Companies Act, 1956, For Income Tax Purposes? v. Itxa-1996-17.Doc

Sonali Kilaje IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1996 OF 2017 Pr. Commissioner of Income Tax -27, Mumbai ..Appellant v/s. Bank of India ..Respondent Mr.Suresh Kumar for Appellant.Mr. Subhash S. Shetty for Respondent. CORAM: UJJAL BHUYAN, & MILIND N. JADHAV, JJ. P. C.:- DATE : JANUARY 23, 2020. .Heard Mr.Suresh Kumar, learned standing counsel, revenue forthe appellant and Mr.Subhash Shetty, learned counsel for therespondent-assessee. 2.This appeal under Section 260A of the Income Tax Act, 1961(“the Act” for short) is preferred against the order dated 13.07.2016passed by the Income Tax Appellate Tribunal, “B” Bench Mumbai,Mumbai (“Tribunal”for short) in Income Tax Appeal Nos. 2966- 3085/Mum/2014 for the Assessment Year 2007-08. 3.Following three questions have been proposed as substantialquestions of law by the revenue in the present appeal : “(a) Whether on the facts and in the circumstances ofthe case, the Hon. Tribunal was correct in law, in holdingthat the provisions of Rule 8D of the Income Tax Rules,1962, are not applicable to assessments prior to AY 2008-09, even if such tool made available to AO at the time ofassessment was considered by him as fair and reasonableand used as such? (b)Whether on the facts and in the circumstance of thecase, the Hon. Tribunal was correct in law in holding thatthe provisions of section 115JB of the Income Tax Act,1961, are not applicable to assessee to whom proviso tosub-section (2) of section 211 of the Companies Act,1956, applies i.e. companies which are not required toprepare its profit & loss account in accordance with Part-II & III of Schedule VI of the Companies Act, 1956without appreciating that under section 115JB(2) of theIncome Tax Act, 1961, every company is mandatorilyrequired to prepare profit & loss account in accordancewith the provisions of Part-II & III of Schedule VI of the Companies Act, 1956, for income tax purposes? (c)Whether on the facts and in the circumstances ofthe case, the Hon. Tribunal was correct in law, in holdingthat the amendment to section 115JB of the Income TaxAct, 1961, to bring all the companies (includingcompanies to whom proviso to sub-section (2) of section211 of the Companies Act, 1956, applies) is notapplicable in the assessment year under considerationwithout appreciating that the said amendment isclarificatory in nature and, thus, retrospective in effect?” 4.Mr.Kumar, learned standing counsel very fairly submits that inso far question No.(a) is concerned, the issue raised therein has beenconcluded by the Supreme Court in favour of the assessee andagainst the revenue in the case of Commissioner of Income Tax- 5Mumbai vs. Essar Teleholdings Ltd., [2018] 90 taxmann.com2(SC)wherein it has been held that Rule 8D of the Income Tax Rules, 1962is prospective in operation and cannot be applied to any assessmentyear prior to assessment year 2008-09. This was also the view ofthis Court in Godrej and Boyce Manufacturing Co. Ltd. v/s. DeputyCIT, 328 ITR 81/194 Taxman 203(Bom.) which view has been upheld by the Supreme Court. 4.1In so far the present appeal is concerned, the assessmentyear in question is 2007-08. Therefore, in view of the decision of theSupreme Court as above, provisions of Rule 8D will not beapplicable. Consequently, question No.(a) does not arise. 5. In so far question Nos.(b) and (c) are concerned, those are also covered by the decision of this Court in Commissioner of IncomeTax- LTU vs. Union of India, [2019] 105 taxmann.com253(Bombay)by answering the questions in favour of the assessee and against therevenue. 6.In light of the above, we find no merit in the appeal.Consequently, the appeal is dismissed. However, there shall be noorder as to cost. (MILIND N. JADHAV, J.) (UJJAL BHUYAN,J.)