TMI Blog2013 (5) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,235/- disallowed u/s 40(a)(ia) and ₹ 4,91,952/- disallowed us/ 36(10(va) of the Act. Thereafter, the commissioner called for the records of this assessment order and noticed that this order is erroneous in so far as it is prejudicial to the interest of the revenue in respect of some aspects of determination of taxable income of the assessee. Consequently, he issued a show cause notice u/s 263 of the Act on 13.07.2011 which was responded by the assessee and filed written submission on 29/07/2011. 3. The show cause issued by the commissioner reads as under :- The assessment for the A.Y. 2008-09 was completed u/s 143(3) on 09.12.2010 at the total loss of ₹ 12,90,95,661/-. The perusal of records reveals the following : 1. While computing the tax u/s 115JB of the I.T./ Act., the MAT credit of ₹ 65,23,000/- has been wrongly allowed. 2. The provision for doubtful debts of ₹ 37,62,000/- under the head selling expenses is also not allowable as per explanation (1) below the section115JB(1) introduced by Finance Act, 2009 with retrospective effect from 01.04.2001. 3. The additional depreciation on Captive Thermal Power Plant is not allowable but it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation (I) For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) as increased by- (a) the amount of Income-tax paid or payable and the provision therefor; It is very clear from the provision of section 115JB that to arrive at the book profit for the purpose of this section, the profit shown in the profit loss account is to be increased by whatever amount of Income Tax paid or payable and the provision thereof. In this case it is apparent that the Income Tax provision made in the books of accounts is only ₹ 125.04 lacs less ₹ 28.75 lacs for fringe benefit tax i.e. ₹ 96.29 Lakhs has been added back to the profit for the year for the purpose of levying the minimum alternative tax, this position is correct as per the law. The pointing out of MAT credit entitlement ₹ 65.23 lacs has been wrongly considered while calculating the booked profit, this is only method of making provision for tax and disclosure thereof. As far as law is concerned, it is very clear that whatever the amount of provision is concerned is to be added back and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the incomechargeable under the head Profits and gains of business or profession of any one previous year;]. On examination of the above provision, your goodself will find that:- 1. first condition is, new machinery or plant should be acquired and installed after 31st day of March, 2005. In this case such plant machinery referred in the querry has been acquired after 31st March, 2005. 2. Such plant machinery should be acquired by an assessee engaged in business of manufacture or production of any article or thing. The assessee Banswara Syntex Limited is engaged in production and manufacturing of yarn, cloth, garments which are article and things and this condition is very well fulfilled by the assessee for the entitlement of the additional depreciation referred as above. Further (a) the plant machinery installed by the assessee should be used within India by the assessee himself and not by any other person. (b) The Plant machinery on which additional depreciation is claimed are not being installed in office remises or any residential accommodation or guest house. (c) The assessee has not claimed any additional depreciation on office appliances or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try wise record at Annexure No. 3. Moreover, we are also enclosing herewith month wise summary of the register kept under the excise law known as RG23(C) for the F.Y. 2007-08 (relevant to the Assessment Year 2008-09) as Annexure No. -4. Further we are also enclosing herewith statement showing the provision of section 145A which also has the summary of whole of the year for the CENVAT availed and utilized on the capital items while calculating the effect u/s 145A. all these evidences show that assessee does not include any part of the MODVAT on capital item for the purpose of arriving the actual cost as defined u/s 43 of the Act. 6. The suspicious transactions related to Shri Rajendra Kumar Jain, the then Accountant of the Company, have not been examined while passing the order u/s 143(3) of. the I.T. Act dated 09.12.2010 SUBMISSION: The fraud committed by Shri Rajendra Kumar Jain amounting to ₹ 43.25 Lakhs was detected only in the financial year 200910, of course this amount relates to many of the years but the assessee could find out such fraud by investigating the records of the Company since 2005. It does not mean that any of the transaction which forms part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of concession given to any of the buyer. Accordingly your goodself will appreciate that no interference is required in the order of the AO. 5. After considering the above objections the ld. Commissioner has found the assessment order leviable in respect of the following ground:- (i) Allowance of MAT credit of ₹ 65,23,000/- while computing tax u/s 115 JB of the Act. (ii) The provision for doubtful debts of ₹ 37,62,000/- under the head selling Expenses in view of Explanation (1) below Section 115 JB (1) introduced by the Finance Act, 2009, with retrospective effect of 1.4.2001which provides that the profit has to be increased by the amount or amounts set aside as provision for diminution in the value of any asset. (iii) The additional depreciation on Captive Thermal power Plant wrongly allowed. (iv) Subsidy granted under Technological Upgradation Fund (JUF) Scheme ahs not been reduced from the cost of the new assets introduced during the year. (v) MODVAT Credit on capital goods has not been reduced from the cost of Capital Goods to arrive at the actual cost for the purpose of depreciation. Therefore, he ahs revised and set aside all the above issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law in directing the A O to recompute the claim of depreciation on fixed assets acquired under TUF Scheme ignoring the fact that interest subsidy accrued to assessee under the Scheme during the year is already reduced from the interest expenditure claimed by the assessee and the capital subsidy received in A.Y. 2009-10 is reduced from the cost of asset in that year and therefore order of AO is not erroneous or prejudicial to the interest of revenue in this regard. 7. We have heard rival submissions. Before we proceed to decide the issues before us in this appeal it would be apt and proper to discuss the law relating to revisions as provided in Section 263 of the Act. It is trite that an order can be revised only and only if twin conditions of error in the order and prejudice caused to the Revenue co-exist. The subject of revision under section 263 has been vastly examined and analyzed by various Courts including that of Hon ble Apex Court. The revisional power conferred on the CIT vide section 263 is of vide amplitude. It enables the CIT to call for and examine the records of any proceeding under the Act. It empowers the CIT to make or cause to be made such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement or order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one by one. First ground of revision is regarding the direction of the ld. CIT(A) given to the A.O. to recompute the book profit u/s 115JB without deducting the amount of ₹ 65,23,000/- on account of MAT Credit Entitlement. 10. After hearing both the sides we have found that from the statement of total income, it can be noticed that the assessee has no liability to pay tax under the normal computation but liability to pay tax under MAT which is to be carried forward u/s 115JAA of the Act. The assessee has shown current tax at ₹ 65,23,000/- but same has been nullified by a contra-entry towards MAT credit entitlement in the profit and loss account. Thus, in fact, no provision has been made in respect of current income tax paid or payable or provision thereof. In fact, this is a mode of presentation of the accounts used by the assessee. The assessee made provision only for deferred tax of ₹ 96,29,000/- which has been added back while computing the book profits. Hence, no adjudication is required to be made in respect of the amount of Income-tax paid or payable. Provision under clause (a) of Explanation 1 appended u/s 115JB no provision for Income-tax paid or payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of 2.32 lakhs is towards bad debts written off and bad debts recovered and ₹ 35.30 lakhs is towards provision for bad debts. Therefore, in our considered opinion, direction given by the ld. CIT to add entire amount of ₹ 37.62 is incorrect. When the assessee filed return on 26.9.2008, there was direct decision of the Hon'ble Supreme Court in the case of CIT Vs. HCL Conmet Systems and Services Ltd. reported in 305 ITR 409 in which it has been held that when provision made for bad and doubtful debts is to cover up probable dimunition in the value of asset and such provision is not a provision for reliability and therefore, it cannot be added to the book profit in terms of Explanation 1 to section 115JA. Thereafter, amendment was made in Explanation 1 w.e.f. 1.4.2001 as stated above providing for adjustment for the amount set aside as provision for diminution in the value of the asset. Otherwise also, when on account of retrospective amendment in law, an amount is required to be added. The same can be done by passing order u/s 154 of the Ac as has been held in the case of CIT Vs. J.S. Sabhavalla reported in 171 ITR 191 [Mum]. Therefore, this canot be treated as an er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been reduced from the cost of plant and machinery in that year. But the case of the ld. CIT is that in view of Schedule 11 of the balance sheet sated that the amount receivable under the TUF Scheme has increased to ₹ 1,174,.10 lakhs from ₹ 455.84 lakhs of last year. Thus a further benefit of ₹ 718.26 lakhs has accrued to the assessee during the year. This is a subsidy from the Government which is not reduced from the cost of plant and machinery and therefore he directed the A.O. to verify the claim of the assessee. 18. After considering the rival submissions we have found that under TUF Scheme, the assessee receives interest subsidy which is already reduced from the interest expenditure claimed during the year. The assessee has, upto the last year, received interest subsidy under TUF Scheme under ₹ 455.84 lakhs. This claim has been raised during the year to ₹ 922.41 lakhs, out of which ₹ 211.15 lakhs was received leaving closing balance of ₹ 1174.10 lakhs [refer PB page 53]. The interest subsidy of ₹ 922.41 lakhs has been reduced from the interest expenditure of ₹ 2155.39 lakhs leaving the interest expenditure of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No 6 of revision pertains to direction given to examine the claim of loss on account of fraud amounting to ₹ 43.25 lakhs in the earlier years and detected during A.Y. 2009-10 and recovered and offered in income in that year. According to the ld. CIT, this issue was not examined by the A.O. while passing his order. According to the assessee, the accountant of the assessee company Shri Rajendra Kumar Jain committed fraud amounting to ₹ 43.25 lakhs which related to earlier years but detected only in A.Y. 2009-10 when this amount was recovered from him and offered for taxation. The ld. CIT has observed that the A.O. has already reopened assessment of two earlier years on this issue and therefore, he set aside the matter to the file of the A.O. to decide the same in totality. It was found that fraud amount relates to various years. But in our considered opinion, this cannot be an error in the assessment order. 22. Ground No. 7 taken for revision is regarding allegation that the A.O. has not examined the genuineness of trading loss. 23. The ld. CIT has noticed that the assessee has incurred loss in trading of viscose fibre but the A.O. has not examined the genui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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