SANGU CHAKRA HOTELS PVT LTD.,TRICHY vs. DCIT CIRCLE 1, TRICHY

आदेश / O R D E R

PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-1, Tiruchirapalli (‘CIT(A)’ for short) dated 29.08.2017 for the Assessment Year (AY) 2001-02.

ITA No.2759/2017 :- 2 -:

‘’1. The order of the Commissioner of Income Tax (Appeals) is opposed to law and contrary to the facts and circumstances of the case.

2.1. The order of the Commissioner of Income Tax (Appeals) upholding the disallowance of deduction u/s. 8OHHD is erroneous and opposed to law.

2.2. The Commissioner of Income Tax (Appeals) ought to have appreciated that Section 8OHHD is self-contained code by itself and accordingly specifies the method of computation of deduction under the said Section without specifying that the deduction has to be allowed only after setting off of unobserved losses or depreciation of earlier years.

2.3. The Commissioner of Income Tax (Appeals) grossly erred in observing that the provisions of Section 80A(2) and 80B(5) applied to all sections appearing under Chapter VI-A of the Act including Section 80HHD.

2.4. Alternative Ground:

2.4.1. The Commissioner of Income Tax (Appeals) erred in rejecting the alternative plea raised by the Appellant that since, even as per the Assessing Officer himself, the gross total income was worked out at �10,45,271/- the deduction u/s. 8OHHD ought to have been allowed to that extent, as against the claim of Rs.16,41,1271- made in the Return of Income.

3.1. The Commissioner of Income Tax (Appeals) grossly erred in upholding the addition of Long Term Capital Gains of Rs.1O,45,27 - for the purpose of arriving at book profit of the Company u/s. 115 B of the Income Tax Act.

3.2. The Commissioner of Income Tax (Appeals) having accepted that the accounts of the Appellant were prepared in accordance with Part II and Part III of Schedule VI of the

ITA No.2759/2017 :- 3 -: Company’s Act and duly certified by statutory auditors ought to have deleted the profit on sale of land and export profit to arrive at the book profit u/s. 115JB of the Income Tax Act, 1961.

3.3. The Commissioner of Income Tax (Appeals) grossly erred in not accepting the claim of the Appellant that the profit on sale of land and export profit has to be reduced while computing the book profit u/s. 115JB after observing that the Assessing Officer has no power to tinker with the figures of the net profit shown in the Profit and Loss Account except as provided in the explanation us.115JB.

3.4. The Commissioner of Income Tax (Appeals) ought to have therefore in the circumstances of the case directed the Assessing Officer to compute the book, profit after reducing the profit on sale of land and export profit.

3.5. Enhancement of Assessment:

3.5.1. The Commissioner of Income Tax (Appeals), grossly erred in enhancing the book profit to Rs.85,84,6031- against Rs.83,05,482/- determined by the Assessing Officer.

3.5.2. The Commissioner of Income Tax (Appeals) ought to have in fact reduced the book profit for the purpose of computation of income u/s. II5JB from Rs.83,05,482/- computed by the Assessing Officer to Rs.52,08,803/- as claimed by the Appellant.

4.1. The Commissioner of Income Tax (Appeals) grossly erred in upholding the levy of interest u/ss. 234B and 234C.

4.2. The Commissioner of Income Tax (Appeals) grossly erred in holding that interest u/ss. 234B & 234C are leviable on default in payment of advance tax o deferment of advance tax while computing the income u/s. 115JB.

4.3. The Commissioner of Income Tax (Appeals) ought to have appreciated that that Section I15JB is a deeming provision under which interest u/ss. 234B & 234C are not chargeable.

ITA No.2759/2017 :- 4 -: 4.4. The Commissioner of Income Tax (Appeals) ought to have therefore deleted the levy of interest u/ss. 234B & 234C in the computation of income u/s. 115JB.

The brief facts of the case are as under: 3.

The appellant namely M/s. Sangu Chakra Hotels Pvt. Ltd is a

company incorporated under the provisions of the Companies Act,

1956. It is engaged in the business of hotel industry. The return of

income for the AY 2001-02 was filed on 30.10.2001 and subsequently

the same was revised on 17.10.2002 declaring Nil income claiming

deduction under the provisions of Section 80HHD of the Income Tax

Act, 1961 (in short ‘’the Act‘’) while computing book profits for the

purpose of deemed income u/s.115JB of the Act. Against the said

return of income, the assessment was completed by the Assistant

Commissioner of Income Tax, Company Circle I, Tiruchirapalli,

(hereinafter called “AO”) vide order dated 30.11.2006 passed u/s.

143(3) r/w s. 147 of the Act at total income of Rs. 10,45,274/- after

setting off of brought forward loss of �70,46,042/- and computed

books profits of �10,45,271/-, placing reliance on the decision of

Special Bench of the Tribunal in the case of Sutlej Cotton Mills Ltd.

ITA No.2759/2017 :- 5 -: vs. Asst. CIT (1993) 199 ITR (AT) 164 (Cal) (SB) and this stand was

superseded by the decision of Hon’ble Bombay High Court in the case

of CIT. vs. Veekaylal Investment Company (P) Ltd 249 ITR 597 and

not allowed exemption of income u/s.80HHD of the Act from the book

profit.

CIT(A), who vide impugned order had confirmed the action of the

Assessing Officer stating that gross total income was reduced by the

amount of brought forward loss placing reliance on the decision of

Hon’ble Supreme Court in the case of Synco Industries Ltd vs.

Assessing officer (Income Tax ) and another 299 ITR 444 and the plain

provisions of Sections 80A(1) and 80A(2) of the Act. As regards to the

computation of book profit u/s.115JB of the Act, the ld. CIT(A)

directed the Assessing Officer to adopt sum of �85,84,602/- as book

profit for the purpose of computing tax liability u/s. 115JB of the Act,

while doing so the ld. CIT(A) held that amount on export profit

credited to profit and loss �20,51,408/- and capital gain arising on

sale of land of �13,24,392/- should be added to the book profits which

were claimed as deduction from the book profits. The ld. CIT(A)

placed reliance on the decision of the Hon'ble Supreme Court in the

case of Appollo Tyres vs. CIT, (2002) 255 ITR 273, Hon’ble Bombay

High Court in the case of CIT vs. Veeekaylal Investment Company Pvt.

ITA No.2759/2017 :- 6 -: Ltd (2001) 249 ITR 597 (Bom) and Hon’ble Karnataka High Court in

the case of B and B Infratech Ltd (2017) 396 ITR 420 for confirming

the action of the ld. Assessing Officer.

Being aggrieved, the appellant is in appeal before us in the 5.

present appeal.

record. Grounds of appeal Nos.1, 5 & 6 are general in nature therefore, does not require any adjudication.

exemption u/s.80HHD of the Act after set off of brought forward

business loss. The approach of the lower authorities is supported by

plain provisions of Income Tax Act and Hon'ble Supreme Court

decision in the case of Synco Industries Ltd (supra). The order of the

ld. CIT(A) is well reasoned, speaking order and in consonance with

the settled proposition of law. Thus, we do not find any merits in the

ground No.2 raised by the assessee. The ground of appeal No.2 stands

dismissed.

Ground No.3 challenges the action of the lower authorities 8.

by adding back the profits earned on exports and long term capital

gains made on sale of land. In the light of the above finding

confirming the methodology adopted by the Assessing Officer for

computing the amount of exemption u/s.80HHD of the Act, there was

ITA No.2759/2017 :- 7 -: no amount available for exemption u/s.80HHD of the Act.

Accordingly, no amount can be claimed as deduction while computing

book profits u/s.115JB of the Act. Similarly, as regards to the addition

of long term capital gains made on sale of land to book profit, action

of the lower authorities are supported by the decisions of Hon'ble

Supreme Court in the case of Appollo Tyres (supra), Hon’ble Bombay

High Court in the case of Veeekaylal Investment Company Pvt. Ltd.

(supra) and Hon’ble Karnataka High Court in the case of B and B

Infratech Ltd (supra). Accordingly, we do not find any merits in the

ground of appeal No.3 raised by the assessee. Hence, ground of

appeal No.3 stands dismissed.

In the result, the appeal of the assessee stands dismissed. 9.

Order pronounced on 20th day of August, 2019, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन) (इंटूर� रामा राव) (N.R.S. GANESAN) (INTURI RAMA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated: 20th August, 2019 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF