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TMI Blog2008 (12) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer in treating the revised return of income filed by the appellant-company as non est while making an observation that the Assessing Officer has taken into consideration the details filed with the revised return for computation of total income. Therefore, the appellant should not have any grievance. Accordingly, this ground is dismissed. II.Computation of MAT tax liability and income assessed as per the provisions of section 115JB and MAT tax liability thereon 1. The ld. CIT(A) has erred in law and on facts in dismissing the appeal on the observation that as per the provisions of section 115JB, book profit is allowed to be reduced by the amount of profits eligible for deduction under sections 80HHC and 80HHF as per Explanation to section 115JB, whereas there is no such provision to deduct the profit eligible for deduction under section 80-IA or 80-IB. The ld. CIT(A) further observed that as per the decision of the Supreme Court in Apollo Tyres Ltd. v. CIT [2002] 255 ITR 2731, the Assessing Officer is bound to accept the authenticity of the accounts with reference to provisions of the Companies Act, and there is no authority to modify book profits as shown in the P & L Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 234C of the Act in the case of book profit under section 115JB of the Act. 2.The ld. CIT(A) ought to have upheld the contention of the appellant that the liability for advance tax could not have been anticipated by the appellant-company while making payment of advance tax on the basis of book profit as per provisions of section 115JB of the Act as the book profit can be determined only after ending of the accounting year at the time of finalization of accounts. ITA No. 831/Ahd./2008 for assessment year 2004-05 by the revenue 1.The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of Rs. 1,15,125 out of depreciation of motor car. 2.The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of electricity expenses at Rs. 56,441. ITA No. 762/Ahd./2008 for assessment year 2004-05 by the assessee 2. In respect of Ground No. 1, the learned AR stated that this ground is merely academic and, therefore, did not press, as the Assessing Officer has taken into consideration the details filed with the revised return for computation of total income. Since this ground has not been pressed by the learned AR, therefore, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Tyres Ltd. reported in 255 ITR 273, the Assessing Officer is bound to accept the authenticity of the accounts with reference to provisions of the Companies Act and there is no authority to modify book profits as shown in the P&L account. In view of the above facts, the appellant's claim that the profits eligible for deduction under sections 80-IA and 80-IB should be excluded is not accepted and the ground of the appellant is dismissed." 5. The learned AR before us referred to section 115JB(5) and contended that as the profits of the assessee-company's undertaking from Building and Housing Development Project are exempt under section 80-IB(10), therefore, these profits must be reduced while computing the book profit. The Legislature has inserted clause (5) in section 115JB with an intention that if any of the items has not been specifically provided in the Explanation 1 to sub-section (2) of section 115JB, the same can be claimed under sub-clause (5) of section 115JB. Under earlier section 115J, clause (5) was not there and this clause has been inserted with the specific purpose and reasoning. It was pointed out that the provisions of section 115JB(5) are similar to the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten per cent] of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of ten per cent]. (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956) : Provided that while preparing the annual accounts including profit and loss account,- (i)the accounting policies; (ii)the accounting standards adopted for preparing such accounts including profit and loss account; (iii)the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or (ii)the amount of income to which any of the provisions of [section 10 (other than the provisions contained in clause (38) thereof)] or section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or (iia)the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); or (iib)the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or (iii)the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation. -For the purposes of this clause,- (a)the loss shall not include depreciation; (b)the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or (iv)the amount of profits eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142. (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. (6) The provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be." 8. From the perusal of aforesaid section, it is apparent that if in the case of an assessee being a company the income-tax computed in accordance with the provisions of the Income-tax Act comes to less than 10 per cent of the book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income, i.e., b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the determination of the amounts in relation to the relevant previous years to be carried forward to the subsequent year or years under section 32(2) or 32A(3) or 72(1) or 73 or 74A(3). Section 115JB(4) makes it mandatory on the part of the assessee-company to whom section 115JB is applicable to furnish a report in the prescribed form from the Chartered Accountant certifying that the book profit has been computed in accordance with the provisions of this section and such report should be furnished along with the return of income filed under section 139(1) or in response to a notice under section 142(1)(i). Sub-section (5) provides that all the provisions of this Act shall apply to every assessee being a company except to the extent otherwise provided in this section. The crux of the arguments of the learned AR is on this sub-section and, therefore, he pleaded that the deduction available under section 80-IB since falls under Chapter VI-A and has to be allowed to the assessee even a company while computing the total taxable income, therefore, in view of sub-section (5) of section 115JB, the assessee should be allowed the deduction in respect of the income eligible for deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the total income computed in accordance with the provisions of the Income-tax Act before making any deduction under Chapter VI-A. The deduction under section 80-IB is allowable to the assessee on the profits of the eligible business included in the gross total income out of the gross total income and falls under Chapter VI-A. Section 80A(1) provides in computing the total income of an assessee, there shall be allowed from his gross total income in accordance with and subject to the provisions of this Act, the deduction specified in sections 80C to 80U. Thus, the income computed prior to the deduction under Chapter VI-A has to be regarded to be the gross total income and once the deductions under Chapter VI-A are allowed, the total income is arrived at. On this total income, the tax is computed subject to the provisions contained in Chapters VII and VIII of the Income-tax Act. Section 115JB as has been reproduced hereinabove itself distinguishes in the terms 'total income' and 'book profit'. It clearly states that firstly, the total income of the assessee has to be computed in accordance with the provisions of the Income-tax Act. Secondly, the income-tax payable on the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Therefore, this exempted income should not be a part of the capital gains. Section 115JA only stipulates total income based on book profits, but does not enlarge the scope of the income. In other words, a receipt which is not in the nature of income cannot be taxed as income under section 115JA. Similar view has been taken by the Bombay Bench 'B' of the Tribunal in the case of Rolta India Ltd. v. Jt. CIT [IT Appeal No. 20 (Mum.) of 2001], for the assessment year 1997-98, which has been authored by Hon'ble AM who is one of the members of this constitution. Relying on the provisions of sub-section (4) of section 115JA, the Tribunal has observed that section 115JA is distinguishable from the present section. Relevant portion of the same is reproduced hereunder :- 'From the above we find that the judgment in the case of Kwality Biscuits (supra) is based on this consideration that the provisions of section 115J are to be applied for computation of income for the purpose of this section and not for other sections. But in the present case, we find that we are dealing with section 115JA and it is specified in sub-section (4) of this section that 'save otherwise provided in this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision." In view of our above observations, we are of the view that this judgment will not assist the assessee. 11. Now coming to the decision of the Hon'ble Madras High Court in the case of Geetha Ramakrishna Mills (P.) Ltd. (supra). We find that this judgment lays down the proposition of law that after the introduction of sections 115JA and 115JB, all the provisions of the Act except provided otherwise under sections 115JA and 115JB, shall apply to the assessee being a company to which sections 115JA and 115JB is applicable. The issue in this case relates to chargeability of interest under sections 234A, 234B and 234C of the Act and in that context, the Hon'ble Madras High Court has held as under :- "10. That apart, in view of the introduction of section 115JB of the Act with effect from 1-4-1997 by the Finance (No. 2) Act, 1996, the question whether a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that even where the assessment was made under section 115J of the Act, interest could be levied. That apart, in view of the introduction of sections 115JA and 115JB of the Act with effect from 1-4-1997 by the Finance (No. 2) Act, 1996, the question whether a company which is liable to pay tax under either of the provisions should pay advance tax does not assume much importance as specific provisions have been made in the section providing that all provisions of the Act shall apply to the assessee being a company mentioned in the said section and, therefore, section 115J of the Act is no more available for the assessee for delaying the payment of advance tax of the insertion of sections 115JA and 115JB of the Act'. The similar view has been expressed in other decisions of CIT v. Kotak Mahindra Finance Ltd. [2004] 265 ITR 119 (Bom.) and CIT v. Upper India Steel Mfg. & Engg. Co. Ltd. [2005] 279 ITR 123 (Punj. & Har.) wherein it has been held that advance tax provisions would apply for book profits under section 115JA and where such advance tax is not paid or under-paid, interest under sections 234B and 234C would be liable. So relying on the above decisions, the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 2002/2001 in the case of Ashima Synthetics, has held that interest under sections 234B and 234C will be chargeable even in the case where the income has been determined under section 115JB of the Act. The decision of the Special Bench of this Tribunal is binding on us and, accordingly, we confirm the order of the CIT(A) sustaining the order of the Assessing Officer charging interest under sections 234B and 234C of the Act. Thus, this ground stands dismissed. ITA No. 831/Ahd./2008 for assessment year 2004-05 and ITA No. 509/Ahd./2008 for assessment year 2005-06 by the revenue 16. In these two appeals filed by the revenue, the following effective grounds have been raised :- For assessment year 2004-05 1.The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of Rs. 1,15,125 out of depreciation of motor car. 2.The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of electricity expenses at Rs. 56,441. For assessment year 2005-06 1.The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of Rs. 1,59,124 out of depreciation of motor car. 2.The ld. CIT(A) erred in law and on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicate the issues afresh in accordance with law in the light of the above decision of the Jurisdictional High Court. 18. The second common ground taken by the revenue in both the years relates to deletion of the disallowance of electricity expenses. The CIT(A) has dealt with the issue as under :- "5.2 I have carefully considered the submissions made and the decisions cited by the ld. Authorised Representative. It is found that the appellant has itself disallowed 1/5th of electricity expenses of branch office at Ganesh House. Just because the rent agreement was not available the Assessing Officer has disallowed half of the electricity expenses without giving any finding as to the area occupied by the branch office. Non-furnishing of rent agreement cannot be the basis for disallowing half of electricity expenses. Thus, the disallowance having been made on guesswork and without proper basis, is held to be not justified and the same is deleted." Having heard both the parties and carefully considered their rival submissions, we do not find any illegality or infirmity in the order of the CIT(A) in deleting the disallowance out of electricity expenses. The assessee has itself disallo ..... 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