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2007 (1) TMI 201 - AT - Income TaxChallenged the rectification order passed by the AO u/s 154 - Jurisdiction Of AO - calculation of the "book profits" u/s 115JA - assessment originally framed u/s 143(3) - HELD THAT:- As the present case is concerned, it relates to cl. (iv) of the Explanation below s. 115JA(2) of the Act. Sec. 115JA inserted w.e.f. 1st April, 1997 also seeks to impose tax on the 'book profits' of a company incorporated under the provisions of the Companies Act, 1956. The said section also refers to the 'net profit' as shown in the P&L a/c for the relevant previous year prepared in accordance with provisions of Parts II and III of Sch. VI to the Companies Act, 1956 and subject to the adjustments as outlined in the Explanation below sub-s. (2). The erstwhile s. 115J is pari materia to s. 115JA which we are presently dealing with insofar as it relates to the controversy on hand. In our view the parity of reasoning enunciated in the case of G.T.N. Textiles Ltd.[2000 (8) TMI 35 - KERALA HIGH COURT] is squarely applicable in the instant case to understand the amount deductible in terms of cl. (iv) of the Explanation below s. 115JA(2) of the Act. Following the aforesaid, in our view, for the purposes of cl. (iv) of the Explanation to s. 115JA(2) it is not the actual deduction u/s 80-IA which is relevant but what is relevant is the profits of eligible undertaking computed in terms of the P&L a/c for the relevant previous year prepared in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act, 1956. Considering the order of the AO in the aforesaid light, the same clearly emerges to be untenable in the eyes of law. Factually speaking, there is no dispute that the net profit has been computed for the power co-generation unit of the assessee is in terms of the P&L a/c prepared in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act, 1956. Therefore, in terms of cl. (iv) it is the amount that is deductible to arrive at 'book profits' u/s 115JA of the Act. AO while reducing the amount of deduction allowed u/s 80-IA from the 'net profits' shown in the P&L a/c for the instant year prepared in accordance with the provisions of Parts II and III of the Sch. VI of the Companies Act, in order to compute 'book profit' squarely fell in error. The said action of the AO is clearly not warranted by the statutory provisions. Hence in terms of the ratio of the decision in the case of Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT], in the instant case, the AO exceeded his jurisdiction while computing 'book profits' u/s 115JA of the Act by seeking to exclude the actual amount of deduction allowable u/s 80-IA in contrast to the actual profits of the eligible unit. Thus, we hereby affirm the decision of the CIT(A) and stand of the Revenue is hereby dismissed. In the result, appeal of the Revenue is dismissed.
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