TMI Blog2016 (11) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... , engaged in the business of power generation, filed its return of income for A.Y. 2010-11 on 30.09.2010 declaring total income of ₹ 4,27,77,222/- under the normal provisions of the Income Tax Act, 1961 (in short 'the Act') and book profits at ₹ 71,27,23,926/- under section 115JB of the Act. The return was processed under section 143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was concluded under section 143(3) of the Act vide order dated 29.03.2013, wherein the income of the assessee was accepted as returned at ₹ 4,27,77,222/- under normal provisions of the Act. The Assessing Officer (AO) computed the book profit under section 115JB of the Act at ₹ 73,76,84,930/- in view of the following additions thereto: - (i) Interest income ₹ 99,93,000/- (ii) Profit on sale of units of Mutual Funds ₹ 1,49,68,000/- In coming to this view, the AO placed reliance on the decisions of the Hon'ble Bombay High Court in the case of Veekaylal Investment Company Pvt. Ltd. reported in 249 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in generation of interest income and income from sale of Mutual Funds. It is submitted that accordingly the assesseecompany has offered both the interest income of ₹ 99.93 lakhs and income on sale of Mutual Funds of ₹ 149.68 lakhs under the head income from other sources , under the normal provisions of the Act since the interest earned is clearly revenue in nature. 3.2.2 The learned A.R. submits that the accounting treatment for interest income and income from sale of Mutual Funds has been done in accordance with AS-16 and Accounting Standard on Accounting for Fixed Assets. As per point No. 11 - Borrowing Cost of AS-16, financing arrangements for a qualifying asset may result in an enterprise obtaining borrowed funds. In some circumstances, during the setting up of the qualifying asset concerned, idle funds are often temporarily invested pending their expenditure on the qualifying asset. In determining the amount of borrowing costs eligible for capitalisation during the said period, any income earned on temporary investment of those idle borrowings, is to be deducted from borrowing costs incurred. The learned A.R. contends that as these items; i.e. interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Apex Court in Apollo Tyres Ltd. (supra). It is submitted that a similar finding has also been rendered by the Hon'ble Bombay High Court in the case of Adbhut Trading Co. P. Ltd. (2011) 338 ITR 94 (Bom). It was further submitted that a Coordinate Bench of this Tribunal in the case of Forever Diamonds Pvt. Ltd. (ITA No. 5720/Mum/2011) dated 23.01.2013), following the decisions of the Hon'ble Apex Court in the case of the Apollo Tyres Ltd. and of the Hon'ble Bombay High Court in the case of Akshay Textiles Trading and Agencies (supra) and Adbhut Trading Co. Pvt. Ltd. (supra), has held that the reliance placed by Revenue on the decision of the Hon'ble Bombay High Court in the case of Veekaylal Investment Company Pvt. Ltd. is misplaced. This decision of the Coordinate Bench has been upheld by the Hon'ble Bombay High Court in ITA No. 1609 of 2013 dated 12.08.2015. The learned A.R. prayed that in the factual and legal matrix of the case on hand, the assessee s appeal be allowed in view of the decisions. 3.3 Per contra, the learned D.R. for Revenue placed strong reliance on the orders of the authorities below. 3.4.1 We have heard the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Company Pvt. Ltd., which has been subsequently distinguished as not applicable by the Hon'ble Bombay High Court in later judgement in the cases of Akshay Textiles Trading and Agencies P. Ltd. (2008) 304 ITR 401 (Bom) and Adbhut Trading Co. Pvt. Ltd. (2011) 338 ITR 94 (Bom), by following the decision of the Hon'ble Apex Court in the case of Apollo Tyres Ltd. (2002) 255 ITR 273 (SC). In these decisions it has been held that once the Profit Loss Account is certified by authorities under the Companies Act, it is not open to the AO to contend that the same has not been prepared in accordance with the provisions of Companies Act, except as provided in the Explanation to section 115JB(2) of the Act. 3.4.3 We have respectfully perused these judicial pronouncements (supra) and find that the Coordinate Bench of this Tribunal in the case of Forever Diamonds Pvt. Ltd. in ITA No. 5720/Mum/2011 dated 23.01.2013 has considered the aforecited decisions cited by both Revenue and the assessee and has decided this issue in favour of the assessee holding as under at paras 4 to 4.2 thereof: - 4. We have perused the records and considered the rival contentions carefully. The dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of the words in accordance with the provisions of part-II and Part-III of Schedule-VI of the Companies Act was made for the limited purpose of empowering the assessing authority to rely upon the authentic statement of accounts of the company and while so looking into the accounts of the company, the AO had to accept the authenticity of the accounts. It was so held by the Hon'ble Supreme Court that the AO has only the power to examine whether books of account are certified by authorities under the Companies Act as having been properly maintained in accordance with the provisions of the Companies Act. The AO, thereafter, has limited power of making adjustments as provided in Explanation to section 115J. The relevant portion of the judgment of the Hon'ble Supreme Court is reproduced below as a ready reference. The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Companies Act. The ld. DR pointed out that the Tribunal in case of Sumer Builders (P) Ltd. (supra) even after considering the judgment of the Hon'ble High Court of Bombay in case of CIT vs. Akshay Textiles Trading And Agencies P. Ltd. (supra), have held that the AO has power to re-cast the accounts prepared under the Companies Act, in case, these were not correctly prepared. Arguments advanced by the revenue have no merit in view of the issue having been already settled by the judgment of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra), as pointed out earlier. Moreover, the Tribunal in the case of Sumer Builders (P) Ltd. (supra) had no occasion to consider the latest judgment of the Hon'ble High Court of Bombay in the case of Adbhut Trading Co. P. Ltd. (supra) in which the Hon'ble High Court following the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) have allowed the claim of the assessee. In the case of Appolo Tyres Ltd. (supra), it has been clearly held that the AO has only power of examination whether books of account prepared under the Companies Act have been certified by the authorities under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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