- (1.) This appeal under Section 260A of the Income-tax ( Act ), 1961 is at the instance of an assessee and is directed against order dated August 28, 2003 passed by the Income-tax Appellate Tribunal, C Bench, Kolkata in Income-tax (Appeal) being ITA No.1153 (Cal) of 2001 for the Assessment Year 1997-98 dismissing the appeal filed by the assessee.
(2.) Being dissatisfied, the assessee has come up with the present appeal.
(3.) The facts giving rise to filing of this appeal may be summed up thus: a) The assessee is a public limited liability company within the meaning of the Companies Act, 1956 and is assessed under the Act and the present appeal arises out of the appellant s assessment for the Assessment Year 1997-98 for which the relevant previous year was financial year ended on March 31, 1997. b) The appellant carries on business of manufacture of alloy free cuttings and special sheets, black and bright bars, electrical stampings, laminations, strip wound cores, bolts and nuts, rivets and spikes for special purpose machinery etc. c) One M/s. Powmex Steel Limited was merged with the appellant with effect from October 01, 1995 and become a division of the appellant. d) Exports were made by the said division under the Advance Licence Scheme of the Government in terms of which raw-materials required for the export of high-speed steels could be imported duty-free. Under the said scheme, it was permissible to procure the rawmaterials for the export product from the local market and subsequently, import the raw-materials duty-free on the basis of Advance License granted by the Government. e) The benefit of making import without payment of customs duty accrues, according to the appellant, only at the time of actual import and if the domestic price of the raw-materials is lower than that of the landed cost of the imported materials, it would not be sensible to import the raw-materials under the Advance Licence. Over and above, at times, advance licences cannot be utilized within the period of validity thereof and in such cases, no actual benefit is obtained. f) Prior to the previous year ending on March 31, 1997, the benefit of duty-free imports was accounted for in the books of accounts as and when the same accrued, i.e., at the time of actual import. Because of the duty free import, the cost of the imported raw-materials accounted for in the books of accounts did not include any amount on account of import duty. As a result, the amount of expenditure debited to the profit and loss account on account of cost of rawmaterials was a lower figure and consequently, the profits were higher. g) In its accounts for the previous year ending on March 31, 1997, the appellant passed a book entry debiting export benefit receivable account and crediting miscellaneous income by a sum of Rs.228.34 lac. The said amount represented the customs duty benefit which would have accrued to the appellant on the import of raw-materials in future. The said amount was worked out with reference to the duty-free import entitlement on the basis of the exports made by the appellant during the Financial Years 1993-94 to 1996-97 on the assumption that the appellant would actually receive the import licence and utilise the same within the validity period. h) The quantum of customs duty benefit was taken at 22% of the import entitlement on the assumption that the customs duty rate would be 22% at the time of import which the appellant would not have to pay. The appellant did not sell any license at all and the sum of Rs.228.34 lac was a notional figure and was not income accrued to the appellant during the previous year relevant to the assessment year. i) The appellant during the previous year ending on March 31, 1997 deposited fixed asset at a profit of Rs.6,02,91,024/-. The said amount was reflected in the appellant s profit and loss as forming part of the miscellaneous income along with the notional export benefits receivable of Rs.228.34 lac. j) In its return for the Assessment Year 1997-98, the appellant claimed that the said sum of Rs.228.34 lac credited to the profit and loss account was a notional figure not liable to income-tax. Accordingly, the said amount was claimed as a deduction from the profits as per profit and loss account. k) In the computation of book profit under Section 115JA of the Act, the appellant claimed that the profit of Rs.6,02,91,024/- credited to the profit and loss account on account of disposal of fixed assets did not form part of the book profits for the purposes of the said section. l) In the order dated March 31, 2000 passed under Section 143(3) of the Act, the Assessing Officer treated the sum of Rs.228.34 lac as the appellant s income on the ground that the appellant had itself shown the same as such in its books of accounts. The Assessing Officer in computing the book profits under Section 115JA did not exclude the sum of Rs.6,02,91,024/- on account of profit on sale of fixed assets on the ground that the Department had preferred an appeal before this Hon ble Court against the order dated July 14, 1999 of the Tribunal. In the said order, the Assessing Officer also considered rent of Rs.1.32 lac and repairs and maintenance of RS.2,43,131/- in respect of guest house for the purpose of disallowance under Section 37(4) of the Act. m) Being aggrieved, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals). Before the Commissioner of Income-tax (Appeals,) the appellant filed written submission, inter alia, in respect of its claim for exclusion of the rent and repairs and maintenance charges of guest house in computing the disallowance under Section 37(4), exclusion of the sum of Rs.228.34 lac on account of duty-free import entitlement in computing the total income and exclusion of Rs.6,02,91,024/- on account of profit on sale of fixed assets in computing the book profits under Section 115JA. n) The Commissioner of Income-tax (Appeals), however, by an order dated March 20, 2001 dismissed the said appeal. o) Being dissatisfied, the appellant preferred an appeal before the Tribunal below and reiterated the same points as advanced before the Commissioner of Income-tax (Appeals). p) The Tribunal by an order dated August 28, 2003 dismissed the said appeal by affirming the order passed by the Commissioner of Income-tax (Appeals). Against the decision of the Tribunal, the assessee has come up with the present appeal. A Division Bench of this Court at the time of admission of this appeal formulated the following substantial questions of law for determination in this appeal: i) Whether the Tribunal was justified in law in holding that rent and repairs and maintenance referable to guest house allowable under Section 30 of the Income Tax Act, 1961 were to be disallowed under section 37(4)?(sic). ii) Whether the Tribunal mis-directed (sic) itself in law in holding that the notional figure of Rs.228.34 lacs (sic) in respect of duty free import entitlement accrued as income during the financial year ender March 31, 1997 relating to the assessment year 1997-98?(sic). iii) Whether the Tribunal was justified in law in holding that the profit on sale of fixed assets amounting to Rs.6,02,91,024/- formed part of the book profit under Section 115JA of the Income Tax Act, 1961? (sic). iv) Whether the provisions relating to payment of advance tax are applicable in a case where the total income is deemed to be 30% of the book profit under Section 115JA and the Tribunal was justified in upholding the charging of interest under Section 234B in the appellant s case for the assessment year 1997-98? (sic). ;