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Facts
The appellant company is aggrieved by additions made by CPC under section 143(1) and by the Ld. AO under section 143(3) on issues that were common and for the same assessment year. The appeals were clubbed and a common order was passed.
Held
The Tribunal held that double disallowances, which were already considered in the return of income by the appellant, should be deleted. The AO was directed to verify these claims and if correct, delete the additions. The issue regarding deferred tax for book profit computation under section 115JB was also directed to be verified and adjusted as per law.
Key Issues
Whether the AO erred in making double disallowances on items already considered in the ROI, and whether deferred tax credit should be reduced for book profit computation.
Sections Cited
143(1), 143(3), 37, 36(1)(iii), 115JB, 234C, 158A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “C” Bench, Mumbai.
Before: Shri Sandeep Gosain (JM) & Shri Omkareshwar Chidara (AM)
Per Omkareshwar Chidara (AM) :- The appellant company is aggrieved by the additions made by CPC under section 143(1) of the I.T. Act in the first stage and by the Ld. AO under section 143(3) subsequently on the same issues in these two appeals. Since the issues involved are common, assessment year is the same, both the appeals are clubbed and a common order is passed by the Bench.
The following grounds of appeal are filed as per and this appeal is against the addition made by CPC under section 143(1) of the Act which were later confirmed by Ld. CIT(A):-
1. “1. The Learned Deputy Commissioner of Income Tax, CPC, Bengaluru (the Ld. AO) and learned Commissioner of Income-tax (Appeals) ['CIT (Appeals)'] erred in computing the income at INR 1,51,85,43,820 under normal provision of the Act and INR 1,22,88,10,516 under section 115JB of the Act in the intimation order under section 143(1) of the Act resulting in erroneous tax demand of INR 3,04,61,600.
2. Re; Dismissal of appeal filed against intimation u/s 143(1) on the grounds of doctrine of merger;
2 Owens-Corning (India) Private Limited 2.1 On the facts and in the circumstances of the case and in law, the CIT (Appeals) erred in dismissing the in appeal filed by the Appellant against the intimation under section 143(1) treating it as infructuous merely on the ground that another appeal had been dismissed by a higher authority.
2.2 The learned CIT(Appeals) failed to appreciate the submissions made and explanations furnished by the Appellant and without adjudicating the appeal on merits erred to conclude the appeal as redundant
3. Re: Erroneous double disallowances to income determined under normal provision - INR 8.52.48,385 upheld by CIT(Appeals) consequent to treating the appeal as infructuous (a) Disallowance of forex loss on ECB and creditors relating to capital asset- INR 8,44,04,626 3.1 The Ld. AO erred in disallowing forex loss on ECB and creditors relating to capital asset of INR 8,44,04,626 under section 37 of the Act without considering the fact that the said amount is already disallowed under 'schedule ICDS' in the return of income ('ROI').
(b) Disallowance of interest relating to capital work in progress for plant expansion - INR 14,22,381 3.2 The Ld. AO erred in disallowing interest of INR 14,22,381 relating to capital work in progress for plant expansion under section 36 of the Act without considering the fact the said amount is already disallowed under 'schedule ICDS' in the ROI.
(c) Amortization of premium paid for leasehold land - INR 20,39,318 3.3 The Ld. AO erred in disallowing the amortisation of premium paid for leasehold land of INR 20,39,318 under section 37 of the Act without considering the fact that the same is claimed as other deduction in the ROI.
(d) Deduction of donation, CSR expenditure - INR 26,16,852 and Interest on TDS -1,870 3.4 The Ld. AO erred in not considering the disallowances made under section 37 of the Act in the ROI relating to donation and CSR expenditure of INR 26,16,852 and interest on TDS of INR 1870.
The Appellant submits that the Ld. AO be directed to delete all the aforesaid double disallowances aggregating to INR 8,52,48,385.
Re: Reduction of deferred tax credited to profit and loss while calculating book profit - INR 5,45,86,490
3 Owens-Corning (India) Private Limited 4.1 The Ld. AO erred in not reducing the amount of INR 5,45,86,490 relating to deferred tax credited to profit and loss account while computing the book profit under section 115JB of the Act at INR 1,22,88,10,516.
5. Re: Violation of Principles of Natural Justice 5.1 The CIT(Appeals) erred in not granting opportunity of being heard by virtual conference in respect of above grounds of appeal despite the specific request made by the Appellant in its submission.”
From these above grounds of appeal, Ld. AR of the appellant did not press ground No. 1,2 and 5 during the hearing proceedings before the Bench and hence not adjudicated.
Ld. AO under section 143(3) of the Act which was subsequently confirmed by Ld. CIT(A) :-
“1.0 Re: Intimation order under section 143(1) of the Act merges with assessment order under section 143(3) of the Act 1.1 The Commissioner of Income Tax (Appeal) ('CIT(A)')/ Learned Assessing Officer (Ld. AO) erred in appreciating that intimation under section 143(1) of the Act ceased to operate and gets merged into the assessment order under section 143(3) of the Act.
2.0 Re: Double disallowance of items already considered in the return of income - INR 8,52,48,385 2.1 The CIT (A)/ Ld. AO erred in upholding double/erroneous disallowance of INR 8,52,48,385 made in the intimation order under section 143(1) already considered the return of income ('ROI') in respect of following items:
Particulars Amount (In INR) ICDS adjustment on account of forex loss on ECB and 8,44,04,626 creditors relating to capital asset Amortization of premium paid for leasehold land 20,39,318
ICDS adjustment on account of interest relating to 14,22,381 capital work in progress for plant expansion Donation and CSR Expenditure (26,16,852) Interest on TDS (penal in nature) (1,087) Total 8,52,48,386
4 Owens-Corning (India) Private Limited 2.2 The Appellant submits that the Ld. AO be directed to delete the disallowance so made by him and to re-compute its total income accordingly.
3.0 Re: Non grant of opportunity of being heard 3.1 The CIT (A) erred in not granting opportunity of being heard despite the specific request made by the Appellant.
3.2 The CIT (A) erred in not considering the fact that no show cause notice was issued by the Ld. AO while proceeding with the adjustment as per the intimation under section 143(1 )(a) in the assessment order under section 143(3) of the Act.
3.3 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the action of the CIT (A) and Ld. AO in this respect is erroneous, misconceived and not in accordance with the law.
4.0 Re: Disallowance of amortisation of the premium paid for the leasehold land -INR 20.39.318 4.1 The CIT (A)/ Ld. AO erred in disallowing the amortization of a sum of INR 20,39,318 being part of the premium paid for acquiring lease rights over a plot of land.
4.2 The Appellant submits that the Ld. AO be directed to delete the disallowance so made by him and to re-compute its total income accordingly.
4.3 Without prejudice, the CIT (A) erred in not considering Form 8 duly filed under section 158A of the Act requesting for consequential impact of outcome of appeal pending before Hon'ble High Court for AY 2004-05 on similar issue.
5.0 Re: Disallowance of depreciation on additions to the fixed assets made during the Assessment Year 2006-2007 - INR 4.31.598 5.1 The CIT(A)/Ld. AO has erred in confirming the disallowance of depreciation of INR 4,31,598 out of the total depreciation of INR 9,08,564 claimed by the Appellant during year under consideration relating to addition to fixed assets made during AY 2006-07.
5.2 The Appellant submits that the Ld. AO be directed to allow depreciation as claimed by it and to recompute its total income accordingly.
6.0 Re: Excess lew of interest under section 234C of the Act in the assessment order - INR 9.58.842
5 Owens-Corning (India) Private Limited 6.1 The CIT(A) erred in not disposing the grounds of appeal relating to excess levy of interest under section 234C of the Act while passing order under section 250 of the Act. 6.2 The Ld. AO erred in appreciating that the interest under section 234C of the Act ought to be restricted as per ROI resulting into excess levy of INR 9,58,842 (INR 20,27,591 levied by Ld. AO (-) INR 10,68,749 as per ROI). 6.3 The Appellant submits that the Ld. AO be directed to delete excess interest of INR 9,58,842 charged under section 234C of the Act and re- compute its tax payable accordingly.”
From the above grounds of appeal, the Ld. AR of the appellant did not press the ground Nos. 1,3 and 5 during the hearing proceedings before the Bench and hence not adjudicated.
From the above grounds of appeal, the issues which remain to be adjudicated in both these appeals relate to :- a) Disallowance made due to ICDS adjustment on account of forex loss on ECB and creditors relating to capital asset. b) Amortization of premium paid for leasehold land. c) ICDS adjustment on account of interest relating to cap-in-progress for plant expansion. d) Donation and CSR expenditure and e) Interest on TDS (Penal in nature)
As mentioned earlier, the issues to be adjudicated in both the appeals against the orders passed under section 143(1) and 143(3) of the Act are the same, and hence common appeal is processed.
During the hearing proceedings, the Ld. AR of the appellant has filed separate paper book for these appeals which are taken into consideration. From the order of Ld. CIT(A), it is observed that this appeal order has not adjudicated the issues on merits before dismissal of appellant’s appeal.
As mentioned above, ground No. 1,2 & 5 are not pressed by the Ld. AR of the appellant and hence the ground No.3 & 4 are only adjudicated as follows :
6 Owens-Corning (India) Private Limited 10. The Ld. AO has disallowed an amount of Rs. 14,22,381/- relating to inconsistency in amount of interest paid in respect of borrowed capital under section 36(1)(iii) of the Act in the 143(1) order and subsequently in the assessment order passed under section 143(3) of the Act. The Ld. AR of the appellant has submitted that this amount was already disallowed by appellant itself which can be seen from the Return of Income and the “Computation of Income” enclosed to the Return of Income. A copy of “Computation of Income” filed by the appellant before the Department alongwith copy of Return of Income filed was submitted to the Bench to demonstrate its case. After going through the same, the Bench is satisfied and hence decided that when the appellant has already disallowed the said amount, adding to the “Taxable Income” amounts to double disallowance. Hence, the addition made by the Ld. AO towards this disallowance is deleted.
Similarly, the Ld.AR of the appellant has stated that the company itself disallowed the amount of Rs. 8,38,26,004/- which can be evidenced from the “Computation of Income”. Since, the amount was disallowed by the appellant company, there is no need of making same addition and hence addition is deleted.
The third issue relates to disallowance of Rs. 20,39,318/- which pertains to amortization of premium paid for leasehold land. In the written submission filed by the Ld. AR of the appellant, it was mentioned that this amount also was disallowed by appellant and disclosed in clause 21(a) of Form 3CD. Since, this amount was disallowed by appellant company, the Ld. AO cannot make same addition and hence the same is deleted.
The last issue to be adjudicated relates to computation of book profit under section 115JB of the Act. In this appeal, the appellant has submitted that the deferred tax of Rs. 5,45,86,490/- was credited to the profit and loss account and current tax of Rs. 5,45,86,490/- was debited to the profit and loss account. It was also submitted that the appellant disallowed net amount
7 Owens-Corning (India) Private Limited of Rs. 43,28,29,964/- while calculating the book profit under section 115JB of the Act. But, the grievance of the appellant is that the Intimation Order was processed wherein the disallowance of Rs. 48,74,16,454/- on account of current tax was considered and the deduction on account of deferred tax credit of Rs. 5,45,86,490/- was ignored. The Ld. AR of the appellant argued that an amendment was brought in by the Finance Act, 2008 with retrospective effect of 1.4.2001, in clause (viii) of Explanation (1) of section 115JB of the Act which states that the amount of deferred tax, if any, credited to the profit and loss account is required to be reduced from the book profit. In view of the same, the Ld. AR has pointed out that the deduction of Rs.5,45,86,490/- should be allowed while calculating book profit under section 115JB of the Act. The Ld. AR of the appellant has filed a paper book which contains a copy of profit and loss account alongwith computation of book profit under section 115JB of the Act and demonstrated that this amount of deferred tax was credited to the profit and loss account and hence should be reduced for computing book profit under section 115JB of the Act.
Prima facie, all these calculations appear to be correct. But, the same were not verified neither by the Ld. AO nor Ld. CIT(A). Thus, all these double additions/disallowances as pointed by Ld. AR of the appellant may be verified and if the contentions are correct, all these additions relating to interest paid in respect of borrowed capital under section 36(1)(iii) (Rs. 14,22,381) and inconsistency in total amount of disallowance under section 37 (Rs. 8,38,26,004) shall be deleted. Similarly, if the disallowance of Rs. 20,39,318/- relating to amortization of premium paid for leasehold land is already reduced by the appellant in the Return of Income/computation of Income, the same also may be deleted by the Ld. AO, after verification. Finally, the Ld. AO is directed to verify whether the deferred tax was credited and current tax was debited to profit and loss account, then consequent effect may be given as per section 115JB, Explanation (1) of Clause (viii) of the I.T. Act. To sum up, as mentioned above, prima facie, all the 8 Owens-Corning (India) Private Limited disallowances/additions made by the CPC/Ld. AO were already done by the appellant in the Return of Income itself. But, the Ld. AO is directed to go through the copy of Return of Income and “Computation of Income” and if the appellant itself had disallowed them, then all the additions made by Department should be deleted. This direction is given to Ld. AO, as the same were not verified by Revenue and due to this limited extent, the issues are remitted to the file of the Ld. AO.
Thus, the appeal of the appellant is allowed for statistical purposes.
Order pronounced in the open Court on 30/04/2025.