Rex Polyextrusion Ltd., v. Asstt. CIT Cir. 2 Sangli,

ITA 1514/PUN/2008 | misc
Pronouncement Date: 31-08-2010 | Result: Allowed

Appeal Details

RSA Number 151424514 RSA 2008
Assessee PAN FLOOR1077N
Bench Pune
Appeal Number ITA 1514/PUN/2008
Duration Of Justice 1 year(s) 9 month(s) 10 day(s)
Appellant Rex Polyextrusion Ltd.,
Respondent Asstt. CIT Cir. 2 Sangli,
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 31-08-2010
Assessment Year misc
Appeal Filed On 20-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR JM AND SHRI D.K. SRIVASTAVA AM I.T.A. NO. 1514/PN/2008: A.Y. 2005-06 REX POLYEXTRUSION LTD. KUMAR PLAZA 1 ST FLOOR 1077 NORTH SHIVAJINAGAR OP. K.W.C. COLLEGE SANGLI 416 416 PAN AAACR 9290 E APPELLANT VS. ASSTT. CIT CIR. 2 SANGLI RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY: SHRI ABHAY DAMLE ORDER PER I.C. SUDHIR JM THE ASSESSEE HAS QUESTIONED THE FIRST APPELLATE OR DER MAINLY ON THE GROUND THAT THE LEARNED CIT(A) HAS ER RED IN HOLDING THAT THE PROVISIONS OF SECTION 115JB ARE AP PLICABLE TO THE ASSESSEE-COMPANY. 2. IN SUPPORT OF THE GROUND THE LEARNED AR WHILE R EITERATING THE CONTENTIONS RAISED BEFORE THE LOWER AUTHORITIES SUBMITTED THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE TH AT SECTION 115JB CREATES A FICTION AND THEREFORE HAS TO BE IN TERPRETED IN ACCORDANCE WITH THE PURPOSE FOR WHICH THE SAID FICT ION IS CREATED. HE SUBMITTED FURTHER THAT THE LEARNED CIT (A) HAS ITA NO.1514/PN/2008 ROX POLYEXTRUSION LTD. A.Y. 2005-06 2 ERRED IN NOT FOLLOWING THE CBDT CIRCULAR NO. 762 DA TED 18-2- 1998. THE LEARNED AR SUBMITTED THAT IN THE ASSESSM ENT YEAR 2004-05 THE A.O HAS HELD THE ASSESSEE AS A SICK CO MPANY. HE REFERRED PARA 3 ON PAGE 2 OF THE SAID ASSESSMENT FOR A.Y. 2004-05 (COPY SUPPLIED) IN SUPPORT. HE POINTED OUT THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2005- 06 THE ASSESSEE EARNED PROFIT. HE SUBMITTED THAT THE SCHE ME OF TAXING BOOK PROFIT WAS INTRODUCED TO TAX COMPANIES WHO MADE HEALTHY PROFITS AND ALSO DECLARED DIVIDENDS BUT WHO DID NOT PAY ANY TAX BY TAKING ADVANTAGE OF CERTAIN PROVISIO NS OF THE ACT. THE CONTENTION OF THE ASSESSEE REMAINED THAT IT EARNED PROFIT FOR HIM BUT IT HAD NOT DECLARED DIVIDEND SIN CE INCEPTION THEREFORE THE PROVISIONS OF SECTION 115JB WERE NOT APPLICABLE IN ITS CASE. HE SUBMITTED THAT CBDT CIRCULAR IS BI NDING ON THE A.O AND HE SHOULD HAVE FOLLOWED THE SAME. THE LEAR NED AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) PROCESS PUMPS (P) LTD. VS. DY. CIT (2005) 3 SOT 200 (BANG) II) NCL INDUSTRIES LTD. VS. JT. CIT (2004) 88 ITD 150 (HYD) (III) FASCEL LTD. VS. ITO (2008) 12 DTR 154 (AHD) (IV) RASHTRIYA ISPAT NIGAM LTD. (2006) 285 ITR 1 (AAR) (V) CIT VS. AJANTA PHARMA LTD. (2009) 318 ITR 252 (BOM) 3. THE LEARNED DR ON THE OTHER HAND TRIED TO JUSTIF Y THE ORDERS OF LOWER AUTHORITIES AND PLACED RELIANCE ON THE DECISION ITA NO.1514/PN/2008 ROX POLYEXTRUSION LTD. A.Y. 2005-06 3 IN THE CASE OF CIT VS. SHRISHAKTI TRADING CO. (1994 ) 207 ITR 442 (BOM). 4. AFTER HAVING GONE THROUGH THE ORDERS OF THE LOWE R AUTHORITIES AND THE DECISIONS RELIED UPON IN VIEW OF THE ABOVE SUBMISSIONS OF THE PARTIES WE FIND THAT THE LEARNE D CIT(A) DID NOT AGREE WITH THE ABOVE CONTENTION OF THE LEARNED AR ON THE BASIS THAT THE BACKGROUND IN WHICH SECTION 115JA AN D THE CURRENT SECTION 115JB WERE ENACTED ARE NOT IDENTICA L. THE LEARNED CIT(A) HAS OBSERVED THAT CBDT CIRCULAR NO. 762 DATED 18-2-19989 IS WITH REFERENCE TO THE PROVISIONS OF S ECTION 115JA AND NOT IN RELATION TO SECTION 115JB OF THE A CT APPLIED IN THE PRESENT CASE. THE LEARNED CIT(A) ALSO REMAI NED OF THE VIEW THAT THE CITED DECISIONS IN THE CASE OF PROCES S PUMPS (P) LTD. (2005) (94 TTJ 190 (BANG) IS IN RELATION TO SE CTION 115JA HENCE IT HAS NO DIRECT APPLICATION TO THE PROVISION S OF SECTION 115JB APPLIED IN THE PRESENT CASE. THE LEARNED CIT (A) OBSERVED THAT THE CBDT CIRCULAR DOES NOT SPECIFY AN YWHERE THAT PROVISIONS OF SECTION 115JB ARE APPLICABLE ONL Y TO SUCH COMPANIES WHO SATISFY BOTH THE CONDITIONS OF PROFIT S AND DECLARATION OF DIVIDEND. EVEN CBDT CIRCULAR NO. 8 D ATED 27-8- 2002 DOES NOT MAKE ANY SUCH MENTION WITH REFERENCE TO SECTION 115JB. ONE OF THE CONTENTIONS OF THE LEAR NED AR REMAINED THAT UNDER THE SIMILAR CIRCUMSTANCES IN TH E ASSESSMENT YEAR 2004-05 THE A.O BEING SATISFIED WI TH THE ITA NO.1514/PN/2008 ROX POLYEXTRUSION LTD. A.Y. 2005-06 4 EXPLANATION OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE IN THE INSTANT CASE AS TH IS IS A SICK INDUSTRIAL UNIT AS THE WORK IS TOTALLY ERODED DUE TO CONTINUOUS LOSS HAS ACCEPTED THAT THE EXEMPTION PR OVIDED IN SUB-SECTION (2)(VII) OF SECTION 115JB APPLIES IN TH E CASE. HAVING GONE THROUGH THE ASSESSMENT ORDER FOR A.Y. 2 004-05 ON THE ISSUE WE FIND THAT THE A.O HAS ACCEPTED THE ABOVE CONTENTION OF THE ASSESSEE AFTER VERIFICATION AND H AS HELD THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE IN THIS CASE. IN THIS REGARD WE ALSO FIND STRENGTH FROM THE DECI SION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF NCL INDUSTRIES LTD. VS. JT. CIT (SUPRA) HOLDING THAT MI NIMUM ALTERNATIVE TAX HAS BEEN INTRODUCED BY THE LEGISLAT URE TO TAKE CARE OF THE PHENOMENON OF PROSPEROUS ZERO-TAX COMPA NIES WHICH HAD CONTINUED BUT WERE PAYING NO INCOME TAX T HOUGH THEY HAD PROFITS AND WERE DECLARING DIVIDENDS. A M INIMUM CORPORATE TAX WAS SOUGHT TO BE ENSURED ON THESE PRO SPEROUS COMPANIES. IT WAS NOT THE INTENTION OF THE LEGISLA TURE TO IMPOSE THIS MINIMUM ALTERNATE TAX ON NEW PROJECTS T HAT HAVE JUST BEGUN TO MAKE PROFITS AFTER SOME YEARS OF LOSS ES AND ALSO SICK COMPANIES THAT HAVE JUST TURNED THE CORNER HE LD THE TRIBUNAL. THE LEARNED AR HAS ALSO ADVANCED OTHER ARGUMENTS THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO A COMPANY WHICH IS NOT DISTRIBUTING DIVIDENDS. IN SU PPORT THE LEARNED AR HAS REFERRED CBDT CIRCULAR NO. 762 DATED 11-2- ITA NO.1514/PN/2008 ROX POLYEXTRUSION LTD. A.Y. 2005-06 5 1998 AND OTHER DECISIONS. WITHOUT GOING INTO THESE CONTENTIONS WE FIND THAT THE A.O UNDER THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE AS IN THE ASSESSMENT YEAR 2004-05 SHOULD HAVE MAINTAINED CONSISTENCY IN ITS APPROACH ON AN IDENTICAL ISSUE AND SHOULD HAVE ACCEPTED THE CONTEN TION OF THE ASSESSEE THAT PROVISIONS OF SECTION 115JB ARE NOT A PPLICABLE IN A CASE OF SICK INDUSTRIAL UNIT. WE THUS REMAND THE MATTER TO THE FILE OF THE A.O TO VERIFY THE CORRECTNESS OF TH E EXPLANATION OF THE ASSESSEE FOR THE ASSESSMENT YEAR IN QUESTION TH AT THE ASSESSEE IS A SICK INDUSTRIAL UNIT AND DECIDE THE ISSUE AFRESH IN VIEW OF EXEMPTION PROVIDED TO SUCH UNIT IN SUB-S ECTION (2)(VII) OF SECTION 115JB OF THE ACT AND IN VIEW OF THE ASSESSMENT ORDER PASSED IN THIS REGARD IN A.Y. 2004 -05. THE GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPO SES. 5. CONSEQUENTLY THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST 2010. SD/- SD/- (D.K. SRIVASTAVA) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 31 ST AUGUST 2010 ANKAM ITA NO.1514/PN/2008 ROX POLYEXTRUSION LTD. A.Y. 2005-06 6 COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- (A) KOLHAPUR (4) CIT KOLHAPUR (5) THE D.R. B BENCH PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL PUNE BENCHES PUNE