By Sri. K v. Aravind, Adv

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 9 DAY OF JUNE, 2016 PRESENT THE HON’BLE MR.JUSTICE JAYANT PATEL AN D THE HON’BLE MR.JUSTICE B.SREENIVASE GOWDA ITA NO.453/2015 BETWERE 1.|THE COMMISSIONER OF INCOME TAX, LTU, JSS TOWERS, BSK II STAGE, BANGALORE — 560 OSD. D |THE DY. COMMISSIONER OF INCOME TAX,LTU, JSS TOWERS, LTU, JSS TOWERS, BSK II STAGE, BANGALORE — 560 O85. _. APPBELLANTS | (By SRI. K. V. ARAVIND, ADV.) AND: M/S. SANSERA ENGG. PVT. LTD., NO.261/C, BOMMASANDRA, 2 INDUSTRIAL AREA, HEBBAGODI,ANEKAL TALUK, BANGALORE-560 099.. PAN: AABBCS 2440M. _. RESPONDENT| (By SRI. CHYTHANYA K. K., ADV. ) THIS [TA IS FILED UNDER SEKC.260-A OF INCOMETAX ACT 1961, ARISING OUT OF ORDER DATED|21/11/2014 PASSED IN ITA NO. 303/BANG/2014, FOR|THE ASSESSMENT YEAR 2JOO8-2009. THIS ITA COMING ON FOR ADMISSION THIS DAY,JAYANT PATEL J.,DERELIVERTHE FOLLOWING:| JU DBGMEN Ti The present appeal has been preferred by the. appellants - Revenue on the following substantialquestions of law :| “1. Whether the Tribunal was correctin holding that prohibition mentioned insection 4O(a)(ic) of the act does not apply tothe computation of the book profit for the|purpose of section 115JB and according tothat the FBT is an allowable deduction ? 3 .? Whether the tribunal was correct|in deleting the addition made by theassessingofficerholdingthat.therectification is neither permissible u/s.1954nor u/s.115JB (explanation-1) in respect ofexclusion of prior period expenditure? 3. Whether the tribunal was correct|in deleting the addition made by theassessing officer in respect of addition ofolT holding that none of the 9 items listedin explanation 1 to section 115JB(2) wasincluded and hence, it could not have usedthis to enhance the book profit ?” 2.|The relevant discussion by the Tribunal inthe impugned order is at paras 4 to 7 which reads as.under: “4,.The learned CIT (A) has excluded theFringe Benefit Tax (FBT) included by theAssessingOfficerin|the|book|profit.According to the CIT (A), the Board has issued| v (Ocircular No.8/2005|dated 29.08.2005wherein it was explained that for the purpose|of computing the income under the head|“profits and gains of profession’, the FBTwould not be claimed as deduction becauseit |is an expenditure laid out extending wholly|and exclusively for the purpose of business or profession of the employer. Section 40(a)(ic)specifically prohibit the claim of its deductionfor the purpose of computing the income.under the regular provisions. However, for|the purpose of section 115JB, this prohibition|would not apply. The question and reply|read as under: “Q.103. Whether FBT would be allowablededuction while computing ‘book profit’ u/s|LI5SJB? FBT is a liability qua employer. It is anexpenditure laid out or expended wholly and|exclusively for the purposes of the business or profession of the employer . However,sub-clause (ic) of clause (a) of section 40 of|the income tax Act expressly prohibits the| 5 deduction of the amount of FBT paid, for the|purpose of computing the income under the.‘profits and gains of business or profession’.This prohibition does not apply to _ thcomputation of the ‘book profit’ for _ thpurpose of section 115JB. Accordingly, theFBT is an allowable deduction in _ tcomputation of ‘book profit’ for the purpose ofsection 115JB. Accordingly, the FBT is anallowable deduction in the computation of|‘book profit’ u/s 115JB of the income tax Act”. ©. On due consideration of the above, weare of the view that the learned CIT (A) has|rightly excluded the FBTfrom the computation|of book profit. 6. Thenextitem1sprior|periodexpenditure. According to the learned CIT (A),Explanation-1 attached to section 115JB(2)does not provide for adjustment of this|expenditure in the book profit. With the|assistance of the learned representatives, we| ©. On due consideration of the above, weare of the view that the learned CIT (A) has|rightly excluded the FBTfrom the computation|of book profit. 6. Thenextitem1sprior|periodexpenditure. According to the learned CIT (A),Explanation-1 attached to section 115JB(2)does not provide for adjustment of this|expenditure in the book profit. With the|assistance of the learned representatives, we| have considered this issue. The leqrned CIT|(A) has relied upon the order of the ITAT|Mumbatinthe|CASEof|ShivshashiPunarvasan Prakalpa Ltd vs. ITI 135 ITD 51)which is based on the judgment of the|Hon’ble Supreme Court in the case of ApolloTyres Ltd, 254 ITR 2753. For the purpose of|section 115JB, the book profit is the profitdisclosed as per P&L a/c prepared in|accordance with the provisions of Part-II and|Part-Ill of Schedule VI of the Company’s Act,|1956, laid before the company in its AGM.The adjustment to that profit can only be|madequad,theitemsprovidedExplanation-1 to section 115JB te. ato f. Onperusal of clause a to f, under explanation-1,_we find that no adjustment on account of|prior period expenses is to be made. The|Hon’ble Supreme Court in the case of ApolloTyres has observed that except the|adjustment provided in Explanation-1_ tosection 115JB (2), the Assessing Officer|cannot tinker with the book profit computed| in by the assessee and approved in the AGM.The leaner CIT(A) has held that this type of|expenditure cannot be adjusted. We are of|the view that such type of rectification 1s|neither permissible u/s. 154; nor u/s 115JB(Exp-1), therefore, the CIT (A) has rightlydeleted this addition format he book profit.Similar is the position with regard to third|aspect, the learned CIT (A) has observed as|under:| “Oo. In respect of Security TransactionTax(STT), the appellant pointed out that it isnot included in any of the 9 items listed in|Explanation 1 to section 115JB(2) and, hence,could not be used to enhance the book profit.This is an argument based on a correct|understandingof|the|prevailing legalprovisions and it is admitted. The addition bythe Assessing Officer to the book profit in this|regard is directed to be deleted”. 7.On due consideration of the order of theCIT (A), we find no error in it. The adjustment 8 made by the Assessing Officer cannot be|made.in.anorderpassedU/ S.L154.Therefore, we do not find any merit in this|appeal of the Revenue, it is dismissed.” 3.|The aforesaid shows that so far as FringeBenefit Tax (F.B.T.) 1s concerned, the Tribunal has notinterfered with the view taken by the CIT(A), which was_based on the Board circular dated 29-08-2005. When|the Board has issued the circular and the FBT is foundto be allowable while computing book profit, we do notsee that any substantial question of law would arise onsuch aspect as sought to be canvassed. Same is thesituation for the other two items, one for prior periodexpenditure and another for Security Transaction Tax,but on a different scrutiny that such amounts werealready excluded for the purpose of computation of bookprofit at the time when the assessment order under Sec. Q 143 was passed. Thereafter, in the purported exercise|of power under Sec. 154, such could not be upset. 4However, Mr. Aravind, the learned Counselappearing for the appellants — Revenue contended thatonly one view was possible and no deliberation was.required to disallow the amount under the head of priorperiod expenditure and Security Transaction Tax. 5After hearing him at length, we do not findthat such would fall in the arena of mistake on the faceof record within the scope and ambit of Sec. 194 of theAct, which is limited to rectification of the mistake or)error. When the initial order of rectification is found tobe beyond the scope of Sec. 154, as has been rightlyheld by the Tribunal, everything would fall to ground. —The Tribunal has rightly held that such type ofrectification is neither permissible under Sec. 194 read �� ;<2,��-@�����������-1@-��;-�7:�1:2�6<17�2,32�31#�09502312<34�>9-02<:1�:6�43;�;:947�3/<0-�6:/�@:10<7-/32<:1�� �-1@-��2,-�3..-34�<0�7<0A<00-7�� 5After hearing him at length, we do not findthat such would fall in the arena of mistake on the faceof record within the scope and ambit of Sec. 194 of theAct, which is limited to rectification of the mistake or)error. When the initial order of rectification is found tobe beyond the scope of Sec. 154, as has been rightlyheld by the Tribunal, everything would fall to ground. —The Tribunal has rightly held that such type ofrectification is neither permissible under Sec. 194 read �� ;<2,��-@�����������-1@-��;-�7:�1:2�6<17�2,32�31#�09502312<34�>9-02<:1�:6�43;�;:947�3/<0-�6:/�@:10<7-/32<:1�� �-1@-��2,-�3..-34�<0�7<0A<00-7�� A=1&'� ��$&������� ��$&�������