9911796707
TMI Blog2011 (4) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) Ltd. (ii) Provision for bad and doubtful Rs. 86,48,265.68 relating to various other parties. (iii) Deposit of Rs. 2,00,00,000/- against Electricity tax demand of Rs.10.51 Crores for captive power consumption, considered as contingent liability. (iv) Electricity tax demand of Rs. 98,67,181/- as per Tamil Nadu Tax on Consumption or Sale of Electricity Act, again considered as contingent liability. 4. Ld. CIT in his show cause notice under Section 263 of the Act conveyed to the assessee that none of the above items were considered by the Assessing Officer for the purpose of computation of book profits under Section 11 5JB of the Act. Reply of the assessee vis-à-vis item No.(i) was that the said amount represented an advance given to one M/s Sical Ships (India) Ltd., which was engaged by the assessee-company to transport imported raw material from other countries for use in its manufacture of chemical fertilizers and the said Sical Ships (India) Ltd. was under winding up. According to assessee, a petition was already filed before Hon'ble High Court Judicature at Madras in this regard and Hon'ble High Court vide its order dated 4.9.2003 had directed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) in support of its argument that the CIT could not take a different view when lawful view was taken by the Assessing Officer. 8. CIT after considering the above submission was of the opinion that none of the above merited any positive consideration. According to him, the provisions mentioned at (i) and (ii) above were against unascertained liabilities. According to CIT, in so far as the dues from M/s Sical Ships (India) Ltd. was concerned, Hon'ble High Court had ordered winding up of the said company on 4.9.2003 and assessee despite having such order with it, which was passed during the currency of the relevant financial year, had decided only to make a provision. As per the CIT, assessee had effected an actual write off only in the next assessment and this by itself clearly showed that the sum of Rs.16,03,61,290/- represented unascertained liability. In so far as item No.(ii) was concerned, CIT noted that these were amounts due from various Government Departments and could not be considered as bad or doubtful. Vis-à-vis the third item, ld. CIT noted that it was only a deposit made pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. took us through para 5 of the order of the Assessing Officer for arguing that the liability arising to assessee on account of such taxes was properly considered by the A.O. According to him, the Assessing Officer had made a disallowance of the claim of Rs. 2,98,67,181/- under the normal provisions of the Act despite assessee's argument that these were crystallized liabilities. In other words, according to him, the Assessing Officer had duly considered the issue regarding allowance of such amounts and after having considered such issue, came to a conclusion that no addition was called for under Explanation 1 to second proviso to Section 11 5JB(2) of the Act. In any case, according to him, the provision for bad debts of Rs. 16.04 Crores relating to M/s Sical Ships was already deducted from its loans and advances appearing in the balance sheet. For this contention, he placed reliance on audited accounts statement of the assesseecompany for the relevant previous year and Schedule X thereto. Similarly, according to him, the other amount of Rs. 86.48 lakhs was also deducted from its sundry debtors balance and Schedule VII to the audited accounts would substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account and made an addition thereof, under normal provisions, considering it to be not allowable. But, nevertheless, the argument of the assessee with regard to electricity tax was that it was an ascertained liability whereas the A.O. considered it to be a contingent liability. Such disallowance as well as all other disallowances made by the A.O. were only for the purpose of computing the total income of the assessee under the normal provisions of the Act. There is not even a whisper in the assessment order regarding any computation of book profits under Section 115JB of the Act. A.O. has not discussed anything regarding the provision for bad and doubtful debts, made by the assessee, which it had by itself added back in its normal computation. Obviously, Assessing Officer would not have found any need of discussion on these items since assessee had made a suo‑ motu disallowance. No doubt, just because the order of Assessing Officer was cryptic, we cannot consider it as erroneous. But, where there is a total lack of enquiry, we cannot say that the order is not erroneous and prejudicial to the interest of the Revenue. All the discussions in the assessment order were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , decision of Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) would come to the aid of the Revenue here. The order of the A.O. was without application of mind on Section 11 5JB of the Act. Sub-section (1) of Section 11 5JB starts with a non obstante clause and it runs as under:- "115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after [the 1st day of April, [2010]], is less than [fifteen per cent] of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of [fifteen percent]." A duty is thus cast on an Assessing Officer to work out book profit as defined under subsequent sub-section, and apply 7.5% thereon, and make a comparison thereof with total income under normal provisions of the Act. The Assessing Officer had failed to discharge this duty cast on him. In so far it relates to the electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interest of the Revenue. In so far as the claim of bad debts was concerned, CIT was of the opinion that the said amount was part of miscellaneous expenses and further deduction made as claimed by the assessee and allowed by the A.O. resulted in double deduction. Reply of the assessee in this regard was that depreciation of Rs.6.40 lakhs on let out property, was already added back by the Assessing Officer in the assessment and the said disallowance was under challenge before the CIT(Appeals). Therefore, according to assessee, the CIT had no jurisdiction to revise the order of the A.O. on an issue in appeal before the CIT(Appeals). Vis-à-vis the double claim for bad debts, explanation of the assessee was that there was no such double claim. According to assessee, it was following an accounting practice whereby party-wise receivables were considered and provisions made to the extent it had become doubtful by charging the same to the profit and loss account. Nevertheless, as per the assessee, when the amounts really become irrecoverable, there was a reversal of the amounts earlier charged from the provision and equivalent write-off thereafter effected. Therefore, as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of Rs.6,40,000/- made by the A.O. Hence, there is a clear omission by the A.O. in making a scrutiny of each of the claim of depreciation of the assessee. We cannot find any error in the order of the CIT in considering such non-application of mind to be erroneous and prejudicial to the interest of the Revenue. Nevertheless, we cannot also accept the order of CIT that the A.O. shall disallow the claim of the assessee. Hence, vis-à-vis the depreciation claim, we modify the order of CIT and direct the A.O. to verify the claim of the assessee and deal with it in accordance with law. 18. Coming to the claim of deduction of bad debts Rs.84.09 lakhs, though the assessee had argued that there was no double deduction, as mentioned by the learned CIT, nothing was produced by the assessee to prove that it consistently followed an accounting practice whereby provision made in one year was reversed it to the extent debts were considered bad, in a subsequent year and a write-off effected for such bad debts. In any case, nothing is there in the assessment order which would show that there was any application of mind by the Assessing Officer in this regard. Therefore, we cannot f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
