Commissioner Of Income Tax-Ichandigarh v. M/S. Hutchison Max Telecom Pvt. Ltd.mumbai

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 586 of 2008Date of decision: 21.7.2011 Commissioner of Income Tax-IChandigarh --- Appellant Versus M/s. Hutchison Max Telecom Pvt. Ltd.Mumbai --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Ms. Urvashi Dhugga, Senior Standing Counselfor the appellant-Revenue. Mr. Salil Kapoor, Mr.Saurabh Kapoor and Mr.Ankit Gupta, Advocatesfor the respondent. --- AJAY KUMAR MITTAL, J. This order will dispose of Income Tax Appeal Nos.586 and 761 of 2008 as the learned counsel for the partiesagreed that identical question of law arises in both theappeals. The facts have been taken from Income Tax AppealNo. 586 of 2008. 2. This appeal under Section 260A of the Income-TaxAct, 1961 (for short “the Act”) has been filed by the revenueagainst the order dated 29.2.2008, passed by the Income TaxAppellate Tribunal Chandigarh Bench ‘B’, Chandigarh (in short“the Tribunal”) in ITA No. 623/CHANDI/2007, relating to theassessment year 2004-05. 3.The appeal was admitted by this Court fordetermination of the following substantial question of law: The appeal was admitted by this Court for “Whether on the facts and the circumstances of thecase and in law, the Hon’ble ITAT was right inholding that the provision for bad & doubtful debtsshould not be added back for the purpose ofcomputation under Section 115JB?”case and in law, the Hon’ble ITAT was right inholding that the provision for bad & doubtful debtsshould not be added back for the purpose ofcomputation under Section 115JB?” 4. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the assessee is a companyengaged in the business of cellular services. The assessee filedreturn of income for the assessment year in question on29.10.2004 declaring its income as NIL. The return was selectedfor scrutiny. The assessee company had shown its profit in thesum of Rs. 2,33,73,44,847/- and after making various adjustment,the net profit was shown at Rs. 1,89,61,50,677/-. Against thisincome, the assessee claimed brought-forward business lossand unabsorbed depreciation for the earlier years, amountingto Rs. 1,92,31,50,677/- and shown the net assessable income atNIL. During the proceedings under Section 143(3) of the Act, itwas observed that the assessee had claimed provision for doubtful debts at Rs. 11,79,85,000/- in the P&L account andhad paid tax under Section 115JB of the Act and while doingso, the assessee made a note and accordingly the assessingofficer made the adjustment in net profit by increasing the netprofit. The assessment was completed at an income ofRs.1,85,87,67,000/- and a demand of Rs. 95,91,174/- includingthe interest amounts of Rs. 38,59,236/- and Rs. 5,21,077/-calculated under Sections 234C and 234D of the Act,respectively, was created by the assessing officer, vide orderdated 11.12.2006. 5.The assessee approached the Commissioner ofIncome Tax (Appeals) [for short “the CIT(A)”], by filing appeal.The CIT(A) by its order dated 21.3.2007 deleted the addition ofRs. 11,79,85,000/- made by the assessing officer for calculatingthe book profit under Section 115JB. It was held that theadjustment on account of provision for doubtful debts did notfall under clause (c) of the Explanation to Section 115JB of theAct. 6.Aggrieved by the above order, the revenuepreferred appeal before the Tribunal. The Tribunal upheld thedecision of the CIT(A) and accordingly dismissed the appealby order dated 29.2.2008. 7.We have heard learned counsel for the parties andhave perused the record. 8.Learned counsel for the revenue argued that clause(i) of Explanation 1 had been inserted in Section 115 JB (2) of 6.Aggrieved by the above order, the revenuepreferred appeal before the Tribunal. The Tribunal upheld thedecision of the CIT(A) and accordingly dismissed the appealby order dated 29.2.2008. 7.We have heard learned counsel for the parties andhave perused the record. 8.Learned counsel for the revenue argued that clause(i) of Explanation 1 had been inserted in Section 115 JB (2) of the Act by Finance (No.2) Act, 2009 which is effectiveretrospectively from 1.4.2001. According to clause (i), anyamount or amounts set aside as provision for diminution in thevalue of any asset shall not reduce the book profits of anassessee. It was submitted that provision for bad and doubtfuldebts would be covered thereunder. Support was gatheredfrom the decision of this Court in Commissioner of Income Taxv. M/s Steriplate Ltd., ITA No.931 of 2008, decided on 30.5.2011.Learned counsel for the revenue also placed reliance on ajudgment of the Madras High Court in (2000) 244 ITR 256.Learned counsel for the assessee, however, cited the judgmentof the Supreme Court in Commissioner of Income-Tax v. HCLComnet Systems and Services Ltd., (2008) 305 ITR pg. 409(SC)but he could not controvert the submission of the learnedcounsel for the revenue that insertion of clause (i) inExplanation to Section 115 JB(2) retrospectively with effect from1.4.2001 was applicable but it was submitted that the matterrequires to be considered by the assessing officer regarding theapplicability of other clauses mentioned in the Explanation. 9.After hearing counsel for the parties, we are of theopinion that identical issue came up for consideration beforethis Court in M/s Steriplate Pvt. Ltd.’s case (supra) where thisCourt had observed that introduction of clause (i) ofExplanation 1 to Section 115 JB(2) of the Act was madeeffective from 1.4.2001 and would, therefore, apply toassessment year 2001-02 and subsequent assessment years. 10.In view of the above, the issue needs to be decidedafresh by the assessing officer. The judgment of the apex Courtreferred to by the learned counsel for the assessee in the wakeof the aforesaid amendment made retrospectively does notadvance the case of the assessee in any manner. 11. Accordingly, the appeals are allowed and the matteris remitted to the assessing officer to decide the same afresh inaccordance with law. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE