DCIT Vs. M/s Reliance Infrastructure Ltd. (ITAT Mumbai)
Where something is not possible then the assessee cannot be forced to do so under specific provisions of law. Those previsions of law cannot be followed because it is impossible to do so. The doctrine of impossibility is squarely applicable on the facts of the present case because it is not possible to prepare the accounts under the Companies Act because the assessee is preparing the accounts as per the policies of Electricity Supply Act.
The Honorable Supreme Court in the case of Kwality Biscuits Ltd in 284 ITR 434 has held that provisions of sec. 234B & 234C are not applicable in respect to computation of deduction u/s 115J because the computation of profit under the provisions of sec. 115J has to be made on the basis of book profit and since the entire exercise of computing the income under section 115J can only be done at the end of the financial year, and the provisions of sec. 207, 208, 209 & 210 cannot be made applicable ‘until and unless the accounts are audited and the balance sheet prepared. The ratio of this decision helps the case of the assessee because it is not possible to prepare the accounts in accordance with part II &III of Schedule VI of the Companies Act for the purpose of provisions of sec. 115JB. Therefore, in view of the ratio of this decision, in our considered view, the provisions of sec. 115JB cannot be attracted of the present case.
As discussed above when it is not possible to prepare the accounts under the Companies Act for the purpose of computation u/s 115JB, therefore, assessee cannot he forced to prepare the accounts when it is not possible. Therefore, we are in agreement with the contentions of in as much as the accounting policies followed in the accounts if followed for the preparation of Companies Act. 1 not disclose true and fair view and will not be in accordance work part II and III of Schedule VI of the Companies Act. The ratio of the decisions of the Hon7ble Supreme Court and the ratio of the decision of the Tribunal discussed above are in support of the contentions of the assessee. We further found that the issue of applicability of sec. 115J came before the Tribunal for AY 88-89. Taking into consideration the preparation of accounts under the Electricity Act and other contentions the assessee including the decisions of the Supreme Court in the case of B.C.Srinivasa Setty (supra), the Tribunal has held that. the provisions of Sec. 115J are not attracted on the facts of the present case.
As discussed above, the assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & 11 of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Honorable Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
These cross appeals have been filed against the order of the CIT(A) dated 28.04.2015.
2. In assessee’s appeal the assessee has not pressed ground No. 1. Therefore the only ground remain for our disposal reads as under: –
“2. The learned CIT(A) erred din considering all investments (excluding investment in subsidiaries) capable of earning tax free income whether they have yielded tax free income or not for computation of dis allowance u/s 14A read with Rule 8D. Your appellant submits that only those investments (excluding investment in subsidiaries) which had actually yielded tax free income during the year ought to have been considered while working out dis allowance u/s. 14A r.w. Rule 9D.”
3. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We noted that similar issue relating to the deletion of dis allowance made under Section 14A r.w. Rule 8D has also been taken by the Revenue by way of ground Nos. 3 & 3.1 in their appeal, which read as under:
“3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the AO not to consider the interest expenses for working out the dis allowance u/s 14A r.w. Rule 8D.
3.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the AO to exclude the investments made in subsidiary companies by the assessee while working out the average investment @ 0.5% as mandated by the Rule 8D of the Income Tax Rules without appreciating the fact that the assessee has earned exempt income from the investment in subsidiary companies.”
4. Since this issue involved in both the appeals relate to the dis allowance made under Section 14A, we therefore decided to dispose off this issue first instead of deciding the other ground taken by the Revenue in its appeal. The facts relating to the dis allowance made under Section 14A r.w. Rule 8D are that the assessee has computed the dis allowance under Section 14A at Rs. 39,12,99,320/- in the original return of income considering all the investments capable of earning tax free income which are exempt under Section 14A. Subsequently, during the course assessment proceedings the assessee submitted revised computation of dis allowance under Section 14A at Rs. 86,27,620/-. Further, by way of another submission he reduced the dis allowance under Section 14A to Rs. 50,20,000/- relying on the decision of in the case of it vs. Reliance Utilities and Power Ltd. (313 ITR 340) but the AO disallowed the sum of Rs. 39,12,93,402/- on the basis of the return filed by the assessee. The assessee went in appeal before the CIT(A). Before the CIT(A) assessee submitted that during the year the assessee received following exempt income:-
