By Ajay R. Singh, Advocate
CIT vs. Weizmann Ltd. [
Income tax Appeal no 1020 of 2014 dt : 09/12/2016 (Bombay High Court)].
[M/s Weizmann Ltd.,vs.
ACIT. [ITA No. 768 /MUM/2012; Bench : G ; date:31/10/2013 ; A Y: 2001- 2002.
(MUM) ITAT ]
On 27th February,
2004, the assessment order was passed u/s. 143(3) for the subject assessment
year. The assessing officer accepted the assessee’s claim of book profits u/s.
115JB. The book profits as claimed was after allowing of amounts set aside as
provisions for diminution in the value of assets. The assessee being aggrieved
by the assessment order on certain other issues had preferred an appeal to the
appellate authority and carried its grievance up to the Tribunal. On 29th August,
2007, the Tribunal restored some of the issues by which the assessee was
aggrieved to the Assessing Officer. It is relevant to note that the issue of
allowing of amounts set aside as provision for diminution of the value of
assets was not an issue which was restored to the Assessing Officer for
readjudication.
Consequent to the above,
the Assessing Officer passed an order dated 30th December, 2008 u/s.
143(3) r.w.s 254 of the Act giving effect to the order dated 29th
August, 2007 of the Tribunal.
The Finance (No.2) Act of
2009 amended section 115JB of the Act with retrospective effect from 1st April,
2001. The amendment inter alia added to Explanation I to section 115JB
of the Act, clause (i) providing that for purposes of computing that the book
profits thereunder, the profit shown in the profit and loss account is to be
increased by the amounts set aside as provision for diminution in the value of
assets.
In view of the above amendment the A.O. by
order dated 19th August, 2010 u/s. 154 rectified its order dated 30th
December, 2008 and made addition of Rs. 1,28,60,000/- to the book profit
of the assessee on account of provision for diminution in the value of
investment relying on the amendment made in the provisions of section 115JB
that with retrospective effect on 1-4-2001.
The assessee challenged
the order passed by the A.O. u/s. 154 of the Act by preferring an appeal before
the CIT(A) disputing the addition of Rs. 1,28,60,000/- made by the A.O. to the
book profit on account of provision for diminution in the value of investment.
The ld. CIT(A) did not find merit in the said appeal of the assessee and
dismissed the same.
The assessee preferred an
appeal before the Tribunal. The assessee submitted that the order u/s. 143(3)
r.w.s. 254 of the Act, was passed by the A.O. as per the specific directions
given by the Tribunal while restoring only the limited issues to the file of
the A.O. He submitted that the issue relating to the allowability of provision
for diminution in the value of investment was not before the Tribunal and since
the same was not restored by the Tribunal to the file of the A.O., the
consideration of the same was beyond the scope of order passed by the A.O. u/s
143(3) r.w.s. 254 of the Act. He relied on the decision of Hon’ble Bombay
High Court in the case of CIT vs. Sakseria Cotton Mills Ltd. (1980) 124 ITR 570.
The Tribunal held that it
cannot be said that there was any mistake in the order of the A.O. passed u/s
143(3) r.w.s. 254 of the Act on 30-12-2008 in allowing the deduction on account
of provision for diminution in the value of investment calling for any
rectification u/s. 154 of the Act. Such mistake, if any, was in the order originally
passed by the A.O. u/s. 143(3) of the Act on 27-2-2004 and not in the order
passed on 30-12-2008. The rectification made by the A.O. on this issue to the
order passed u/s. 143(3) r.w.s. 254 of the Act by an order dated 19-8-2010
passed u/s. 154 of the Act thus was not permissible. The Tribunal, therefore,
directed the A.O. to delete the addition made by way of rectification order
u/s. 154 of the Act.
The Revenue preferred an
appeal before the High Court. The High Court held that the issue stands concluded
by the decision of this Court in Sakseria Cotton Mills Ltd. (supra) in
favour of the assessee. The distinction sought to be made by the Revenue on the
basis of the amendment to section 115JB of the Act in 2009 with retrospective
effect from 2001 does not address the fundamental issue of non merger of the
order dated 27th February, 2004 with the order dated 30th December,
2008. Therefore, any rectification of the order dated 27th February,
2004 is required to be done within 4 years from 27th February, 2004
as provided u/s. 154 of the Act. It is not disputed before us that issue of the
provisions made for diminution in value of assets which is sought to be
rectified is an issue which was never the subject matter of consideration in
the order dated 30th December, 2008 passed u/s. 143(3) r/w section
254 of the Act. Therefore, in these circumstances, it could not be rectified
u/s. 154 of the Act. In the above view, the revenue appeal was dismissed.
