DCIT 5(3)(2), MUMBAI vs. TOLANI SHIPPING CO. LTD, MUMBAI

O R D E R Per P K Bansal, Vice-President:

This appeal has been filed by the Revenue against the order of the CIT(A)-10, dated 02.12.2014, for A.Y.2006-07, by taking the following effective grounds of appeal:

“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the enhancement of book profit of the assessee u/s. 115JB(2) by holding that the enhancement made in book profit was a debatable issue and issues where two opinions are possible cannot be a subject matter of rectification u/s. 154 of the Income-tax Act, 1961. (ii) On the facts and in the circumstances of the case and in laws the Ld. CIT(A) failed to appreciate that the reduction of profit on sale of depreciable asset from the profit as per Profit & Loss account was not covered under any of the clauses (i) to (viii) of the Explanation 1 to section 115JB(2) and, therefore, the assessee had erred in reducing the profit on sale of depreciable asset while computing the book profit and this was a mistake apparent from record which could be rectified u/s. 154 of the Income-tax Act, 1961.” 2. The brief facts of the case are that the assessment u/s. 143(3) was completed, wherein additions on account of order u/s. 92CA(3) amounting to ` 9,69,74,059/- and disallowance u/s.14A amounting to ` 45,54,204/- were made. The Assessing Officer noted that there are discrepancies on account of irregular allowance of chapter VIA deduction and escapement of book profit u/s. 115JB. Accordingly, notice u/s. 154 was issued to the assessee.

The assessee objected to the notice stating that there is no mistake apparent which requires rectification. The Assessing Officer did not agree with the assessee and observed that the assessee in its second revised return filed on 05.03.2009 has declared income under normal provisions of the Act at ` 18,30,43,646/- and profit taxable u/s. 115JB at loss of ` 4,02,99,527/-. As the assessee is a shipping company income and has offered to pay tax on its income as per tonnage tax scheme, income is to be computed in accordance with the provisions of section 115V-I of the Income tax Act. As per clause (i) of sub-section (1) of section 115VI, the profits from core activities of a company are from operating qualifying ships. The Assessing Officer therefore enhanced the book profits u/s 154 and worked out the same to ` 50,46,75,094/-. The assessee went in appeal before the CIT(A). The CIT(A) did not agree with the Assessing Officer and partly allowed the appeal of the assessee and so far as enhancement of income on account of profit on depreciable asset is concerned, the CIT(A) deleted it.