TMI Blog2020 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16/08/2011 and its net worth turned positive by virtue of implementation of revival scheme, the assessee would be precluded from relief u/s 115JB in view of Explanation 1(vii) to Section 115JB (2) and therefore, no relief would be available from AY 2011-12 onwards. Therefore, the matter of applicability of Sec.115JB was delved into by CBDT and it was proposed to restrict the relief u/s 115JB as per the provisions contained therein. This being the case, the plea as raised by Ld. AR could not be accepted since the assessee s claim was specifically examined by appropriate authorities and it was decided not to extend the benefit of provisions of Sec. 115JB after assessee s net worth turned positive. Therefore, no relief could be granted to the assessee on this point. Reduction in Book Profits u/s 115JB - Amount credited to Profit Loss Account on account of waiver of loan would not partake the character of income and hence should not form part of Book Profits u/s 115JB and Adjustment in accumulated debit balance of Profit Loss Account through Restructuring Account - HELD THAT:- As per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report submitted by the revenue, it could be observed that Form No.29B has been filed by the assessee only for AYs 2017-18 2018-19. The assessee s computation of income for AYs 2013-14 2014-15 would also reveal 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies as a part of rehabilitation Scheme. As per the Scheme, the rehabilitation period was from 01/04/2009 to 31/03/2017. The Clause 11.4 of the Scheme envisages certain tax concessions for the assessee and the same reads 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 lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the provisions of Sec. 28 / Sec. 41 should not be applied to AY 2011-12 which was principally accepted by BIFR. However, DIT(Recovery), while passing the order did not specifically grant the relief under Sec.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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Account in respect of waiver of loans as per the orders of BIFR, would even otherwise have no character of income and therefore, beyond the scope of levy of Income Tax. Therefore, the same should be excluded for the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act for a period of eight years from the cut-off date except for the prosecution and criminal proceedings 5.7 From the above it is noted that the BIFR vide its order had directed CBDT To CONSIDER to exempt 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver is less without setting off of amounts written back as per order of B1FR 1. The Id. CIT(A) erred in law and on facts by rejecting the claim of the appellant for reduction of Book Profit on account of the recomputed/ 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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned positive as on 31/03/2011. It is settled legal position that the manner of computation as provided in Sec.115JB would be complete code in itself and the computations were to be made strictly in the manner as provided 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 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t specifically deal with these issues rather Ld. CIT(A) has placed reliance on the decision of Hon ble Apex Court in Apollo Tyres Ltd. V/s CIT (supra) to support the stand of Ld. AO. 6.2 In support of stated submissions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member immediately. However, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was 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 Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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