TMI Blog2003 (6) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,550 and thereby had shown net loss of Rs. 5,09,19,856. While processing the return under section 143(1)(a), the Assessing Officer adopted the book profit at Rs. 2,17,84,694 as shown in the P L account prepared in accordance with the provisions of parts II III of Schedule VI of Companies Act i.e. without allowing deduction for interest relating to HR Project and made an adjustment accordingly. The reasons given by the Assessing Officer for making the impugned adjustment is as under: "The assessee has wrongly computed deemed income under section 115JA by reducing interest of HR Project claiming it as revenue expenditure from the book profits. Since section 115JA does not provide for any such reduction out of book profits. Only specified amounts have to be increased/decreased from the book profits. Since this does not fall within the items specified in the section, therefore, book profits for purpose of section, 115JA will be Rs. 2,17,84,69,4 and 30% of that will be deemed income." 3. Being aggrieved, the assessee impugned the adjustment-made by the Assessing Officer in appeal before the CIT(A). It was submitted thefore the CIT(A) that the issue in question was debatable and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of ITAT, Ahmedabad Bench in the case of Atul Ltd. v. Asstt. CIT [1999] 69 ITD 187 when his attention was drawn to the recent judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd v. CIT [2002] 255 ITR 2731, the Ld. counsel for the assessee submitted that this judgment is not applicable to this case in view of the fact that the adjustment has been made under section 115JA and not under section 115J. However, he vehemently contended that the issue being debatable, the same fell outside the scope of provisions of section 143(1)(a). He further contended that the matter is squarely covered by the decision of ITAT, Ahmedabad Bench in the case of Atul Ltd. 6. We have heard both the parties and given our thoughtful consideration to the rival submissions. The undisputed facts of the case are that the assessee had not debited interest of Rs. 7,27,04,550 to the P L account prepared in accordance with the provisions of Parts II III of Schedule VI of Companies Act. The assessee had claimed such deduction in the statement of income filed alongwith the return. The Assessing Officer has made adjustment by adopting book profit as shown in the P L account prepared in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an net profit as shown in the P L account for the relevant previous year prepared under section 115JA(2) as increased by amounts mentioned in clauses (a) to (f) and as reduced by amounts covered by clauses (i) to (ix) of the Explanation. Thus section 115JA is self contained code in itself. Proviso to section 115JA further stipulates that while preparing P L account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing P L account laid before the company at its Annual General Meeting in accordance with the provisions of section 210 of Companies Act, 1956. The provisions of section 115JA are more or less the same as provisions of section 115J with minor changes. This is accepted by the Kerala High Court in the case of CIT v. Apollo Tyres Ltd. [1999] 237 ITR 706. One such minor change introduced by the Finance (No.2) Act, 1996 is that section, itself now provides that method of depreciation and the rate of depreciation shall be the same as adopted for preparing P L account laid before the company at its Annual General Meeting in accordance with the provisions of section 210 of Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars such industrial undertaking is eligible to claim a deduction of hundred per cent of the profits and gains under sub-section (4) or sub-section (5) of section 80-IB; or (vi) the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility [as defined in the Explanation to sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section]; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation - For the purposes of this clause, 'net worth' shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or (viii) the amount of profits eligible for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer under the Income-tax Act, 1961, has to accept the authenticity of the accounts w.r.t. provisions of Companies Act, which are duly certified by the statutory auditors and are required to be approved by the Company in its Annual General Meeting and thereafter file before the Registrar of Companies to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Hon'ble Supreme Court has, therefore, held that the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the P L account accepted to the extent provided in the Explanation to section 115J. The relevant finding of the judgment is extracted below:- "The above Speech shows that the income tax authorities were unable to bring certain companies within the net of income tax because these companies were adjusting their accounts in such a manner as to attract no tax or very little tax. It is with a view to bring such of these companies within the tax net that section 115J was introduced in the I.T. Act with a deeming provision which makes the company liable to pay tax on at least 30% of its book profits as shown i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, then it should be that income which is acceptable to the authorities under the Companies Act. There cannot be two incomes one for the purpose of Companies Act and another for the purpose of income tax both maintained under the same Act. If the Legislature intended the Assessing Officer to reassess the company's income, then it would have stated in section 115J that "income of the company as accepted by the Assessing Officer", In the absence of the same and on the language of section 115J it will have to held that view taken by the Tribunal is correct and the High Court has erred in reversing the said view of the Tribunal, Therefore, we are of the opinion that the Assessing Officer while computing the income under section 115J 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 power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Schedule VI of the Companies Act should be same or it should be as per Income-tax Act, 1961 for the purpose of computing book profit. But this does not mean that the assessee could prepare two balance sheets. Therefore, after the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. there is no controversy about the fact that the Assessing Officer is duty bound to adopt the profit as shown in the P L account prepared in accordance with Parts II III of Schedule VI of Companies Act without making any adjustment other than those specified in the explanation. As regards the decision of ITA T, Ahmedabad Bench in the case of Atul Ltd., the same is prior to the judgment of Supreme Court in the case of Apollo Tyres Ltd. In view of the binding judgment of Supreme Court, decision of ITAT Ahmedabad Bench no longer holds good. Moreover, there could be some dispute in that case whether a particular receipt was not in the nature of income. Even such controversy ceases to exist after the judgment of Supreme Court where the Apex Court has held that the Assessing Officer cannot go behind the P L account prepared in accordance with Parts II III of Schedule VI of Companies Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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