TMI Blog2008 (8) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not able to establish that these power generating units of the assessee are independently functioning in a fully established manner. It is clearly made out by the AO by necessary material that the assessee is maintaining these units only with a skeletal staff and it is not established that these units are functioning de hors the other units as well as independently without having any connection of other units with regard to management in every aspect. Therefore, under these facts and circumstances, it cannot be said that these power units are independent though forming part of industrial undertaking of the assessee. The assessee is not able to establish that the P L a/c and balance sheet submitted along with return or consisting of profits derived from all the units of the undertaking in total including these power units. Thus contending, he relied on the Accounting Standard No. 21 (hereinafter referred to as AS-21) prescribed by the ICAI to the effect that the final accounts and other information given by the assessee along with return are not in accordance with the said AS-21. Therefore, the claim of the assessee, that the profit shown as per P L a/c of the assessee is inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently argued supporting the order of the learned CIT(A) and assailing the arguments made on behalf of the Department contending inter alia that the assessee is undisputedly a public limited company and it is manufacturing and exporting the yarn and fabric. During the period under consideration, the assessee has run three units, namely, (1) Kharigram (Gulabpura), (2) Mandapam (Bhilwara) and (3) Banswara at Kharigram, it is carrying on the activity of spinning and weaving and power generating. At Mandapam also he is operating spinning mills only. All these are separate and different undertakings of the assessee company. The assessee company is maintaining separate and independent books of account for each unit of undertaking. Accordingly, it is bearing balance sheet and P L a/c of the company as attached to the annual report which is consisting of consolidated figures after preparing balance sheet and P L a/c of each unit. It also attached the unit-wise balance sheet, P L a/c along with annual report. The assessee company filed the return showing total income as nil. However, in view of the applicability of provisions contained in s. 115JA(ii), it calculated book profit that it is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing them all in preparing annual report disclosing the total figures of P L a/c as well as balance sheet shown in the annual reports placed before the general body meeting and attached to the return filed by the assessee. The separate balance sheet and P L a/c of each unit was also attached to the annual report consisting of the consolidated P L a/c and balance sheet of the assessee company. It is not the case of the AO that the assessee is not generating power in its two units during the period under consideration. The only objection of the AO to refuse the claim of the assessee is that it has not got the approval from the local authority for establishing these power generating units and it is not registered with the sales-tax authorities for trading of power generating units observing that these two are important ingredients for allowing the claim of the assessee. While coming to that conclusion, the AO has not at all considered the nature of the provision contained in s. 80-IA as well as s. 115JA(ii) of the Act. The provision contained under s. 80-IA is a substantive provision whereas the provisions in s. 115JA(ii) are only fictional provision to calculate MAT in a company havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed by them, it is found that undisputedly the assessee is having seven units and operated those units during the period under consideration which consist of two power generating units established in this period. The power generated by them is entirely consumed by the assessee for running its other units. The assessee is maintaining separate books of account for each unit and preparing his P L a/c and balance sheet for each unit separately after consolidating the P L a/c and balance sheet for all the units which has prepared the annual reports and duly certified by the chartered accountants as required under the Companies Act to place before the annual general body meeting of the company by attaching individual P L a/c and balance sheet thereto. For the period under consideration, the assessee has no income to pay tax. Therefore, under the provisions contained in s. 115JA(ii) it is liable to pay MAT on its book profits. Accordingly he has computed MAT and filed return enclosing all the necessary documents before the assessing authority. This return was processed under s. 143(1) accepting the return filed by the assessee. Therefore, the AO has issued notice under s. 148 initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions contained in cl. (4) of Explanation attached to sub-s. (2) of s. 115JA(ii) clearly mandates that the book profit is to be reduced by the profit derived by an industrial undertaking from the business of generation or generation and distribution of power. A plain reading of this provision clearly indicates that the profit derived by the industrial undertaking from generating of power or distributing power is to be reduced from the book profit arrived as per the provision of s. 115JA(ii). Undisputedly, the term 'business' is defined in s. 2(13) of the IT Act which is an inclusive definition comprehending trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. This clause clearly shows that the activity of 'manufacture' is also a business by applying this definition to the provision contained in Expln. 4 to sub-s. (2) of s. 115JA(ii). There is no requirement for sale of commodity in order to constitute a business as mentioned therein. Impliedly, the manufacture itself is a business. Undisputedly, in the case in hand, the assessee has produced power in its two units during the period under consideration and supplied the entire ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act as has been laid down by the Hon'ble apex Court in the case of Apollo Tyres Ltd. In the present case in appeal, the learned CIT(A) has taken the book profit as the basis for arriving at deemed income as required to be computed by the provisions of s. 115JAA of the Act. He is also found to have limited his power of making increases and reductions as provided for in Explanation to s. 115JAA of the Act. The book profit as computed in accordance with provisions of Part II and Part III of Sch. VI of the Companies Act, 1956 has been increased in terms of Explanation provided under that section and thereafter he has reduced rightly the amount of profits derived by industrial undertaking from business of generation or generation and distribution of power in terms of reductions as provided for in the same Explanation. This Explanation does not explicitly say that only that amount of profit derived by industrial undertaking is to be reduced that is credited to the P L a/c. Even if the amount is not specifically credited to the P L a/c, it was sufficient that such amount of profit formed part of the consolidated P L a/c of the assessee as he had transferred the electricity at cos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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