AMICHAND INVESTMENT PVT. LTD. vs. DY. CIT (ASSTT.) S.R.

ITR/35/1998HC GujaratGJHC24024393199822 April 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED13 pages
AI SummaryAllowed

What were the facts?

The assessee, Amichand Investment Pvt. Ltd., is challenging an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 1988-89. The Assessing Officer (AO) added Rs. 5,73,451/- to the assessee's book profit calculated under Section 115J of the Income Tax Act, 1961. The AO's addition was based on the belief that Tax Deducted at Source (TDS) on dividend income had been wrongly excluded. The Commissioner (Appeals) and the ITAT upheld the AO's action. The assessee contended that the TDS amount should not be added as it was not debited to the Profit and Loss Account in accordance with Schedule VI of the Companies Act, 1956. The ITAT rejected the assessee's Miscellaneous Application seeking rectification.

What did the High Court hold?

The High Court held that the Tribunal was not right in law in holding that the book profit under Section 115J is to be increased by the TDS of Rs. 5,73,451/-. The Court reasoned that Section 115J, particularly its Explanation, permits increases to net profit only if the specified amounts are debited to the Profit and Loss Account. Clause (a) of the Explanation allows adding income tax paid or payable if it is debited to the P&L account. In this case, it was admitted that the TDS amount was not debited to the Profit and Loss Account, but to the dividend account. Therefore, a literal interpretation of the statute did not permit the revenue's exercise. The Court emphasized that it cannot add words to the statute. The non-obstante clause in Section 115J(1) makes it a self-contained code. The Court noted that Accounting Standard AS-13 was effective from 1.4.1995 and thus not applicable to the assessment year in question. The reference is answered in the negative, in favour of the assessee.

What were the issues?

1. Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the book profit under Section 115J is to be increased by the TDS of Rs. 5,73,451/-, despite the same not being debited to the Profit and Loss Account in accordance with Parts II and III of Schedule VI of the Companies Act? Assessee's Contentions: The assessee argued that Section 115J's Explanation requires book profit to be calculated based on the net profit in the Profit and Loss Account prepared as per the Companies Act. Any adjustments are permissible only as per the Explanation. Since the accounts were prepared correctly as per the Companies Act, the AO and Tribunal erred in adding TDS, as this addition was not permitted by the Explanation. The assessee relied on the Supreme Court judgment in Apollo Tyres Ltd. vs. CIT and various High Court decisions. Revenue's Contentions: The revenue contended that dividend is income under Section 2(24)(ii) and should be taken as gross. TDS reduction was impermissible. Clause (a) of the Explanation to Section 115J requires increasing net profit by income tax paid or payable if debited to the P&L account. The revenue argued that failure to do so justified the addition. Paragraphs 2(a) & (b) of Schedule VI require clear disclosure of results, and paragraph 3(xi)(c) mandates showing TDS. Reliance was also placed on Accounting Standard AS-13.

Which sections of the Income-tax Act were involved?

Section 115J,Section 2(24)(ii),Section 198,Section 8

AI-generated summary — verify with the full judgment below

ITR/35/1998 1/13 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 35 of 1998 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ============================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== AMICHAND INVESTMENT PVT. LTD. - Applicant(s) Versus DY. CIT (ASSTT.) S.R. - Respondent(s) ===================================================== Appearance : MR MANISH J SHAH for Applicant(s) : 1, MR MANISH R BHATT for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 22/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/35/1998 2/13 JUDGMENT

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