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2015 (6) TMI 317 - ITAT AHMEDABAD

2015 (6) TMI 317 - ITAT AHMEDABAD - TMI - Applicability of clause (vii) to the Explanation 1 of S.115JB(2) - disallowance to reduce an amount of profit of sick industrial appellant company from the net profit to determine book profit u/s 115JB - Held that:- the profit of the sick industrial undertaking is to be reduced from the book profit, beginning with the year in which the Company becomes a sick industrial company and such exemption would be available till the year in which for the first tim .....

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> Addition on Interest waived by the State Bank of Saurashtra and State Bank of Indore - Held that:- we set aside the orders of the authorities below with regard to addition of ₹ 77,81,667/- made by the Assessing Officer on the presumption that it was the interest waived by State Bank of Saurashtra. We direct the Assessing Officer to verify whether it is waiver of interest or its conversion of interest into loan. Conversion of interest into loan does not amount to waiver of interest becau .....

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R For the Respondent: Shri Tushar P. Hemani, AR ORDER PER G.D. AGRAWAL, VICE PRESIDENT: ITA No. 266/Ahd/2011 is the appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-I, Baroda dated 16.11.2010 for the Assessment Year 2005-06. ITA No.2459/Ahd/2010 is the appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals)-I, Baroda dated 21.04.2010 for the Assessment Year 2007-08. CO No.176/Ahd/2011 is filed by the assessee for Assessm .....

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lication for condonation of delay which is duly supported by the affidavit of Shri Chandrakant R. Patel, Managing Director of the assessee. In the affidavit, it is mentioned by the Managing Director of the assesses that since the CIT(A) has allowed the appeal in favour of the assessee with respect to computation u/s 115JB, the assessee did not prefer appeal or cross-objections. However, when the notice of hearing of the appeal is served upon the assessee, the assessee engaged the Counsel for app .....

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ction, the assessee can raise this issue in view of Rule 27 of the ITAT Rules. He further submitted that for adjudicating this ground, no investigation in to the facts is required because all the facts are already on record and the ground is only with regard to legal interpretation of Clause (vii) in Explanation-1 of Section 115JB. He also stated that the delay in filing of the cross-objection is not on account of any malafide intention or lethargy on the part of the assessee. He, therefore, req .....

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ng took place on 29.07.2011. The cross-objection is furnished by the assessee on 27.07.2011. Thus, the cross-objection was furnished even before the first date of effective hearing. These facts support the averment made in the affidavit of Shri Chandrakant R. Patel, Managing Director of the assessee. That after the receipt of hearing of notice, when the assessee approached the Counsel, he advised to file the cross-objection. Moreover, the issue raised in the cross-objection is already considered .....

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Cross-objection reads as under:- 1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in holding that provisions of clause (vii) to the Explanation 1 of S.115JB(2) of the Act are not applicable to the facts of the case of the assessee and thus not allowing to reduce an amount of profit of sick industrial appellant company from the net profit to determine book profit u/s 115JB of the Act as per clause (vii) to the Explanation 1 of S.115JB(2) of 8. Th .....

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n which the company becomes sick industrial unit and is available up to the year during which the net worth of the company exceeds the accumulated losses. He, therefore, submitted that for the year under consideration, the net profit of the sick unit is to be excluded. In support of this contention, he relied upon the following decisions of the ITAT. i. DCIT vs. Steelco Gujarat Limited- ITA No.178 & 349/Ahd/2007 ii. Viswabharathi Textiles P. Ltd. vs. CIT - ITA No.778/Mds/2011 iii. ACIT vs. M .....

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xplanation-1, Clause (vii) would not be applicable. 11. We have carefully considered the arguments of both the sides and perused the material placed before us. In the case of Steelco Gujarat Limited (supra), the ITAT A Bench, Ahmedabad has considered the identical issue and held as under:- 7. That from the above it is evident that as on 31-03-2003 the net worth of the assessee company exceeded the accumulated losses. As per Explanation-1, Clause (vii) while computing the book profit, following a .....

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above it is evident that the amount of profit of the sick industrial undertaking is to be reduced while computing book profit. The reduction is to be allowed from the year in which the said company becomes a sick industrial company and such exemption will end with the Assessment Year in which the net worth of the company exceeds the accumulated losses. It means exemption would be available upto the year in which the net worth exceeds the accumulated losses, but will not be available for subseque .....

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industrial undertaking is not chargeable to tax u/s 115(JB), the book profit (Assessment Year 2003-2004) of the assessee company would be nil because the assessee company is having only one industrial undertaking which is a sick unit. In view of the above, ground raised in Revenue's appeal as well as Ground Nos.2,3 and 4 of the assessee's appeal, which are with regard to the computation of the book profit of the assessee, have become infructuous, accordingly rejected. 12. Similar view is .....

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exceeds the accumulated losses. Accordingly, for the year under consideration i.e. Assessment Year 2007-08, the net profit of the sick industrial undertaking is to be reduced while computing the book profit. We direct the Assessing Officer to re-compute the book profit accordingly. Thus, the Cross-objection of the assessee is allowed. ITA No. 2459/Ahd/2010 - Revenue s Appeal (AY : 2007-08) 13. In the light of our decision on the Cross-objection of the assessee, the appeal of the Revenue has bec .....

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t has become academic and infructuous. Accordingly, the Revenue s appeal is dismissed being infructuous. ITA No.266/Ahd/2011 - Assessee s Appeal (AY : 2005-06) 14. The Ground No.1 of the assessee s appeal reads as under:- 1. Confirmation of part addition of ₹ 77,81,667/- out of ₹ 2,50,14,190/-, being interest waiver. 15. Other grounds raised by the assessee in its appeal are only arguments in support of above ground. 16. At the time of hearing before us, it is submitted by the ld. Co .....

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allowable ₹ 77,81,667/- b) Interest waived by State Bank of Indore ₹ 3,77,356/- Rs.2,50,14,190/- =========== 17. He stated that the CIT(A) sustained addition only in respect of ₹ 77,81,667/- and deleted the balance addition. He also stated that to the best of his knowledge, the Revenue has not filed any appeal against part deletion of the addition by the CIT(A). With respect to ₹ 77,81,667/-, he submitted that this amount was claimed by the assessee as deduction and it w .....

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