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Income Tax Appellate Tribunal, ‘D’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
This appeal filed by the assessee is directed against an order dated 17.11.2016 of ld. Commissioner of Income-tax (Appeals)-11, Chennai.
ITA No. 71/Mds/2017 :- 2 -:
Assessee has taken altogether fours grounds. Ld. Counsel for 2. the assessee at the outset submitted that, he was not pressing ground No.1. Accordingly ground No. 1 is dismissed as not pressed.
Vide its ground No.2, assessee assails a disallowance on loss in diminution of value of shares while computing its book profit, taxed u/s.115JB of the Income Tax Act, 1961 ( in short ‘’the Act’’). Ld. Counsel for the assessee submitted that ld. Assessing Officer had erroneously considered a sum of �20,00,000/- which was loss on revaluation of investment as provision for diminution in value of its assets. According to ld. Authorised Representative loss on investment was actually written off and not a provision. Contention of the ld. Authorised Representative was that clause (i) to Explanation 1 to Sec.
115JB(2) of the Act would not apply when there was actual write off.
Per contra, ld. Departmental Representative submitted that 4.
ld. Assessing Officer had rightly applied clause (i) to Explanation 1 to Sec. 115JB(2) of the Act. What was claimed by the assessee as loss on investment was only a provision for diminution in value of assets.
ITA No. 71/Mds/2017 :- 3 -:
I have considered the rival contentions and perused the orders 5. of the authorities below. Ld. Authorised Representative has placed on record audited profit and loss account and Balance sheet prepared under Companies Act, 1956, which is the basis for computing the income u/s. 115JB of the Act. The expenditure debited includes administrative and other expenses of �48,96,973/-. Schedule L gives the break up of administrative and other expenditure. This is reproduced hereunder:-
(Amount in �)
31.03.2007 31.03.2009 SCHEDULE L- ADMINSTRATIVE AND OTHER EXPENSES Advertisement -- 360 Auditors Remuneration Statutory Audit 33672 33672 Tax Audit & Certification 11224 11224 Books & Periodicals 3397 1837 Brokerage & Commission -- 8750 Electricity charges 78633 108286 Fringe Benefit Tax -- 80721 General Expenses -- 6511 Managerial Remuneration 673500 519675 Insurance 58310 36077 Legal & Professional fee 64516 63570 Lease Rent paid 46400 139200 Loss on sale of Car 97074 25026 Membership &Subscription 10000 15000 Miscellaneous Expenses 13500 97390 Office Maintance 218227 270652 Postage & Telephones 158504 226240 Printing & Stationery 23906 21773
ITA No. 71/Mds/2017 :- 4 -:
Rent & Taxes 107854 50234 Rent 210000 110000 Repairs & Maintenance 17088 44541 Sales promotion 8313 7391 Software expenses 5700 7050 Travelling & Conveyance 985945 749868 Vehicle Maintenance 41522 63569 Loss due to Diminution in Value of fixed 29715 384425 assets Loss on Investment 2000000 2000000 --------------- -------------- 4896973 5083042 --------------- -------------- Loss on investment of �20,00,000/- is not charged as provision, but is an actual write-off. Assessee had reduced the value of investment by the said amount. What can be added under clause (i) to Explanation 1 to Sec. 115JB(2) is reproduced hereunder:-
‘’the amount or amounts set aside as provision for diminution in the value of any asset.’’ In my opinion, the above clause cannot be applied when there was an actual write off. I have no hesitation in deleting the addition of �20,00,000/- made by the ld. Assessing Officer while computing profits of the assessee u/s.115JB of the Act. Ground No. 2 of the assessee stands allowed.
Vide its ground no.3, grievance of the assessee is that write- off of the value of cell phones �24,458/- and glass tables �5,257/- were added back while computing profit u/s.115JB of the Act.
ITA No. 71/Mds/2017 :- 5 -:
Ld. Counsel for the assessee submitted that ld. Assessing Officer had again applied clause (i) to Explanation 1 to Sec. 115JB(2) of the Act. According to him, there was an actual write off and the not provision. Thus, according to him, the said explanation could not have been applied.
Per contra, ld. Departmental Representative strongly supported the orders of the authorities below.
I have considered the rival contentions and perused the 9. orders of the authorities below. Table of administrative and other expenditure has been reproduced by me para 5 above. One of the items therein is ‘’loss due to diminution in valuation of fixed assets �29,715/-‘’. It appears not to be provision but a direct charge to the profit and loss account. However, depreciation schedule as per books of accounts filed by the assessee reflected a deletion of �29,673/- against office equipment of �5,625/- against furniture and fitting. Whether the sum written off represent these amounts is not clear from the available records. Therefore, a fresh look has to be made by the ld. Assessing Officer in so far as it relates to computation of income u/s.115JB of the Act. Ordered accordingly. Ground No.3 of the assessee is allowed for statistical purpose.
ITA No. 71/Mds/2017 :- 6 -:
Vide its ground No.4, assessee its aggrieved on levy of interest u/s.234B of the Act which is consequential in nature needing no specific adjudication.
In the result, appeal of the assessee is allowed pro-tanto Order pronounced on Friday, the 3rd day of March , 2017, at Chennai.