TMI Blog2019 (11) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... ubtful debts as well as advances written back - HELD THAT:- In the present case, net profit for the year ended on 31.3.2007 was increased by the amount of provision of ₹ 1,04,42,237/- and ₹ 1,82,43,319/- therefore, CIT(A) was not justified in upholding the adjustment. Merely because for AY 2007-08, total income under regular provisions was more than the book profit u/s 115JB, it cannot be said that book profit for AY 2007-08 was not increased by the amount of provisions. CIT(A) was not correct in holding that the book profits of the earlier ears have not been increased by the said reserves or provisions therefore as per provision Section 115JB the addition sustains. In fact, the net profit for the year ended on 31.3.2007 was increased by the amount of provision. Thus, Ground Nos. 1(b) and 1(c) are allowed. Exclusion of exchange fluctuation in computing deduction u/s 10A - HELD THAT:- All the transactions relate to foreign operations i.e. investment in subsidiaries. Since the gain relate to capital field being investment in subsidiaries, therefore, such gain was capital in nature. These submissions were not taken into account by the Assessing Officer as well as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Disallowing provision for Reversal of provision for diminution in value of of investment(writtenback) 10,442,237 (cr) Consequently computing the Book Profit at ₹ 32,20,96,314/-. c) Not determining the amount of MAT credit available to the assessee company for the assessment year to be adjusted against future normal tax liability. 2) Whether under the facts and circumstances of the case and in law the learned CIT(A) was justified in confirming the action of the AO in considering the Foreign Exchange Fluctuation- Capital Nature (Credit) ₹ 43,82,892/-, chargeable to tax as Business Income. 3) Whether in view of the facts and under the circumstances of the case, the CIT(A) was justified in law in upholding the action of AO in charging of interest of ₹ 29,16,943/- u/s 234B of the Act; on the amount of tax on book profit of ₹ 32,20,96,314/- recomputed on the basis of retrospective amendment in sec. 115JB of the Act inserted by Finance Act (No.2), 2009. 4) The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded from the export turnover. The Ld. AR submitted that though the Assessing Officer had not given any reason for restricting the deduction u/s 10A, however, the CIT(A) attributed certain reasons to him and upheld the deduction allowed by him. As per rectified order dated 19.01.2012 passed under Section 154 of the Act, the Assessing Officer allowed these claims. Further the Ld. AR while referring to section 10A(4) submitted that the said section provides formula for computing deduction, CIT(A) observed that though export turnover - the numerator , in the formula has been defined in section 10A, however, total turnover - the denominator has not been defined. The Ld. AR submitted that since export turnover specifically excludes freight, telecomm and insurance, therefore, different meaning cannot be assigned to total turnover. The Ld. AR relied upon the decision in case of CIT v. Lakshmi Machine Works [2007] 290 ITR 667 (SC). The Ld. AR submitted that neither the Assessing Officer nor CIT(A) has given any adverse finding on the submissions made. There is no finding that ISP charges were for delivery of computer software and the travelling expenses were for provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Though deduction of ₹ 23,95,42,286/- was allowed in the respect of four undertakings having profit, however, by mistake only the figures pertaining to Noida IT were noted. 6. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. From the submissions of the working of deduction under Section 10A, the Ld. AR admitted that there is mistake in figures pertaining to one undertaking. The Ld. AR submitted that by revised return filed on 22.09.2009, deduction u/s 10A of ₹ 25,61,48,875/- was claimed. Deduction u/s 10A was claimed in respect of four undertaking. Against the claim of deduction of ₹ 25,61,48,875/-, the Assessing Officer allowed deduction of ₹ 23,95,42,286/- (difference of ₹ 1,66,06,589) as under: * Profit of the business was taken at ₹ 23,22,45,490/- * Export turnover and total turnover was reduced by ₹ 3,08,53,780/- and ₹ 7,80,68,057/- on account of telecommunication expenses and travel expenses. * Though d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be added to net profit as provided by clause (i) of Explanation 1 to Section 115JB(2). The Assessing Officer declined to exclude provisions for ₹ 1,04,42,237/- and ₹ 1,82,43,319/- in computing book profit for AY 2008-09 for the reason that the said provisions were not added while computing the book profit for AY 2007-08. Proviso to clause (i) of Explanation 1 to section 115JB(2) provides that amount withdrawn from the provision shall be reduced from net profit provided the book profit for the year in which the provision was created was increased. This condition was met because book profit for AY 2007-08 was increased by provisions for ₹ 1,04,42,237/-, ₹ 5,08,06,788/- and ₹ 3,39,47,774/-. The CIT(A) by following Indo Rama Synthetics India Ltd. v. CIT12011 / 330 ITR 363 (SC) upheld the adjustment holding that in the year in which provisions were created, the same were not added back for the purposes of MAT computation in the return originally filed. Only by the revised computation, provisions were added back. Therefore, book profit for AY 2007-08 has not been increased by the provision of ₹ 1,04,42,237/- ₹ 1,82,43,319/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remained untouched by the amount of revaluation reserve. In the accounting year ended on 31.3.2001 (assessment year 2001-02), the assessee withdrew an amount from the reserve which was credited to the profit and loss account. On these facts, it was held that the proviso to clause (i) of section 115JB was applicable because the book profit of the year ended 31.3.2000 had not been increased by the amount of the reserve created in that year. It was in this background that the Hon ble Supreme Court decided the issue against the assessee holding that unless the adjustment has the effect of increasing the net profit as shown in the P L A/c, the assessee cannot be allowed reduction of net profit under clause (i) to the Explanation to section 115JB(2). Since in the present case, net profit for the year ended on 31.3.2007 was increased by the amount of provision of ₹ 1,04,42,237/- 8s ₹ 1,82,43,319/- therefore, CIT(A) was not justified in upholding the adjustment. Merely because for AY 2007-08, total income under regular provisions was more than the book profit u/s 115JB, it cannot be said that book profit for AY 2007-08 was not increased by the amount of provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] was on account of advance to subsidiaries (principal account). All the transactions relate to foreign operations i.e. investment in subsidiaries. Since the gain relate to capital field being investment in subsidiaries, therefore, such gain was capital in nature. The Ld. AR further submitted that in ITA No. 4247/Del/2011 for AY 2007-08, this aspect was not taken into account. 12. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 13. We have heard both the parties and perused all the relevant material available on record. The submission of the Ld. AR that out of gain of ₹ 43,82,892/-, gain of ₹ 32,29,114/- [1,13,262 + 39,08, 276 minus 5,91,524 2,00,900] was on account of payment to shareholders and gain of ₹ 11,53,778/- [11,53,778 3,69,974 + 3,69,974] was on account of advance to subsidiaries (principal account). All the transactions relate to foreign operations i.e. investment in subsidiaries. Since the gain relate to capital field being investment in subsidiaries, therefore, such gain was capital in nature. These submissions were not taken into account by the Assessing Officer as well as by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
