COMMISSIONER OF INCOME TAX Vs. GOETZE (INDIA) LIMITED

JUDGEMENT

(1.) These two appeals by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) relate to Assessment Year 2000-01. We note that the name of the assessee- Goetze (India) Limited underwent a name change and is now known as Federal-Mogul Goetze (India) Limited. In ITA Nos. 1179/2010 and 1366/2010 by order dated 16th May, 2012, the following substantial question of law was framed:-

(2.) The respondent-assessee for the assessment year 2000-01 had filed return of income on 31st November, 2000 declaring loss of Rs.3,05,26,654/- under normal provisions and positive book profit of Rs.2,86,09,379/- under Section 115JA of the Act. This return was subsequently revised on 28th March, 2002 and the positive book profit declared under Section 115JA was reduced to Rs.1,92,73,285/-. By assessment order dated 28th February, 2003, income declared under Section 115JA was accepted but some additions were made on income computed under the normal provisions and it was enhanced to Rs.2,45,57,950/-.

(3.) Commissioner of Income Tax, thereafter passed an order under Section 263 of the Act observing that income computed under Section 115JA by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue on two accounts; (a) the Assessing officer had wrongly allowed deduction of Rs.1.53 crores made in the revised return and excluded this figure from the book profits; (b) expenditure of Rs.183.63 lacs was incurred for earning of exempt dividend income under Section 14A of the Act but this expenditure was not disallowed though the respondent-assessee had earned dividend income of Rs.157.85 lacs, which was exempt under Section 10(33) of the Act.