Itxal-2018 (Copy).Sxw v. The Appeal Is Admitted On Questions (A), (B)And (C

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL LODGING NO.2018 OF 2012 The Commissioner of Income Tax-2. v.Kochi Refineries Ltd.(now merged withBharat Petroleum Corporation Ltd.) ..Appellant. ..Respondent. Mr. Suresh Kumar for the Appellant. Mr. Girish Dave with Mr. A.K.Jasani for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 1st March, 2013 PC: In this appeal for assessment year 2001-02 the revenue has raised following questions of law for our consideration. a)Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in allowing the expenses claimed by the assessee on feasibility studies by relying on the decision of the Tribunal in assessee's case for A.Y. 1994-95 to 1998-99 ignoring that the expenditure was not related to the study on various aspects of operations carried out by the assessee company i.e. beginning from the purchase of crude oil till the disposal of the petroleum products, and the department has not accepted the decision of the Tribunal in earlier years and appeal u/s. 260A has been filed before the Kerala High Court? b)Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in allowing the claim of provision for bad and doubtful debts amounting to Rs.6,34,74,000/- created in the A.Y.1998-99 and written back by the assessee in its book for the purpose of computing the book profit u/s. 115JB for this assessment year holding that said provision is deemed to have been added back in that year, thereby ignoring the provisions contained in clause (1)to Explanation 1 to Section 115JB and the fact that the income of the assessee for A.Y. 1998-99 was computed under the normal provisions and book profits u/s. 115JB has not been determined for A.Y. 1998-99? c)Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in holding that the provisions of Section 234D are applicable from 1/6/2003 and not retrospective and therefore not applicable to the assessee's case for this assessment year by following the decision of the Delhi Special Bench in the matter of ITO v. Ekta Promoters P. Ltd. 204 ITR 1 (AT) which is in contravention of the Explanation to Section 234D inserted by the Finance Act,2012 with effect from 1/6/2003. Based on which, this Court in the case of CIT v. Indian Oil Corporation Ltd. dated 12/9/2012 and CIT 2 v. Tata Sons Ltd. in ITA No.6936 of 2010 dated 17/9/2012 decided the issue in favour of the Revenue? 2)The appeal is admitted on questions (a), (b)and (c). 3)At the request of the Counsel for the parties, the appeal is taken up for final hearing. 4)So far as question (a) is concerned, we find that the Tribunal by the impugned order decided the issue raised in question (a) in favour of the respondent assessee by following its order for the earlier assessment years i. e. 1994-95 to 1998-99. Counsel for the parties state that the revenue had carried this matter for earlier assessment years in appeal to Kerala High Court being ITA No.210/2009 and on 10.11.2009 Kerala High Court refused to entertain the revenue's appeal on the aforesaid question. The revenue has not been able to show any distinguishing features in the present year warranting a different view then taken by the Kerala High Court in its order dated 10/11/2009 in the respondent assessee's own case. In view of the above, question (a) is answered in the affirmative i.e. in favour of the assessee and against the revenue. order for the earlier assessment years i. e. 1994-95 to 1998-99. Counsel for the parties state that the revenue had carried this matter for earlier assessment years in appeal to Kerala High Court being ITA No.210/2009 and on 10.11.2009 Kerala High Court refused to entertain the revenue's appeal on the aforesaid question. The revenue has not been able to show any distinguishing features in the present year warranting a different view then taken by the Kerala High Court in its order dated 10/11/2009 in the respondent assessee's own case. In view of the above, question (a) is answered in the affirmative i.e. in favour of the assessee and against the revenue. 5(i)So far as question (b) is concerned, the respondent assessee supplied raw material to one Cochin Refineries Balmer Lawrie Ltd.(CRBL). Due to financial difficulties CRBL were unable to pay the consideration for the raw material supplied by the respondent assessee. In the above view of the matter, the respondent assessee provided for these dues of Rs.6.34 crores in its books of accounts for assessment year 1998-99 by making a provision for bad and doubted debts. The aforesaid amount of Rs.6.34 crores was claimed as deduction. However, the Assessing officer while assessing the respondent assessee for assessment year 1998-99 disallowed the deduction claimed and added back the amount of Rs.6.34 crores to the income of the respondent assessee and subjected it to tax. (ii)This order of the Assessing Officer was affirmed by the CIT (Appeals). The respondent assessee also accepted the same and did not file any further appeal. (iii)On 9/4/2001, CRBL merged into respondent assessee. Consequently, for assessment year 2001-02 (subject assessment) provision created in the respondent assessee's books was written back to its profit and loss account in the assessment year 2001-02. The Assessing Officer as well as the CIT(A) held that the amount of Rs.6.34 crores written back in the current assessment year has to be considered while computing book profits under Section 115JB of the Income Tax Act. This was for the purpose of arriving at the deemed total income for assessment year 2001-02. (iv)The Tribunal by impugned order held that it is an undisputed position that amount of Rs.6.34 crores was subjected to tax in assessment year 1998-99 when deduction on account of provision for bad and doubtful debts was disallowed by the Assessing officer. However, the respondent assessee continued to show in its account an amount of Rs.6.34 crores as provision for bad and doubtful debts. However, in the assessment year 2001-02 considering the merger of CRBL with respondent assess the provision was written to the credit side of the profit and loss account. This amount of credit of Rs.6.34 crores was being ignored/removed by the respondent while computing its book profits under Section 115JB of the Act. The Tribunal held that as the amount of Rs.6.34 crores has already been subjected to tax in assessment year 1998-99 and subjecting it to tax again in assessment year 2001-02 would result in double taxation of the same. On the aforesaid finding of fact, the Tribunal concluded that the respondent assessee was correct in excluding the amount of Rs.6.34 crores while arriving at its books profits under the provisions of Section 115JB of the Act. (v)In view of the above question (b) is answered in the affirmative i.e. in favour of the respondent assessee and against the revenue. 6)So far as question (c) is concerned, Counsel for the parties state that the issue arising herein is covered against the assessee and in favour of the revenue by the decision of this Court dated 12/9/2012 in Income Tax Appeal No.2012 of 2011 in the matter of CIT v. Indian Oil Corporation Ltd. In view of the above question (c) is answered in the negative i.e. in favour of the revenue and against the assessee. 7)In view of the above, questions (a), (b) and (c) are answered as under: (v)In view of the above question (b) is answered in the affirmative i.e. in favour of the respondent assessee and against the revenue. 6)So far as question (c) is concerned, Counsel for the parties state that the issue arising herein is covered against the assessee and in favour of the revenue by the decision of this Court dated 12/9/2012 in Income Tax Appeal No.2012 of 2011 in the matter of CIT v. Indian Oil Corporation Ltd. In view of the above question (c) is answered in the negative i.e. in favour of the revenue and against the assessee. 7)In view of the above, questions (a), (b) and (c) are answered as under: (i) Question (a) in the affirmative i.e. in favour of the assessee and against the revenue; (ii) Question (b) in the affirmative i.e. in favour of the assessee and against the revenue; and of the assessee and against the revenue; and (iii) Question (c) in the negative i.e. in favour of the revenue and against the assessee. the revenue and against the assessee. 8)The appeal is disposed of in the above terms. No order as to costs. (M.S.SANKLECHA, J.) (J.P. DEVADHAR, J.)