TMI Blog2012 (5) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... s were heard together and are being disposed off by way of this common order for the sake of convenience. 2. First, we take up the penalty appeal for the assessment year 2004- 05. The grounds raised by the revenue are as under: 1) On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the following additions/disallowables for the purpose of working of penalty u/s. 271(l)(c) of the Act - a) Addition on account of adjustment u/s. 145 of ₹ 1,42,34,266, b) Disallowance of ₹ 78,12,884 on account of forestry expenses. c) Disallowance of expenses claimed against liability written back of ₹ 11,58,593. d) Disallowance of ₹ 19,99,68,876 on account of withdrawal of excessive depreciation. e) Disallowance of an amount of ₹ 34,62,416 on account of expenses incurred for earning exempt income u/s. 14A of the Act. 2) On the facts and in the circumstances of the case, the learned CIT (A) ought to have upheld the order of the Assessing Officer. 3) It is, therefore, prayed that the order of the CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent. 2.1 The brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off of brought forward unabsorbed depreciation and after allowing such set off, regular income was assessed at Rs. nil whereas the book profit was assessed at ₹ 18.70 crores as disclosed by the assessee in the return of income. In the light of these facts, now we examine the applicability of this judgement of Hon ble Delhi High Court cited by the Ld. A.R. being the judgment rendered in the case of Nalva Sons Investments Ltd. (supra). As per the facts of this case, original return of income was filed by the assessee declaring loss of ₹ 43.47 crores and thereafter, revised return was filed showing income at ₹ 3,86,82,128/- under the provisions of Section 115JB of the Income tax Act, 1961. The assessment was completed by the A.O. u/s 143(3) at a loss of ₹ 36.95 crores as per the normal provisions and at book profit was computed at ₹ 40163180/- u/s 115JB of the Income tax Act, 1961. This goes to show that in that case, addition was made by the A.O. for computation of income as per the normal provisions of the Income tax Act, 1961 and also for computing book profit u/s 115JB of the Income tax Act, 1961. For the additions made by the A.O., penalty was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tribunal order in assessee s own case in earlier years as cited by the Ld. A.R. 4. The 3rd issue involved in both these appeals of the assessee is regarding upholding of the addition made by the A.O. in respect of closing stock valuation as per the provision of Section 145A of the Income tax Act, 1961. The amount of addition made by the A.O. in the assessment year 2006-07 was ₹ 16,86,535/- and the amount involved in assessment year 2007-08 is ₹ 15,57,991/-. This issue has been raised in both the years as per ground No.3 of the assessee s appeal. 4.1 It was fairly conceded by the Ld. A.R. that this issue is also covered against the assessee by the same Tribunal decision in the assessee s own case for earlier years i.e. assessment year 2002-03, 2003- 04 and 2004-05 and our attention was drawn to page A-40 of the paper book in this regard. Respectfully following this tribunal order in assessee s own case in earlier years, this ground of the assessee is also rejected in both these years. 5. The issue No.4 is raised by the assessee only in assessment year 2006-07 an there is no such issue in assessment year 2007-08. This issue was raised in assessment year 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,501/-. This ground was not pressed by the Ld. A.R. and hence, ground No.4 in assessment year 2006-07 is rejected as not pressed. There is no such ground in assessment year 2007-08. 7. The next issue raised by the assessee is also raised in assessment year 2006-07 only as per ground No.7 and the same is regarding charging of interest u/s 234B and 234C in respect of MAT payable by the assessee u/s 115JB of the Income tax Act, 1961. This ground was not pressed by the Ld. A.R. and hence, the same is also rejected as not pressed. 8. The next issue is also raised by the assessee in assessment year 2006-07 only as per ground No.6 and this issue is regarding ignoring the claim of the assessee for deduction of ₹ 159 lacs while computing book profit which is permissible under clause (i) with Explanation (1) to Section 115JB(2). 8.1 It is submitted by the Ld. A.R. that no basis has been disclosed by the authorities below as to how this amount is not covered by clause (i) of Explanation (1) to Section 115JB(2). Ld. D.R. supported the orders of authorities below. 8.2 We have considered the rival submissions, perused the material on record and have gone through the orders of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 115JB(2) is not applicable in the present case. His objection is this that equal amount was paid by the assessee on account of one time additional interest to financial Institutions with the approval of Hon ble High Court and since that is allowable as expenditure, there is no effect on the P L account in respect of this transfer from general reserve to P L account and, therefore, it cannot be reduced from book profit. We feel that there is no force in this argument of Ld. CIT(A) because this is undisputed fact that an amount of ₹ 159 lacs was transferred from general reserve and was credited to P L account of the present year and it could not be shown by the authorities below or by Ld. D.R. that clause (i) of Explanation (1) to section 115JB(2) is not applicable towards this amount transferred from general reserve to P L account. Only this objection is there that equal amount was paid by the assessee in respect of one time interest paid to financial institutions as approved by the Hon ble High Court. In our considered opinion, this cannot be a basis for not applying the said clause (i) of Explanation (1) to Section 115JB and, therefore, we reverse the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 and the Ld. D.R. could not show us as to how this tribunal decision is not applicable in the present year by pointing out any difference in facts and hence, under these facts, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Accordingly, ground No.1 (a) of the revenue s appeal is rejected in both these years. 13. The 2nd issue raised by the revenue in both these years is regarding deletion of addition made by A.O. in respect of difference in value of stock as per stock statement shown to the bank and as per the books of account. This issue has been raised by the revenue in both the years as per ground No.1(b) and the amount involved is ₹ 9,50,059/- in assessment year 2006-07 and ₹ 11,41,230/- in assessment year 2007-08. 13.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A). He further submitted that Ld. CIT(A) has given his decision by following the tribunal order dated 04.09.2009 in assessee s own case for the assessment year 2004-05 and he has resorted back the matter to the file of the A.O. for a fresh decision as per the direction of the tribunal in assessment year 2004-05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Ld. CIT(A) has decided this issue by following the judgment of Hon ble Gujarat High Court rendered in the case of Ambica Mills Ltd. as reported in 54 ITR 167 and after duly considering the judgment of Hon ble Apex Court rendered in the case of TV Sundaram Ayenger Sons Ltd. as reported in 222 ITR 344 (S.C.). 15.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this is an admitted fact in both these years that in the books of the assessee, the amount in question is shown as liability and it was not written back by the assessee by way of credit to the P L account. In the light of these facts, when we examine the provisions of Section 41(1) of the Income tax Act, 1961, we find that as per Explanation (1) inserted in Section 41(1) by the Finance (No.2) Act 1996 w.e.f. 01.04.1997, if the assessee has written back the liability then it will amount to remission or cessation of liability for the purpose of invoking Section 41(1). As per the judgment of Hon ble Apex Court rendered in the case of Sugauli Sugar Works as reported in 236 ITR 518 (S.C.) and in the case of Kesaria Tea Co. Ltd. re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the outstanding bills for import of material. Now, this issue is covered in favour of the assessee by the judgment of Hon ble Apex Court as rendered in the case of Woodward Governor (India) Ltd. as reported in 312 ITR 254 (S.C.). In view of the above discussion, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Accordingly, ground No.1(e) of the revenue s appeal for the assessment year 2006-07 is also rejected. 17. The next issue raised by the revenue in both these years is regarding deletion of disallowance of raw material procurement expenditure debited to P L account for the purpose of computing book profit/MAT u/s 115JB and the amounts involved in assessment year 2006-07 is ₹ 1,23,29,870/- and in assessment year 2007-08, ₹ 80,45,449/-. This issue has been raised by the revenue as per ground N.1(f) in assessment year 2006-07 and ground No.1(d) in assessment year 2007-08. 17.1 Ld. D.R. supported the assessment order and the Ld. A.R. supported the order of Ld. CIT(A). He further submitted that Ld. CIT(A) has decided this issue by following various tribunal orders in earlier years in assessee s own case for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawal from reserve account was not directly credited to P L account but the same was reduced from those expenditure in the inner column of P L account and only net amount on account of those expenses were debited to P L account. Under these facts, the claim of the assessee for allowing reduction from book profit for withdrawal from reserve was rejected by the authorities below on this basis that the same was not credited to the P L account. Even under these facts, this issue was decided by the tribunal in that case in favour of the assessee as per para 79 of the tribunal order which is reproduced below for the sake of ready reference: 79. We find that in terms of the provisions of Section 115JA(2)(i), to arrive at the book profit, the amount of profit as per profit and loss account is required to be reduced, inter alia, by the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account and it is under this clause that the assessee has made the claim for adjustment. We have also noted that, as evident form Schedule 2 to the profit and loss account of the assessee company [at page 4 of the compilation filed before us], ..... X X X X Extracts X X X X X X X X Extracts X X X X
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