Case Law Details
Transpek Si-lox Industry Ltd Vs Dy. CIT (ITAT Ahemdabad)- Mistake apparent from record must be obviously and patent and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. A decision on a debatable point of law is not a mistake apparent from the record as held by Honourable Supreme Court in the case of T.S. Balaram, ITO Vs. Volkart Brothers, 82 ITR 50 (SC).
Interest under s 234D — Section introduced with effect from 12 June 2003 and is applicable for any refund granted after this date, irrespective of the assessment year.
Transpek Silox Industry Ltd v Dy. CIT
ITAT BENCH ‘D’ AHMEDABAD
ITA No. 12/Ahd/2009
Assessment Year: 2002- 2003
T K Sharma, JM and A N Pahuja, AM
Decided on: 31 May 2011
O R D E R
PER T.K. SHARMA, JUDICIAL MEMBER : This appeal by the assessee is against the order of the CIT(A)-III, Baroda dated 10.11.2008 for A.Y.2002-2003.
2. The brief facts are that the assessee is a company. For the assessee year in appeal, the assessee had filed return of income on 25-10-2002 declaring net taxable income at Rs. 1,59,69,696/- under normal provisions of the IT Act and Rs.8,06,64,581/- under Section 115JB of the IT Act, 1961. The AO framed assessment under Section 143(3) on 21-3-2005 wherein he worked out the total income at Rs. 3,63,09,330/- (under normal provisions of the IT Act) and the book profit under Section 115JB at Rs. 9,27,87,962/-. Since the tax payable computed under normal provisions of the Income-tax Act is more than the tax payable on book profit calculated under Section 115JB of the Act, the tax is calculated on the total income of Rs. 3,18,22,940/-. The AO charged interest under sections 234A, 234B, 234C AND 234D of the Act.
3. Against the aforesaid order, an appeal was filed before the CIT(A) and the CIT(A) vide its order dated 14-03-2007 directed the AO –
(i) to re-compute the book profit under Section 115JB by reducing the deduction under Section 80HHC therefrom and
(ii) to re-compute the deduction under Section 80IB by adopting the market value.
The AO vide order dated 28-5-2007 gave appellate effect of the order of the learned CIT(A) dated 14-3-2007. In this order, the AO computed the assessee’s income at NIL under normal provisions of IT Act and book profits under Section 115JB at Rs.806,64,581/- While computing the book profit under Section 115JB, the AO allowed the deduction under Section 80HHC amounting to Rs. 1,21,23,381/- as claimed in the return of income which was not allowed in the original assessment order dated 21- 3-2005 in view of the decision of the Honourable Apex Court in the case of IPCA Laboratories Ltd., 266 ITR 521 (SC). Subsequently, the AO vide order under Section 154 dated 10-7-2007 reworked out the book profit under Section 115JB disallowing the deduction under Section 80HHC which was earlier allowed in order dated 28-5-2007 giving appellate effect to the order of the learned CIT(A). In this order, he also charged interest under Section 234B and 234C of the Act. Against the aforesaid order the assessee preferred an appeal before the CIT(A) challenging that there was no mistake apparent from record in order dtd. 28-5-2007 giving effect to the order dated 14-3-2007 of the learned CIT(A). In the impugned order, the learned CIT(A) dismissed the appeal of the assessee holding that the deduction under Section 80HHC is rightly recomputed in order under Section 154. The reason given by the learned CIT(A) as contained in para 3.3 reads as under:
“3.3 I have considered the submissions of the counsel and facts of the case. While deciding the appeal in the case of the appellant in para-5, my Id. predecessor has referred both the decisions relied upon by the appellant and held that export profit u/s 80HHC are to be reduced from the net profit. However while computing the deduction u/s 80HHC, the Assessing Officer did not do so as per the provisions of sub-section 3 of section 80HHC. In rectification order the Assessing Officer computed the deduction u/s 80HHC as per the provisions of section 80HHC(3) by reducing 90°%° of export incentives and deduction u/s 8018 allowed to the appellant. What is to be considered as deductible is mentioned in clause 4 of sub-section 2 to section 11538 and as per that account of profit eligible for deduction u/s 80HHC computed under clause (i) to clause (iii) of sub-section 3 in the case may be and subject to the conditions specified in that section. This means the eligible profit u/s 80HHC is to be considered as per provisions of section 80HHC and not on the basis of some isolated calculation. Special bench Mumbai in the case of DCIT Vs. Syn cone Formulation India Ltd reported in 106 ITD 193 held that deduction u/s 80HHC needs to be worked out on the basis of adjusted book profit. Thereafter, computation of eligible profit is to be made under the provisions of section 80HHC. The decision in Smruthi organics Ltd is on different facts where due to loses brought forward, gross total income was negative and no deduction under the normal provisions was eligible. The Tribunal decided that provisions of section 80B will not be considered since what is referred in section 115JA is eligible profit as computed u/s 80HHC. However the computation of eligible deduction has to be made within the provisions of section 80HHC although in respect of adjusted profit of business. Provisions of section 80HHC cannot be ignored while computing book profit. What Assessing Officer has done is calculation of eligible profit as per the provisions of section 80HHC which is not contradicted in the decisions relied upon by the appellant. The Hon. Mumbai High Court in the case of Rohan Dyes reported in 270 ITR 350 held that profit for the purposes of section 80HHC means positive profit and the meaning of profit in proviso to section 8OHHC(3) is not different. It is held here that if the assessee is not entitled to the benefit of deduction u/s 80HHC, the same cannot be allowable u/s 115JA also. Considering this, I find no infirmity in the rectification order passed by the Assessing Officer where he computed the correct profit eligible under Section 80HHC. Since was negative, the same cannot be reduced from book profit. This ground is also therefore rejected.”
Apart from the above, in the impugned order, the learned CIT(A) also upheld the action of the AO regarding levy of interest under Section 234B and 234C on the ground that they were already charged in the original assessment order but while giving appeal effect, through inadvertence they were not charged. This was a mistake apparent from record. Finally, with regard to levy of interest under Section 234D in the impugned order, the learned CIT(A) held that this section was introduced w.e.f. 12-6-2003 and is applicable for any refund granted after this date irrespective of the assessment year. He accordingly upheld the action of the AO confirming the levy of interest under Section 234D of the IT Act, 1961.
4. Aggrieved with the order of the CIT(A), assessee is in appeal before us on the following grounds:
“Your appellant being dissatisfied with the order passed u/s 154 of the Act by the learned Hon’ble Commissioner of Income Tax (A)-III, Baroda, dated 10/11/2008 presents this appeal against the said order on the following amongst other grounds:-
1(a) The order passed by the Honourable Commissioner of Income Tax (A)-III is bad in law, contrary to legal pronouncements and same be quashed.
(b) The Honourable Commissioner of Income Tax (A)-III has erred in confirming the order passed by the Assessing Officer as the mistakes rectified are not apparent from the records and so provisions of sec. 154 are not applicable.
2. (a) The Honourable Commissioner of Income Tax (A)-III has erred in not entertaining your appellant’s claim of deduction u/s 801-HC by reworking the same as per provisions of section 801- IHC(3). The Honourable Commissioner of Income Tax (A)-III has ignored the provisions of explanation to subsection (2) (g)(iv) of section 115JB of the Act while calculating deduction u/s 80HHC. The AO be directed to re-compute the deduction u/s 80 HHC of the Act on the Book Profit as per the provisions of the Act.
(b) The Learned AO be directed to calculate the claim of deduction u/s 80HHC as claimed by the appellant in its return of income i.e. Rs.1,21,23,381 on the net profit as per the Profit and Loss Account prepared for the year in accordance with Schedule VI of the Companies Act and without reducing therefrom the deduction available u/s 801B of the Act.
(c) The Learned AO be also directed to exclude Sales Tax and Excise duty from the Total Turnover of the business.
3. (a) The Honourable Commissioner of Income Tax (A)-III has erred in confirming charging of interest u/s 234D of the Act. Your appellant submits that provisions of Section 234D have been inserted in the Act w.e.f. 01.06.2003 which are not retrospective. The year under consideration being Assessment Year 2002-2003, the levy of interest u/s 234D by the Assessing Officer is incorrect. It be held so now and same be deleted.
b) The Honourable Commissioner of Income Tax (A)-III has erred in charging interest u/s 234B/C of the Act. It is submitted that in case income is finally determined under MAT, interest u/s 234B and 234C is not chargeable as per provisions of the Act. Thus the levy of interest u/s 234B/C is incorrect. It be held so now and same be deleted.”
5. At the time of hearing before us, with regard to ground no.1 and 2 learned counsel for the assessee after narrating the events chronologically leading to passing of the order under Section 154 dated 1-7-2007 pointed out that so far as reworking of the book profit under Section 1 1JB is concerned, there was no mistake apparent from the record within the meaning of section 154 of the IT Act, 1961. Elaborating his arguments, the learned counsel of the assessee pointed out that in this case, the learned CIT(A) against the AO’s order under Section 143(3) dated 21-3- 2005, decided the appeal on 15-3-2007. The AO allowed the appeal effect to the said order on 28-5-2007. In the said order, there was no mistake apparent from record in computing the book profit. Therefore, it may be held that the order under Section 154 to this extent is bad in law and liable to set aside. In support of his contention, the learned counsel relied upon the decision of the Honourable Apex Court in the case of Ajanta Pharma Ltd. Vs. CIT, 327 ITR 305 (SC) for the proposition that 100% export profit earned by the assessee as computed under Section 80HHC(3) is eligible for deduction under clause (iv) of the Act of Explanation to section 115JB. Apart from this, the learned counsel pointed out that the mistake apparent from record must be obviously and patent and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. A decision on a debatable point of law is not a mistake apparent from the record as held by Honourable Supreme Court in the case of T.S. Balaram, ITO Vs. Volkart Brothers, 82 ITR 50 (SC).
6. With regard to levy of interest under Section 234D, the learned counsel of the assessee relied upon the decision of the Special Bench in the case of Income-tax Officer, Ward-11 (1), New Delhi v. Ekta Promoters (P.) Ltd., 113 ITD 219. On the strength of this decision of the Special Bench, he pointed out that in this case, the assessment year involved is 2002-2003, therefore, the interest under Section 234D is not leviable. As against this, the learned DR appeared by the Revenue and pointed out that the interest under Section 234D was levied in the original assessment framed under Section 143(3) on 21-3-2005. It appears that in the original assessment, the assessee accepted the levy of interest under Section 234D therefore, now the assessee has no right to agitate levy of interest under Section 234D of the IT Act.
7. In reply, the learned counsel of the assessee submitted that against the original assessment, the assessee has filed appeal and the assessee raised ground against the levy of interest under Section 234D. The learned CIT(A) decided the appeal on 17-3-2007 and has not adjudicated the ground challenging the levy of interest under Section 234D. Therefore, he submitted that now the Tribunal may adjudicate this ground as per the judgment of the Special Bench in the case of Ekta Promoters Pvt. Ltd. (supra).
8. Finally with regard to the levy of interest under Sections 234B and 234C, the learned counsel of the assessee fairly admitted that in the order giving appeal effect to the order under Section 250, the AO through inadvertence did not charge the interest under both this section. Therefore, this was a mistake apparent from record within the meaning of section 154. Therefore, he has no objection and for this reasons, he has not pressed this ground of appeal.
9. As against this, the learned DR vehemently supported the order of the learned CIT(A).
10. Having heard both the sides, we have carefully gone though the orders of the authorities below as well as the decision of Honourable Supreme Court in the case of Ajanta Pharma (supra) relied upon by the learned counsel for the assessee. It is pertinent to note that the AO allowed the appeal effect to the order of the learned CIT(A) dated 28-5- 2007. In this order, he has allowed deduction under Section 80HHC as claimed by the assessee and recomputed the book profit under Section 115JB. In our considered opinion, there was no mistake apparent from record within the meaning of section 154 because at the relevant time this issue is highly debatable. Further, it is evident from the debate and discussion contained in the decision of the Bombay High Court in the case of CIT Vs. Ajanta Pharma (supra) reported in 318 ITR 352. This decision was reversed by the Hon’ble Supreme Court as reported in 327 ITR 305 (SC) relied upon before us by the learned counsel of the assessee. We therefore of the view that the AO clearly erred in re-computing/withdrawing the deduction claimed under Section 80HHC by order under Section 154 dated 10-7-2007. We accordingly hold that in order under Section 250 dated 28-5-2007, the book profit was rightly computed at Rs. 8,06,64,581/-. The Ground No. 1 and 2 is accordingly allowed.
11. With regard to the levy of interest under section 234D, we find considerable force in the contention of the learned DR. It is pertinent to note that for the assessment year under appeal, the original assessment was framed under Section 143(3) on 2 1-2-2005. In this assessment order, the AO charged interest under Section 234D of the IT Act, which is evident from the direction of the AO contained in page no. 1 of the assessment order. The counsel of the assessee fairly admitted that against in the original assessment order under Section 143(3), the appeal was filed wherein he has specifically challenged the levy of interest under Section 234D also.The learned CIT(A) decided the appeal of the assessee vide order dated 14-3-2007 in Appeal No.CAB/IIII/18-05-2006 wherein he has not adjudicated the ground challenging the levy of interest under Section 234D. The AO allowed the appeal effect to the aforesaid order of the learned CIT(A) vide order dated 28-5-2007 under Section 250. Along with this order, the AO also issued ITNS-150 wherein the interest under Section 234D amounting to Rs. 1,04,574/- was challenged.
Subsequently, the AO vide order dated 10-7-2007 under Section 154 passed the impugned order wherein he rectified under Section 154 withdrawing (i) deduction under Section 80HHC because the profit of the business is negative figure and (ii) levied interest under Section 234B and 234C. From the above, it is clear that the interest under Section 234D was charged by the AO
(i) in the original assessment order under Section 143(3),
(ii) in order giving the appeal effect to the order of the learned CIT(A) in order under Section 250 dated 28-5-2007 and also
(iii) in order under Section 154 dated 10-7-2005.
From the aforesaid chronological event, it is clear that levy of interest under section 234D attained finality in the original assessment order framed under Section 143(3) on 2 1-3- 2005 because the assessee has accepted the order of the learned CIT(A) in appeal No.CAB/IIII/18-05-2006 dated 14-3-2007 wherein the learned CIT(A) has not adjudicated the ground challenging the levy of interest under Section 234D. On this ground, we hold that in the present appeal, assessee cannot agitate that the interest under section 234D of the I.T.Act is not leviable as per ratio of decision of special Bench in the case of Ekta Promoters Pvt. Ltd. (supra). However, the assessee is entitled to consequential relief as provided in sub-section (2) of section 234D of I.T.Act,1961. The AO is accordingly directed to allow consequential relief in charging interest under section 234D, while giving appeal effect to this order in terms of sub-section (2) of section 234D of the I.T.Act, 1961.
12. Ground No.3(b) was not pressed at the time of hearing therefore this ground is dismissed, as being not pressed.
13. In result, the assessee’s appeal is treated to be partly allowed for statistical purpose.
Order pronounced in Open Court on 31st May, 2011
