TMI Blog2020 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 - MADRAS HIGH COURT] is factually distinguishable since the assessee s net worth had not turned positive in that case and the relief as proposed by BIFR was not specifically rejected by the CBDT. Further, that case deal with deduction u/s 43B to an entity which has taken over a sick company. Reduction in Book Profits u/s 115JB - HELD THAT:- As per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitled for deduction of amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It is also evident that the assessee has claimed lower of depreciation and book loss while computing Book Profits u/s 115JB for AY 2012-13 which has not been disturbed by AO in the assessment order for AY 2012-13. Therefore, we find certain strength in these arguments. We find that the issue of aforesaid adjustments has not been delved upon either by Ld. AO or by Ld. CIT(A). Therefore we deem it fit to remit the matter back to the file of CIT(A) to specifically adjudicate the issues raised under the appeal by way of a speaking order and bring on record correct factual matrix, in this respect. Needless to add that reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no computations have been made by the assessee u/s 115JB. The perusal of assessment order for AY 2012-13 dated 18/03/2015, as placed on record, would reveal that no computations have been made by Ld. AO u/s 115JB. In the above background, we take up appeals for AY 2013-14 simultaneously. ITA No. 2709/Mum/2019, AY 2013-14 2.1 Aggrieved by the order of Ld. Commissioner of Income Tax (Appeals)-2, Thane dated 05/03/2019, the assessee is under appeal with following grounds of appeal: - I. Exemption from MAT 1. The Ld. CIT(A) erred in law and on facts in upholding the action of ld. AO of computing Book Profit u/s. 115JB at ₹ 10,76,27,367 liable to MAT and in denying exemption from payment of MAT u/s. 115JB as directed by the Board of Industrial and Financial Reconstruction (BIFR) and altogether ignoring the provisions of law including the overriding provisions of SICA, 1985 under which your appellant during the period of rehabilitation was entitled to exemption from liability to MAT. 2. Your appellant submits that relief claimed from provisions of MAT was as per the order passed by the BIFR dt. 21.09.2010 and provisions of the Income Tax Act, 1961 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads as under: - 11.4 CBDT To consider to exempt / grant relief to the company from the provisions of Section 41, 72, 43-B and 115JB of the Income Tax Act for a period of eight years from the cut-off date except for the prosecution and criminal proceedings. As evident, the CBDT has been directed to consider granting of relief to the assessee u/s 41, 72, 43B and 115JB of the Act for a period of 8 years from the cut-off date. The concluding part of the scheme notes that as per projected profitability, the net worth of the company becomes positive in the seventh year of rehabilitation and the entire losses would be wiped out in the eighth year of rehabilitation i.e. FY 2016-17. 2.3 Fortunately, the assessee s net worth has turned positive on 31/03/2011. Accordingly, the assessee received a letter dated 21/11/2012 from Hon ble Directorate of Income Tax (Recovery) [DIT(Recovery)] mentioning the said fact. The said letter was addressed to BIFR. The copy of the letter has been placed in the paper-book. In the said letter, it was stated that BIFR has discharged the company from the purview of SICA vide order dated 16/08/2011 on the ground that the revival of the company has subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .28 as well as under Sec.41. No relief was granted in this respect for AY 2011-12. The assessee filed necessary application before DIT(Recovery) in this regard but the same remained to be dealt with by DIT(Recovery) till date. Since the date of filing the revised return for AY 2011-12 expired on 31/03/2013, the assessee thought it appropriate to claim the deduction of these items while filing return for AY 2013-14 which was to be filed subsequently, Accordingly, the assessee claimed deduction of the aforesaid items while computing income for AY 2013-14 while agitating the same before appellate authorities for AY 2011-12. 2.6 After considering assessee s submissions, Ld. AO opined that these items pertained to AY 2011-12 and there was no specific order of relief under Sec. 28 / Sec. 41. Therefore, the deduction of the same could not be allowed to the assessee. The assessee, while agreeing for the addition, pleaded that the provisions of Sec. 115JB should not be made applicable. 2.7 Consequently, the deduction of these items was not allowed and the income was computed at ₹ 950.77 Lacs. The aforesaid income was after another disallowance u/s 40(a)(ia) for ₹ 38.69 Lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of computations u/s 115 JB. 3.3 Another alternative ground was that accumulated debit balance in Profit Loss account was adjusted from time to time against the credit balance in Capital Reserve and Share Premium account viderestructuring account . The said set-off should not prejudice or affect assessee s claim for set-off of book-losses or depreciation, which ever is less, as per the books of accounts. 3.4 The Ld. CIT(A) noted the directions given in BIFR order dated 21/09/2010 which read as under: - To consider to exempt / grant relief to the company from the provisions of Section 41, 72, 43B and 115JB of the Income Tax Act for a period of eight years from the cut-off date except for the prosecution and criminal proceedings The contents of letter of DIT (Recovery) dated 21/11/2012 were noted in para 5.2 of the impugned order. It was also noted that consequent to the letter of DIT (Recovery), the assessee filed a letter for reconsideration of the afore said order. 3.5 After due consideration of submissions and material on record, Ld. CIT(A) upheld the action of Ld.AO by observing as under: - 5.4 Now it is seen that the DIT(R) vide its letter F No. 2/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt grant of relief to the appellant from the provisions of a number of sections including 115JB for the period of 8 years from cut off date, which is 01.04.2009 to 31.03.2017. The BIFR has not given any directions to the CBDT regarding the exemptions / reliefs to be granted to the Appellant. The DIT (Recovery) considered the order of the BIFR and relief u/s 115JB of the Act was allowed for up to 2010-11 only and no relief u/s 115JB was allowed to the company from AYr 2011-12 onwards. The AO has followed the decision of the DIT (Recovery). The appellant had also approached the DIT(Recovery) for reconsideration of its decision and as per the information gathered from the AR of the appellant, during the course of appellate proceedings the same has not been disposed off / no communication has been received by the appellant in this regard. 5.8 In view of the decision of the DIT (Recovery) in pursuance of the order dated 21.09.2010 of the BIFR in the case of the appellant wherein exemption from MAT is available up to AYr 2010-11, the action of the AO in applying the provisions of MAT as in Section 115JB(2)(vii) in the instant case is confirmed. It is evident that Ld. CIT(A), goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed/ revised amounts representing the lower of the Unabsorbed Depreciation or Business Loss as per clause (iii) of Explanation to s.115JB(2) of the Act to be arrived at by ignoring the credits on account of write backs due to relief given by BIFR. 2. Your appellant submits that the company was granted certain reliefs by BIFR in repayment of its liabilities which amount of relief was credited to Profit Loss A/c and as a consequence this balance in unabsorbed losses and depreciation accounts were reduced artificially without there being real profits and Your appellant submits that the Book Profit should be calculated as per provisions of S.115JB and the amount representing lower of the Unabsorbed Depreciation or Business Loss, duly adjusted by amount written back should be excluded and/or reduced therefrom. 3. Your appellant prays that the claims of reduction in the Book Profit be allowed and amount of MAT liability be reduced. II Reduction of 'Book Profits' by amounts credited on account of Capital Reserve and Share Premium account to Profit Loss A/c vide the Restructuring account. 1. The Id. C1T(A) erred in law and on facts by rejecting the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided therein. Explanation-1 (vii) envisages reduction of profit of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company u/s 17(1) of Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Going by these provisions, the assessee is ineligible to claim the deduction of profit earned during the year while making computations u/s 115JB. 5.3 So far as the arguments that the provisions of SICA would prevail over other statute is concerned, we find that as noted in para 2.3 above, the assessee s net worth had turned positive on 31/03/2011. As per the letter dated 21/11/2012 of Hon ble Directorate of Income Tax (Recovery) to BIFR, it is evident that BIFR had discharged the company from the purview of SICA vide order dated 16/08/2011 on the ground that the revival of the company had substantially been implemented and the net worth had turned positive. It had issued directions that unimplemented provisions of the sanction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions, Ld. AR has relied upon various binding judicial precedents, the copies of which has been placed on record. After going through the same, we find certain substance in the same. Further, as per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitled for deduction of amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It is also evident that the assessee has claimed lower of depreciation and book loss while computing Book Profits u/s 115JB for AY 2012-13 which has not been disturbed by Ld. AO in the assessment order for AY 2012-13. Therefore, we find certain strength in these arguments. 6.3 We find that the issue of aforesaid adjustments has not been delved upon either by Ld. AO or by Ld. CIT(A). Therefore, on the facts and circumstances, we deem it fit to remit the matter back to the file of Ld.CIT(A) to specifically adjudicate the issues raised under the appeal by way of a speaking order and bring on record correct factual matrix, in this respect. Needless to add that reasonable opportunity of hearing shall be granted to the assessee, who, in turn, is directed to substantiate his cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended from time to time which crippled the functioning of most the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the draft order could not reach Hon ble Judicial Member for approval despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. The draft order was subsequently been received at the first available opportunity and approved by the bench and accordingly, the same is being pronounced now. 8.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon ble President and Hon ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 6103/Mum/2018) order dated 14/05/2020 held as under: - 7. However, before we part with the matter, we must deal with one procedural i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them within a period of three months from the date case is closed for judgment . In the ruled so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any extraordinary circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly . The extraordinary steps taken suo motu by Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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