Shree Shyam Pulp & Board Mills Ltd., New ... vs Department Of Income Tax

ITA no. 1744/Del/2012 A.Y. 2003-04 Income-tax Officer Vs. M/s Shree Shyam Pulp & Board Mills Ltd., Ward 8(3), New Delhi. A-257, Road No. 6, Mahipalpur Extn., New Delhi-110037. PAN: AAACS 4740 C

( Appellant ) ( Respondent )

Appellant by : Shri B.R.R. Kumar Sr. DR Respondent by : None

Date of hearing : 21-05-2015 Date of order : 29-05-2015.

ORDER

PER S.V. MEHROTRA, A.M:-

This appeal, filed by the revenue, is directed against CIT(A)'s order dated

23-1-2012 pertaining to AY 2003-04. Sole effective ground raised is as under:

"The Ld. CIT(A) erred in law and on facts of the case in holding that the assessee company was a sick industrial company during the year under consideration and the provisions of section 115JB were not applicable to the company."

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ITA 1744/Del/2012 ITO Vs. Shree Shyam Pulp & Board Mills Ltd.

2. Brief facts of the case are that in the relevant assessment year the assessee

was engaged in the manufacture of paper of different qualities. The assessee filed

return declaring Nil income. The AO has observed that the company declared a net

profit of Rs. 2,75,62,358/- in its P&L A/c but the same had not been subjected to

tax u/s 115JB since the company being a BIFR case was entitled to deduction as

per clause (2)(vii) of the said section. The AO vide assessment order dated 20-12-

2005 passed u/s 143(3), determined the total income of the assessee as under:

Taxable income for the year as per computation 2,42,21,876/-

Add: belated payment of PF on a/c of employer's and employee's contribution 4,93,984/-

Total income 2,47,15,860/-

Add: Interest waived by PICUP and SBI 6,87,31,611/- Total income 9,34,47,471/- Less: B/F losses from AY 98-99 to 2001-02 9,34,47,471/- (subject to the income available) NIL

2.1. Thereafter, the case was reopened u/s 148 on the ground that assessee had

book profit amounting to Rs. 2,42,21,876/- and tax should have been paid under

special provisions of the Act.

2.2. The assessee advanced two arguments before the AO -

(i) The provisions of MAT were not applicable to it for the year as company was a sick industrial undertaking during this period relevant to AY 2003-

04;

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ITA 1744/Del/2012 ITO Vs. Shree Shyam Pulp & Board Mills Ltd.

(ii) The assessee was entitl4ed to deduction as per clause (2)(vii) of section 115JB.

2.3. The AO did not accept the assessee's contention, inter alia, referring to the

order of BIFR passed in the case of assessee vide order no. 274/2000 dated

8.6.2005, wherein it had been mentioned that the statutory auditor at para 19 of the

annexure to the audit report in this year had clarified that the company was no

longer a sick industrial company within the meaning of clause (o) of sub section

(1) of section 3 of the Sick Industrial Companies (Special Provisions) Act 1985.

He also referred to clause (2)(vii) of section 115JB and pointed out that as per that

clause also the company would no longer be a sick unit during the year in which

the entire net worth of such company becomes equal to or exceeds the accumulated

losses.. He observed that the net worth of the company as Rs. 7,92,21,750/- against

accumulated losses of Rs. 62,37,278/- and, therefore, assessee was not entitled to

deduction u/s 115JB(2)(vii).

2.4. Ld. CIT(A) allowed the assessee's appeal, inter alia, observing that the

assessee was declared a sick industrial unit by the BIFR on 7-12-2000 and vide

order passed on 8-6-2005, BIFR stated that the company's net worth had turned

positive. Therefore, the company stood discharged from the purview of sick

industrial company with immediate effect from 8-6-2005 and, therefore, between

7-12-20000 to 8-6-2005, the company was a sick industrial undertaking and was 4 ITA 1744/Del/2012 ITO Vs. Shree Shyam Pulp & Board Mills Ltd.

subjected to the order passed by the BIFR. She, accordingly, held that the

provisions of MAT were not applicable to it. Aggrieved, the revenue is in appeal

before us.

3. None put in appearance on behalf of the assessee at the hearing. We proceed

to dispose of the appeal ex parte, qua the assessee, on merits and in that process we

have heard ld. DR and perused the entire material available on record.

4. The facts are not disputed. During the assessment year under consideration

viz. AY 2003-04 the company was a sick industrial company within the meaning

of Sick Industrial Companies (Special Provisions) Act 1985 by the order of BIFR

dated 7-12-2000. We are not in agreement with the observation of ld. CIT(A) that

the provisions of MAT were not applicable to assessee company because as per

section 115JB sub-section (2), explanation 1 clause (vii), the amount of profits of

sick industrial company for the assessment year commencing on and from the

assessment year relevant to the previous year in which the said company had

become a sick industrial company under sub-section (1) of section 17 of the Sick

Industrial Companies (Special Provisions) Act 1985, ending with the assessment

year during which the entire net worth of such company becomes equal or

exceeds the accumulated loss, has to be reduced while computing the book profits.

This provision itself makes it very clear that though the provisions of MAT are

applicable but the assessee would be entitled for reducing the profits during the 5 ITA 1744/Del/2012 ITO Vs. Shree Shyam Pulp & Board Mills Ltd.

period when it remains a sick industrial company within the meaning of Sick

Industrial Companies (Special Provisions) Act 1985. It is pertinent to note that AO

has referred to the order dated 8-6-2005 for arriving at his finding. He has not

mentioned any date prior to 8-6-2005 for coming to his finding that the net worth

of the company was Rs. 7,92,71,750/- against accumulated losses of Rs.

62,37,278/-. Therefore, while allowing the ground raised by the department, we

hold that the assessee will be entitled for deduction as per section 115JB(2)

explanation 1 to clause (vii).

5. In the result, department's appeal is partly allowed. Order pronounced in open court on 29-05-2015.

Sd/- Sd/- (A.T. VARKEY) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29-05-2015. MP: Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR