ACIT, NEW DELHI vs. M/S. H.B. ESTATE DEVELOPERS PVT. LTD., NEW DELHI

Learned DR, on the other hand, submitted that for computing the tax effect, not only the disputed addition under the book profit is to be considered but the disputed addition while computing the normal income should also be considered. He also referred to paragraph 4 of the Circular and stated that as per this paragraph 4, the notional tax on the disputed addition is to be considered. He, therefore, submitted that this appeal should be heard on merits and should not be dismissed on tax effect.

We have carefully considered the submissions of both the sides and perused the material placed before us. The grounds raised in this appeal by the Revenue read as under :-

Ground Nos.1, 2 & 3 are relating to determination of income under the normal provisions and ground No.4 is for the determination of income under Section 115JB. So far as normal provision is concerned, the total disputed addition is `16,83,663/- + `25,49,411/- (`29,74,200 - `4,24,789) i.e. `42,33,074/-. Admittedly, the tax has been levied on the MAT income because the total income under the normal provision after the additions made by the Assessing Officer is `1,43,02,850/- while the income determined by the Assessing Officer under MAT provision is `12,36,50,765/-. Accordingly, the tax has been levied on the basis of MAT income. It is also not in dispute that even after the relief by the CIT(A), the tax would be charged on MAT income because the MAT income is much more than income under the normal provisions of IT Act. Therefore, the question remains whether the relief allowed by the CIT(A) under the normal provisions of the IT Act is liable to be considered for determining the tax effect. Learned DR in this regard has relied upon paragraph No.4 of the Circular, which reads as under :-

From the above, it is evident that tax effect is to be worked out by determining :-

Admittedly, in both the circumstances, in the present case, tax is chargeable on the MAT income. As per above paragraph No.4, notional tax effect is to be determined in the case of assessed loss because the variation in the assessed loss has a consequence in the subsequent year in the form of carry forward and set off. However, in the year under consideration, the income declared in the normal provision was positive income and the income determined by the Assessing Officer is also positive income and income worked out after the order of the CIT(A) is also positive income. Therefore, any variation in the income under the normal provision under the Income-tax Act does not have any consequence in the subsequent year because there is no question of any carry forward or set off of loss. In this year, tax is levied by the Assessing Officer under MAT and after the order of CIT(A) also, tax would be charged under MAT. Therefore, in our opinion, no notional tax effect is to be worked out on the disputed addition under the normal provisions of the IT Act.

Undisputedly, the disputed addition under the MAT provision is only of `29,74,200/- on which tax effect is admittedly below `10 lakhs. In view of the above, in our opinion, the above Circular of the CBDT is 5 ITA-1168/D/2013 & C.O.-106/D/2013 squarely applicable. Respectfully following the same, we dismiss the Revenue’s appeal.

As we have dismissed the Revenue’s appeal, the cross-objection of the assessee is treated as infructuous and is dismissed.

In the result, the appeal of the Revenue as well as the cross- objection of the assessee is dismissed. Decision pronounced in the open Court on 20.12.2016.