Haploos Plyboards Private Limited Vs DCIT (ITAT Chandigarh)
Excess stock and cash surrendered during a survey, when arising from the assessee’s regular business and disclosed as business income, cannot be taxed under the enhanced rate of Section 115BBE; moreover, the 60% rate under the amended provision applies only from AY 2018-19.
Summary: ITAT Chandigarh partly allowed the appeal of Haploos Plyboards Private Limited for AY 2017-18, holding that the ₹100 lakh surrendered during a survey, comprising ₹90.40 lakh for excess stock and ₹9.60 lakh for excess cash, was required to be assessed as business income and could not be subjected to the higher rate under Section 115BBE. The assessee, engaged in manufacturing ply and ply board, had surrendered the amount during a survey conducted at its business premises on 21 September 2016 and had offered the surrender as “business income” in its computation. The Assessing Officer nevertheless applied the higher rate under Section 115BBE. The Tribunal noted that the assessee had no other source of income and that its statement recorded under Section 133A accepted the discrepancy and offered the additional amount as “misc. business income”. Relying on A.P. Knit Fab v. DCIT, the Tribunal held that where excess stock had a clear nexus with the assessee’s regular business and no independent undisclosed asset existed, the surrendered amount constituted business income and was subject to the normal rate of tax. The Tribunal further relied on the Rajasthan High Court decision in Deepak Maratha, which held that the amendment enhancing the Section 115BBE rate to 60% applied prospectively from 1 April 2017, corresponding to FY 2017-18 and AY 2018-19 onwards. Accordingly, the higher rate could not apply to the assessee’s AY 2017-18 case. The Tribunal did not interfere with the ₹76,712 disallowance under Section 14A or the ₹5 lakh ad hoc disallowance of expenses and ultimately partly allowed the appeal.
