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Income Tax Appellate Tribunal, “H”, BENCH
Before: SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-10, Mumbai in appeal No.CIT(A)-10/ITO-5(1)(4)/465/16-17 dated 23/03/2018 (ld. CIT(A) in short) against the order of assessment passed 154 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 03/07/2015 by the ld. Income Tax Officer – 5(1)(4), Mumbai (hereinafter referred to as ld. AO).
The ground Nos.1 to 5 raised by the assessee is with regard to the action of the ld. CIT(A) in upholding the validity of the various disallowances made by the ld. AO in the order passed u/s.154 of the Act while computing book profits u/s.115JB of the IT Act.
The brief facts of this issue are that the assessee filed its return of income for the A.Y.2013-14 on 30/09/2013 declaring total income of Rs.Nil under normal provisions of the Act and book profit u/s.115JB of the Act of Rs.13,50,05,198/-. This return was later revised on 16/02/2015 with minor modifications but with the returned income remaining unchanged. The assessment was completed u/s.143(3) of the Act on 03/07/2015 accepting the returned income both under normal provisions of the Act as well as under book profits u/s.115JB of the Act. Subsequently, the order passed u/s.143(3) of the Act was sought to be rectified in the proceedings u/s.154 of the Act wherein the ld. AO sought to re-compute the book profits u/s.115JB of the Act and accordingly, determined the lesser figure of lower of business loss or depreciation loss as per books of accounts to be reduced from the net profit as per P & L
M/s. Hardcastle Restaurants P. Ltd. account for computing book profits u/s.115JB of the Act. This action of the ld. AO was upheld by the ld. CIT(A).
Aggrieved, the assessee is in appeal before us.
We have heard rival submissions. We find that assessee had disclosed book profits u/s.115JB of the Act in the return of income to the tune of Rs.13,50,05,198/- which is computed as under:-
Net profit as per profit and loss account - Rs.30,76,08,875/- Less: Brought forward business loss Or unabsorbed depreciation whichever is lower as per books of accounts (in accordance with explanation to Section 115JB(2)) - Rs.17,26,03,677/- ================== Book profit u/s.115JB - Rs.13,50,05,198/- ================== 5.1. This computation was also supported by audit report in form No.29B which was also filed along with return of income. The assessee furnished the year wise break-up on account of brought forward losses and unabsorbed depreciation as per books of accounts as on 31/03/2012 as under:- Assessment Loss before Cumulative Depreciation Cumulative Total Loss as Cumulative Year Depreciation Loss before for the year Depreciation per Balance Total Loss as for the year Depreciation Sheet for the per Balance year Sheet 1996-97 1,32,36,673 1,32,36,673 91,740 91,740 1,33,28,413 1,33,28,413 1997-98 3,02,26,542 4,34,63,215 17,53.926 18,45,666 3,19,80,468 4,53,08,881 1998-99 3,50,23,699 7,84,86,914 80,18,417 98,64,083 4,30,42,116 8,83,50,997 1999-00 6,63,00,148 14,47,87,062 1,59,73,889 2,58,37,972 8,22,74,037 17,06,25,034 2000-01 7,87,09,985 22,34,97,047 2,42,24,252 5,00,62,224 10,29,34,237 27,35,59,271
M/s. Hardcastle Restaurants P. Ltd.
2001-02 7,10,84,504 29,45,81,551 3,30,46,642 8,31,08,866 10,41,31,146 37,76,90,417 2002-03 9,86,39,991 39,32,21,542 3,53,55,911 11,84,64,777 13,39,95,902 51,16,86,319 2003-04 10,10,81,154 49,43,02,696 4,26,55,303 16,11,20,080 14,37,36,457 65,54,22,776 2004-05 5,89,13,186 55,32,15,882 4,74,56,161 20,85,76,241 10,63,69,347 76,17,92,123 2005-06 5,58,65,092 60,90,80,974 5,56,11,638 26,41,87,879 11,14,76,730 87,32,68,853 2006-07 2,70,58,109 63,61,39,083 6,66,72,796 33,08,60,675 9,37,30,905 96,69,99,758 2007-08 2,88,75,707 66,50,14,790 8,13,95,609 41,22,56,284 11,02,71,316 1,07,72,71,074 2008-09 1,36,62,330 67,86,77,120 10,27,68,548 51,50,24,832 11,64,30,878 1,19,37,01,952 2009-10 10,68,07,520 78,54,84,640 12,82,04,302 64,32,29,134 23,50,11,822 1,42,87,13,774 2010-11 - 78,54,84,640 18,90,80,933 83,23,10,067 18,90,80,933 1,61,77,94,707 2011-12 (18,77,90,280) 59,76,94,360 - 83,23,10,067 (18,77,90,280) 1,43,00,04,427 2012-13 (42,50,90,683) 17,26,03,677 - 83,23,10,067 (42,50,90,683) 1,00,49,13,744 5.2. From the aforesaid table, it could be seen that the lower of losses as on 31/03/2012 as per books of accounts was business loss (or cash loss) to the tune of Rs.17,26,03,677/- which has been rightly reduced by the assessee in the computation of book profits u/s.115JB of the Act. We find that the ld. AO had strangely sought to reduce a sum of Rs.17,96,669/- for A.Y.2011-12 and add Rs.2,55,79,465/- for A.Y.2011-12 and add Rs.1,05,34,520/- in A.Y.2012-13 to the net profit of the respective years and accordingly tinkered with the brought forward loss figures. Now, it would be relevant to understand what is the nature of adjustment made by the ld. AO which had eventually led him to tinker with the figures of brought forward losses as per books of accounts.
5.3. We find that assessee had started earning net profit only for A.Yrs. 2011-12 and 2012-13. Hence, it could be safely concluded that there was only losses as per books of accounts up to A.Y.2010-11. This fact is not in M/s. Hardcastle Restaurants P. Ltd. dispute. We find that the ld. AO in the proceedings u/s.154 of the Act dated 06/02/2017 had sought to include the adjustments in the form of additions / deductions contemplated in explanation to Section 115JB(2) of the Act. In other words, the figures of dividend in the sum of Rs.17,96,669/- (which was reduced from net profit in A.Y.2011-12) and the figures of Rs.2,55,79,465/- (which was added in net profit for the A.Y.2011-12) and Rs.1,05,34,520/- (which was added to net profit for A.Y.2012-13) are nothing but the items of additions and deductions contemplated in explanation to Section 115JB(2) of the Act which are pursuant to specific provisions contained thereon in the Act and has got nothing to do with the profits or losses determined as per books of accounts i.e., Companies Act, 1956. We find that this fact had been ignored by the lower authorities. Hence, these sums cannot be the subject matter of tinkering with the brought forward losses as per books of accounts for the purpose of deciding figures of list of brought forward business losses or unabsorbed depreciation as per books of accounts, which would in turn would have to be reduced from the net profits for the purpose of computation of book profits u/s.115JB of the Act. Accordingly, we direct the ld. AO to delete the adjustments made to Section 115JB of the Act and accordingly, allow the grounds 1 to 5 by the assessee.
The ground No.6 is with regard to chargeability of interest u/s.234C is with regard to the dispute in charging of interest u/s.234C of the Act. We find that the ld. AO had correctly charged the interest u/s.234C of the Act on the returned income whereas in the order passed u/s.154 of the Act dated 06/02/2017, the ld. AO charged interest u/s.234C of the Act on the assessed income. It is well settled that interest u/s.234C should always be charged only on the returned income and hence, the ground No.6 raised by the assessee is allowed.
M/s. Hardcastle Restaurants P. Ltd.
In the result, appeal of the assessee is allowed.