUPPORTED BY CLAUSE (I) OF EXPLANATION TO SEC. 115JB OF THE ACT. 6. CLAUSE (I) OF THE EXPLANATION PROVIDES THAT ANY AMOUNT WITHDRAWN FROM THE PROVISION WILL BE REDUCED FROM THE BOOK PROFIT IF AND SUCH AMOUNT IS CREDITED TO THE PROFIT & LOSS A/C. THE PROVISO TO CLAUSE (I) EXPLAINS THAT THE PROVISION WRITTEN BACK WILL BE DEDUCTED FROM THE NET PROFIT O NLY IF THE PROVISION (OUT OF WHICH THE AMOUNT IS WITHDRAWN) PERTAINS TO ANY PREV IOUS YEAR COMMENCING AFTER 1 ST APRIL 1997 AND BOOK PROFIT OF SUCH YEAR WAS INCREA SED BY THE PROVISION (OUT OF WHICH THE AMOUNT IS WITHDRAWN). IN THE APPE LLANTS CASE THE AMOUNT WITHDRAWN AND CREDITED TO THE PROFIT & LOSS A/C; WA S OUT OF THE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS DEBITED TO THE P ROFIT & LOSS A/C FOR THE YEAR ENDED 31 ST MARCH 2001. IN COMPUTING THE BOOK PROFITS FOR A. Y . 2001-02 THE PROVISION SO DEBITED WAS NOT ALLOWED AS A DEDUC TION AND THEREBY BOOK PROFIT U/S 115JB FOR THE YEAR ENDED 31 ST MARCH 2001 WAS INCREASED BY THE AMOUNT OF THE PROVISION. IN THE LIGHT OF CLAUSE-(I) OF EXPLANATION TO SEC.115JB THE AMOUNT OF RS.1 30 53 000/- WITHDRAWN FROM THE P ROVISION FOR DIMINUTION IN VALUE OF INVESTMENT WAS REQUIRED TO BE REDUCED F ROM THE NET PROFIT TO ARRIVE AT A BOOK PROFIT U/S 115JB. 4 5. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFO RE US. 6. AT THE TIME OF HEARING THE LD. D.R. APPEARING ON BEHALF OF THE REVENUE HAS HEAVILY RELIED ON THE ORDERS OF THE AO AND FURTHER SUBMITTED THAT IN THE ORDER UNDER SECTION 143(3) DATED 28.11.08 COMPUTATION OF TOTAL INCOME UNDER NORMAL PROVISION WAS STARTED WITH RS.8 70 11 000/- WHEREAS COMPUTATI ON OF BOOK PROFIT UNDER SECTION 115JB WAS STARTED WITH RS.7 39 58 000/-. THE REVENU E AUDIT RAISED THE CONTROVERSY REGARDING THE EXCEPTIONAL ITEM OF RS.1 30 53 000/- BEING THE DIMINUTION VALUE OF INVESTMENT. IN THE ORDER OF RE-ASSESSMENT UNDER SEC TION 157/143(3) DATED 26.10.2009 IT WAS HELD THAT THE DIMINUTION IN THE VALUE OF INVEST MENT SHALL NOT BE ALLOWABLE TO BE ADJUSTED FROM THE NET PROFIT TO ARRIVE AT BOOK PROF IT BY VIRTUE OF AMENDMENT IN THE FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 01 .04.2001 AND THE BOOK PROFIT WAS COMPUTED BY MAKING ADDITION OF RS.1 30 53 000/-. TH E LD. D.R. FURTHER SUBMITTED THAT COMPUTATION OF BUSINESS INCOME UNDER NORMAL PROVISI ONS WAS STARTED WITH THE DECLARED LOSS OF RS.3 00 08 000/- AND THEREFORE WI THOUT MAKING ANY ADDITION OF RS.7 05 73 000/- BEING PROVISION IN THE DIMINUTION VALUE OF INVESTMENT DEBITED TO THE P&L A/C TOTAL INCOME WAS COMPUTED AT A LOSS OF RS. 93 17 050/-. THE BOOK PROFIT WAS COMPUTED AT A LOSS OF RS.93 17 050/-. HENCE THE FA CT WAS CLEAR THAT THE PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT OF RS.7 05 73 000/- WHICH WAS DEBITED TO THE P&L A/C. FOR THE YEAR ENDED 31.03.2001 WAS NEITHER DISALLOWED UNDER THE NORMAL PROVISION NOR ADDED BACK UNDER SECTION 115JB. THERE FORE THE CONTENTION OF THE ASSESSEE WHICH WAS CONSIDERED BY THE LD. CIT(A) IN DELETING THE ADDITION IS NOT FACTUALLY CORRECT. HENCE HE REQUESTED TO UPHOLD TH E ORDER OF THE AO BY CANCELLING THE ORDER OF THE LD. CIT(A). 7. ON THE OTHER HAND THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS RELIED ON THE ORDERS OF THE LD. CIT(A) AND FURTHER CONTENDED THAT THE ASSESSEE HAD CREDITED RS.1 30 53 000/- BEING PROVISION FOR DIMIN UTION IN VALUE OF INVESTMENT NO LONGER REQUIRED AND WRITTEN BACK. THE AMOUNT WRITTE N BACK WAS OUT OF THE PROVISION CREATED IN THE ASSESSEES AUDITED PROFIT & LOSS A/C . FOR THE YEAR ENDED 31 ST MARCH 2001. THE LD. COUNSEL FURTHER POINTED OUT THAT IN COMPUTI NG BOOK PROFIT UNDER SECTION 115JB FOR ASSESSMENT YEAR 2001-02 ASSESSEE HAD NOT CLAIMED DEDUCTION FOR PROVISION 5 FOR DIMINUTION IN VALUE OF INVESTMENT AMOUNTING TO RS.7 05 73 000/- WHICH WAS DEBITED IN THE PROFIT & LOSS A/C. FOR THE YEAR ENDE D 31 ST MARCH 2001. THEREFORE HE REQUESTED TO UPHOLD THE ACTION OF THE LD. CIT(A). 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD IT IS OBSERVED THAT SECTION 11 5JB WAS AMENDED BY THE FINANCE ACT 2009 VIDE WHICH DIMINUTION IN VALUE OF INVESTM ENT WAS NOT TO BE ALLOWED AS DEDUCTION FROM THE NET PROFIT TO ARRIVE AT THE BOOK PROFIT AND THE AMENDMENT WAS MADE RETROSPECTIVELY FROM 1 ST APRIL 2001. IT IS ALSO OBSERVED THAT CLAUSE (I) O F EXPLANATION TO SECTION 115JB OF THE ACT SAYS THAT THE AMOUNT WI THDRAWN FROM ANY RESERVES OR PROVISIONS CREATED ON OR AFTER 01.04.1997 WHICH AR E CREDITED TO THE PROFIT AND LOSS ACCOUNT SHALL NOT BE REDUCED FROM THE BOOK PROFITS UNLESS THE BOOKS PROFITS WERE INCREASED BY THE AMOUNT TRANSFERRED TO SUCH RESERVE S OR PROVISIONS IN THE YEAR OF CREATION OF SUCH RESERVES (OUT OF WHICH THE SAID AM OUNT WAS WITHDRAWN). IN THIS CASE PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT RS.7 05 73 000/- WAS CREATED IN THE FINANCIAL YEAR 2000-01 RELEVANT TO ASSESSMENT Y EAR 2001-02 BUT BOOK LOSS OF THE SAID YEAR WAS NOT APPRECIATED BY THE SAID AMOUNT IN THE COMPUTATION FILED UNDER SECTION 115JB ALONG WITH THE RETURN. AS THERE IS A LOSS OF RS.30 008/- PRIOR TO PROVIDING OF PRIOR YEAR ADJUSTMENT AND DIMINUTION I N THE VALUE OF INVESTMENT NO ADDITION HAS BEEN MADE UNDER SECTION 115JB BY THE A SSESSEE IN THE ASSESSMENT YEAR 2001-02 ON ACCOUNT OF DIMINUTION IN THE VALUE OF IN VESTMENT. AS REGARDING THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME HAS BEEN ALLOWED BY THE REVENUE IN THE ASSESSMENT YEAR 2003-04 WE ARE OF T HE OPINION THAT IN THIS YEAR ALSO THE POSITION IS THE SAME WITH THAT OF THE ASSESSMEN T YEAR 2001-02. IN THIS CASE THE LOSS OF THE ASSESSEE COMPANY IS RS.33 752/- AND THE EXCE PTIONAL ITEM ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVESTMENT HAS NOT BEEN ADJUSTED WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. THEREFORE WE ARE OF TH E CONSIDERED OPINION THAT THE OBSERVATION OF THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSEE IN COMPUTING THE BOOK PROFITS FOR A. Y. 2001-02 THE PR OVISION SO DEBITED WAS NOT ALLOWED AS A DEDUCTION AND THEREBY BOOK PROFIT U/S 115JB FOR THE YEAR ENDED 31 ST MARCH 2001 WAS INCREASED BY THE AMOUNT OF THE PROVI SION. IN THE LIGHT OF CLAUSE-(I) OF EXPLANATION TO SEC.115JB THE AMOUNT OF RS.1 30 53 000/- WITHDRAWN FROM THE 6 PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT WAS REQUIRED TO BE REDUCED FROM THE NET PROFIT TO ARRIVE AT A BOOK PROFIT U/S 115JB WHICH IS IN FACT BASED ON THE INCORRECT FACTS. HENCE WE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE THAT OF THE AO. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLO WED. 4 $3 5 6' 7 48 ORDER PRONOUNCED IN THE COURT ON 07.01.2011. SD/- SD/- . . . . . . . . B.R.MITTAL JUDICIAL MEMBER . .. .'# '#'# '#. .. . $% C.D. RAO ACCOUNTANT MEMBER ( (( ( #% #%#% #%) )) ) DATE: 07.01.2011 MST(SR.P.S.) $3 1 /9 :$9);- COPY OF THE ORDER FORWARDED TO: 1. M/S. STONE INDIA LTD. 16 TARATALA ROAD KOLKATA 700 088. 2. DCIT CIRCLE-1 KOLKATA 3. THE CIT(A) 4. THE CIT 5 . DR KOLKATA BENCHES KOLKATA 09 // TRUE COPY $3'6/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES . 7