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TMI Blog2007 (1) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, the AO determined the gross total income before allowing deductions under Chapter VI-A at Rs. 3,42,68,514 and the amount of deduction under s. 80-IA was accordingly allowed at Rs. 3,30,44,329. The assessment order, so finalized was rectified by the AO under s. 154 of the Act on 1st June, 2004. In the order passed under s. 154, the AO reworked the income of the assessee by allowing depreciation pertaining to power co-generation unit and paper units before allowing deductions under s. 80-IA of the Act whereas in the assessment originally finalized under s. 143(3), the deduction under s. 80-IA was allowed before allowing depreciation under s. 32 of the Act in relation to the power co-generation unit and paper units of the assessee. As a result of this adjustment, the gross total income arrived before allowing of deductions under Chapter VI-A (i.e. s. 80-IA regarding power co-generation unit also) came to a negative figure and hence deduction under s. 80-IA was not allowable. Simultaneously, in the order passed under s. 154, the AO also worked out the income under s. 115JA of the Act as under : "Computation of profits under s. 115JA Profits as per PBI account Rs. 3,23,00,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profits under s. 115JA has been made. The learned Departmental Representative also argued that the order of the CIT(A) was rather cryptic and did not bring out the controversy on hand. In contrast, the learned counsel for the assessee made a reference to the notice of the AO issued under s. 154 wherein the only rectification proposed was with respect to deducting depreciation before allowing deduction under s. 80-IA of the Act. There was no mention of any reworking of 'book profit' under s. 115JA of the Act. Learned counsel also pointed out that in the assessment originally framed under s. 143(3), there was no computation of income in terms of s. 115JA and that such a computation has been made for the first time in terms of impugned order of the AO passed under s. 154 of the Act. On merits, the learned counsel pointed out that in any case the adjustment made to the "book profits" under s. 115JA was contrary to the statutory provisions. For this proposition, the learned counsel has relied upon the decision of the Kerala High Court in the case of CIT vs. G.T.N. Textiles Ltd. (2000) 164 CTR (Ker) 185 : (2001) 248 ITR 372 (Ker) as also the decision of the Mumbai Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f book profits under s. 115JA was never the subject-matter of notice issued by the AO under s. 154 of the Act. We have perused the said notice and also the findings of the CIT(A) in this regard and find ourselves in agreement with the stand of the assessee. On this aspect itself, we are inclined to sustain the order of the CIT(A) that the impugned order of the AO passed under s. 154 to the above extent is untenable. 8. Now even with regard to the merits of the issue, we find that the pleas of the assessee have ample force. The Explanation below s. 115JA(2), cl. (iv) reads as under : "The amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or'." The amount referred above is to be reduced from the net profit, as shown in the P&L a/c for the relevant previous year prepared in accordance with para 2 and 3 of Sch. (VI) to the Companies Act, 1956 in order to compute 'book profits' for s. 115JA of the Act. The assessee contends that what is excludible is the amount of profits of the eligible undertaking computed by it in terms of the books of account and not in terms of the computation provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant 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 by the Hon'ble Kerala High Court in the case of G.T.N. Textiles Ltd. (supra) 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 under 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. 10. Factually speaking, there is no dispute that the net profit of Rs. 3,30,44 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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