M/S PUNJAB AGRO INDS. CORPORATION LTD.,CHANDIGARH vs. DCIT, CHANDIGARH

PDF · subscribers
ITA 1448/CHANDI/2016Status: DisposedITAT Chandigarh15 November 2018AY 2011-124 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the assessee followed the cash system of accounting for receipts, it could not claim related expenditures on an accrual basis as per Section 145(1). The disallowance for book profit calculation under Section 115JB was also upheld.

What were the facts?

The assessee debited interest expenditure on loans received from the Government of Punjab. The Assessing Officer disallowed this expenditure, and the CIT(A) upheld the disallowance. The assessee's appeals were against these orders.

What were the issues?

Whether interest expenditure claimed on accrual basis is allowable when the assessee follows the cash system of accounting for receipts. Whether the disallowance of interest for book profit calculation under Section 115JB is justified.

Which sections of the Income-tax Act were involved?

Section 145(1),Section 115JB

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member:

These appeals have been preferred by the assessee against the order dated 27.10.2016 of the Commissioner of Income Tax (Appeals)-2, Gurgaon [hereinafter referred to as CIT(A)].

2.

At the outset, the Ld. Counsel of the assessee fairly submitted that the sole issue involved in both the appeals for different assessment years relating to the disallowance of interest expenditure of Rs. 96,17,200/- (for assessment year 2011-12) and Rs. 97,93,020/- (for assessment year 2012- 13) respectively, payable to Government of Punjab, is squarely covered against the assessee by the decision of the Coordinate Bench of the

ITA No. 1448 & 1449/Chd/2016- M/s Punjab Agro Industries Corporation Ltd., Chandigarh 2

Tribunal in the own case of the assessee for earlier assessment years from

2008-09 to 2010-11 vide order dated 22.9.2016. A copy of the said order

has also been placed in the file.

3.

We have gone through the order of the Coordinate Chandigarh Bench

of the Tribunal dated 22.9.2018 passed in the own case of the assessee in

ITA Nos. 782/Chd/2011 and 55 & 848/Chd/2013 for assessment years

2008-09 to 2010-11, wherein, the Tribunal after detailed discussion

decided the same against the assessee. The relevant part of the order of the

Tribunal dated 22.9.2018 (supra) is reproduced assessee under:-

“4. The brief facts on the issue are that assessee had debited amount of Rs. 1,04,25,000/- to the Profit & Loss Account as interest payable to the Punjab Government on amount of Rs. 5.5 Crores received by the assessee as assistance in the form of loan for setting up agro based project in the State of Punjab. The Assessing Officer has made addition of the said interest of Rs. 1,02,00,560/- after allowing 2% expenditure.

4(i) The ld. CIT(Appeals), after considering facts of the case and submissions of the assessee, noted that assessee had debited interest expenditure to the Profit & Loss Account as interest on loan taken from Punjab Government. As per provisions of Section 145(1) of the Income Tax Act, income under the head ‘profit and gains of business or profession’ or 'income from other sources' is to be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The assessee is following cash system of accounting in respect of receipts from various projects on cash basis but the related expenditure is being claimed on accrual basis. The ld. CIT(Appeals), therefore, held that this amount claimed by the assessee is not allowable in view of explicit provisions of Section 145(1) of the Act. This ground was, accordingly, dismissed.

ITA No. 1448 & 1449/Chd/2016- M/s Punjab Agro Industries Corporation Ltd., Chandigarh 3

5.

The ld. CIT(Appeals) also considered the disallowance of interest while calculating book profits under section 115JB of the Act. The Assessing Officer added the amount of interest while calculating book profits for the purpose of Section 115JB of the Act. The ld. CIT(Appeals) noted that in the case of company, which is required to pay tax on book profits under section 115JB has to prepare its Profit & Loss Account in accordance with provisions of Part-II and Part-III of Schedule-VI to the Companies Act, 1956. In the case of the assessee, interest was received being credited on cash basis, whereas interest paid has been claimed on accrual basis and so the accounts were not in accordance with provisions of Schedule-VI to the Companies Act. Therefore, interest claimed in the Profit & Loss Account has to be added to the declared book profits to arrive at the correct figure of book profits and argument of the assessee was not correct. This ground was also dismissed.

6.

After considering rival contentions, we are not inclined to interfere with the impugned order. The ld. counsel for the assessee admitted that assessee is a company who is following cash system of accounting in respect of receipts from various projects. He has also admitted that related expenditures are, however, claimed deduction on accrual basis. The provisions of Section 145(1) of the Act are, therefore, clearly applicable in the case of the assessee because income under the head ‘profit and gains of business or profession’ is to be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The assessee is following cash system of accounting regularly in respect of all the interest amount, therefore, the related expenditure cannot be allowed on accrual basis.

6(i) Further, as regards calculation of book profit under section 115JB, the ld. CIT(Appeals) has given same reasoning and confirmed the addition. During the course of arguments, ld. counsel for the assessee was not able to point out any infirmity in the order of ld. CIT(Appeals) in dismissing the appeal of the assessee.

ITA No. 1448 & 1449/Chd/2016- M/s Punjab Agro Industries Corporation Ltd., Chandigarh 4

7.

Since assessee’s counsel is not able to make out any case for the assessee, therefore, we do not propose to interfere with the orders of authorities below. The appeal of the assessee, therefore, stands dismissed.

In the result, appeal of the assessee is dismissed.”

4.

Therefore, following the aforesaid decision of the Tribunal dated 22.9.2016 (supra), rendered in the own case of the assessee for earlier assessment years from 2008-09 to 2010-11, we dismiss both the appeals filed by the assessee on identical issue.

5.

In the result, both the appeals of the assessee are hereby dismissed.

Order pronounced in the Open Court on 15.11.2018.

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member

Dated : 15.11.2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

More judgments on Section 145(1)

All 103 judgments and leading authorities on Section 145(1) →

Recent GST High Court judgments

Search GST case law →