M/S. SWAN MILLS LTD, MUMBAI V. THE ACIT 7(2), MUMBAI

CO 217/MUM/2007

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6244 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-05-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 19-09-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Keywords: Depreciation; Opportunity of being heard; Deemed to accrue or arise in india
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI V. DURGA RAO , JM I.T.A.NO.4203/MUM/2007 ASSESSMENT YEAR 1998-99 THE A SST . COMMISSIONER OF INCOME - TAX-7(2), MUMBAI VS. M/S. SWAN MILLS LTD., FREE PRESS HOUSE, 2 ND FLOOR, 215, NARIMAN POINT, MUMBAI PAN: AABCD 7890 Q (APP ELLANT ) (RESPONDENT) C.O. 217/MUM/07 (ARISING OUT OF ITA NO. 4203/MUM/07) ASSESSMENT YEAR : 1998-99 M/S. SWAN MILLS LTD., FREE PRESS HOUSE, 2 ND FLOOR, 215, NARIMAN POINT, MUMBAI PAN: AABCD 7890 Q VS. THE ASST. COMMISSIONER OF INCOME - TAX-7(2), MUMBAI ( CROSS OBJECTOR ) ( APPELLANT IN APPEAL) REVENUE BY : SHRI B. JAYA KUMAR ASSESSEE BY : SHRI J.P. BAIRAGRA O R D E R PER P.M. JAGTAP, AM: THIS APPEAL IS PREFERRED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VII, M UMBAI, DATED 27.03.2007 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CR OSS OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 217/MUM/2007. 2. IN THE SOLITARY GROUND RAISED IN ITS APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSES SING OFFICER TO ACCEPT THE ASSESSEES REVISED ANNUAL ACCOUNTS FOR THE PURPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115JA. 3. IN THIS CASE, WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE COMPANY U/S.115JA, ADDITION WAS MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF GAIN ON CONVERSION OF LAND CREDITED BY THE ASSESSEE COMPANY TO ITS PROFIT & LOSS ACCOUNT IN THE ASSESSMENT COMPLETED ORIGINALLY UNDER SECTIO N 143(3) VIDE ORDER DATED ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 2 31.1.2001. WHEN THE MATTER REACHED TO THE TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER DATED 8.12.2005 PASSED IN MA NO. 301/M/2004 RESTORE D THE SAME TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH FOR THE FOLLOWING REASONS GIVEN IN PARAS 4 TO 6 OF ITS ORDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD AND WE HAVE GONE THROUGH THE PR OVISIONS OF SECTION 115J AND SECTION 115JA AND ALSO THE JUDGMEN TS CITED BOTH SIDES. WE HAVE ALSO GONE THROUGH THE IMPUGNED TRIBU NAL ORDER DATED 30.09.2002 AND WE FIND THAT AS PER THE CONTEN TIONS OF LEARNED COUNSEL OF THE ASSESSEE AS RECORDED BY THE TRIBUNAL ON PAGE 8 IN PARA 5 OF THIS TRIBUNAL ORDER, THE MAN CONTENTION O F THE ASSESSEE WAS THAT THE A.O. SHOULD HAVE COMPUTED THE NET PROF IT IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI OF THE COMPANIE S ACT, 1956 EVEN IF THE ASSESSEE HAD NOT CORRECTLY DONE SO. THIS ASPECT OF THE ISSUE WAS DECIDED BY THE TRIBUNAL ON PAGE 13 OF THE IMPUG NED TRIBUNAL ORDER BY RELYING ON THE JUDGMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF APOLLO TYRES LIMITED (SUPRA) AND IT WAS HELD THAT INVIEW OF THIS JUDGMENT, THE NET PROFIT SHOWN IN THE PROFI T & LOSS ACCOUNT CANNOT BE TINKERED WITH EXCEPT TO THE EXTENT PROVI DED IN THE EXPLANATION TO SECTION 115JA. 5. BEFORE US, THE CONTENTION RAISED IS THAT THIS JU DGMENT RENDERED IN THE CASE OF APOLLO TYRES LIMITED (SUPRA) WAS RENDER ED WITH REGARD TO SECTION 115J BUT IN THE PRESENT CASE, WE ARE CONCER NED WITH SECTION 115JA AND OUR ATTENTION WAS DRAWN TO TWO PROVISOS T O SECTION115JA(2), WHICH ARE NOT PRESENT IN SECTION 1 15J AND IT IS CONTENDED THAT IN VIEW OF THESE TWO PROVISOS, IT IS AMPLY CLEAR THAT THIS IS NOT THE INTENTION OF THE LEGISLATURE THAT T HE PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT APPROVED IN THE ANNUAL GENERA L MEETING SHOULD BE ADOPTED AS IT IS FOR THE PURPOSE OF SECTI ON115JA(2) AND HENCE A SEPARATE PROFIT & LOSS ACCOUNT IS MANDATORY TO BE PREPARED FOR SECTION115JA (2) AND HENCE THE JUDGMENT IN THE CASE OF APOLLO TYRES LIMITED (SUPRA) IS NOT APPLICABLE WHILE DECID ING THE ISSUE WITH REGARD TO SECTION 115JA. THESE TWO PROVISOS TO SECT ION 115JA(2) ARE REPRODUCED BELOW FOR READY REFERENCE. PROVIDED THAT WHILE PREPARING PROFIT AND LOSS ACCO UNT, THE DEPRECIATION SHALL BE CALCULATED ON THE SAME METHOD AND RATES WHICH HAVE BEEN ADOPTED FOR CALCULATING THE DEPRECI ATION FOR THE PURPOSE OF PREPARING THE PROFIT AND LOSS ACCOUNT LA ID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 195 6 (1 OF 1956): PROVIDED FURTHER THAT WHERE A COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THE ACT, THE METHOD AND RATE FOR DEPRECIATION SHALL CORRESPOND TO THE METHOD AND RATES WHICH HAVE BEEN ADOPTED FOR CALCULATING THE DEPRECIATION FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. 6. IN VIEW OF THESE TWO PROVISOS IN SECTION 115 JA( 2), WE FIND FORCE IN THE CONTENTION OF LEARNED AR OF THE ASSESSEE. THER E IS NO DOUBT ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 3 THAT THESE TWO PROVISOS MAKE THE PROVISIONS OF SECT ION 115JA MATERIALLY DIFFERENT WITH THAT OF SECTION 115J WITH REGARD TO THIS ASPECT AS TO WHETHER THE PROFIT & LOSS ACCOUNT AS A DOPTED IN THE ANNUAL GENERAL MEETING HALL BE CONSIDERED AS IT IS FOR THE PURPOSE OF CALCULATING BOOK PROFIT UNDER SECTION 115JA AND ONL Y THOSE ADJUSTMENTS CAN BE MADE AS PROVIDED IN EXPLANATION TO SECTION115JA(2) OR WHETHER A SEPARATE PROFIT & LOSS ACCOUNT SHALL BE PREPARED UNDER SECTION 115JA(2). THESE TWO PROVI SOS ARE NOT THERE IN SECTION 115J AND WITH REGARD TO SECTION 11 5J, IT WAS HELD BY HONBLE APEX COURT IN THE PROFIT & LOSS ACCOUNT PRE PARED UNDER THE COMPANIES ACT SHALL BE DEEMED INCOME UNDER SECTION1 15J. BUT ADDITION OF THESE TWO PROVISOS IN SECTION 115JA(2) CHANGES THE SITUATION. THESE TWO PROVISOS MAKE IT APPARENT THAT A SEPARATE PROFIT & LOSS ACCOUNT SHALL BE PREPARED FOR THE PUR POSE OF SECTION 115JA AND THE SAME SHOULD BE AS ER PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND IN SUCH PROFIT & LOSS A CCOUNT, DEPRECIATION SHALL BE PROVIDED AS PER SAME METHOD A ND RATE WHICH HAVE BEEN ADOPTED FOR CALCULATING THE DEPRECIATION FOR THE PURPOSE OF PREPARING THE PROFIT AND LOSS ACCOUNT LAID BEFOR E THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS TO BE ADOPTED FOR THE PURPOSE OF SECTION 115JA EXCEPT FOR MAKING ADJUSTMENTS AS PROVIDED IN EXPLANATION TO SECTION 115JA(2), THEN T HERE WAS NO NEED OR PURPOSE OF THESE TWO PROVISOS AND THESE PROVISOS HAVE NO APPLICATION AND THEY BECOME REDUNDANT. WE DO NOT FO RESEE ANY SITUATION OTHER THAN PREPARING OF A SEPARATE PROFIT & LOSS ACCOUNT, WHERE THESE PROVISOS CAN BE PUT TO USE. LEGISLATURE DO NOT ADD ANY THING IN THE STATUTE WHICH IS REDUNDANT AND IS OF N O USE AND THEREFORE WE FIND THAT THERE IS A MISTAKE IN THIS TRIBUNAL OR DER SINCE THIS ASPECT OF THE MATTER WAS DECIDED BY FOLLOWING THE JUDGMENT RENDERED IN THE CASE OF APOLLO TYRES LTD. (SUPRA) WITHOUT CONSIDERI NG THE DIFFERENCE IN THE PROVISIONS OF SECTION115J AND SECTION115JA. THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THE P RESENT CASE, WE ARE CONCERNED WITH SECTION 115JA AND IF THIS JUDGME NT IS APPLIED, IT WILL RESULT IN MAKING THDSE TWO PROVISOS TO SECTION 115JA(2) REDUNDANT. IN VIEW OF THE ABOVE DISCUSSION, WE HOL D THAT THERE IS AN APPARENT MISTAKE IN THIS TRIBUNAL ORDER WHILE HOLDI NG SO, WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE KERALA HIGH CO URT RENDERED IN THE CASE OF KERALA CHEMICALS AND PROTEINS LTD (SUPR A), WHEREIN, THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. MAHALAXMI SUGAR MILLS CO. LIMITED, 160 ITR 920 WAS FOLLOWED AND IT WAS HELD THAT IT IS THE DUTY OF THE TRIBUNAL TO CON SIDER THE LAW AS IT EXISTED THEN EVEN THOUGH THE ASSESSEE FAILED TO BRI NG IT TO IT NOTICE. WE, THEREFORE, RECTIFY THIS TRIBUNAL ORDER BY HOLDI NG THAT AS PER THE PROVISIONS OF SECTION115JA(2), A SEPARATE PROFIT & LOSS ACCOUNT SHALL BE PREPARED WHICH SHALL BE AS PER PART II AND III OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956 AND ALSO SHO ULD BE IN CONFORMITY WITH THE PROVISOS TO SECTION 115JA(2) AN D ADJUSTMENT AS PER THE EXPLANATION TO SECTION 115JA(2) SHALL BE MA DE TO THE NET PROFIT AS PER SUCH PROFIT & LOSS ACCOUNT PREPARED A S PER SECTION 115JA(2). SINCE, NO SUCH PROFIT & LOSS ACCOUNT IS CONSIDERED BY THE LOWER AUTHORITIES, WE RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THIS ISSUE AFRESH IN THE LIGHT OF ABOVE DISCUSSION AFTER CONSIDERING THE PROFIT & LOS ACCOU NT PREPARED BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 115JA (2) AND THEN PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 4 4. AS PER THE DIRECTION OF THE TRIBUNAL, THE ASSESS EE COMPANY PREPARED AND FURNISHED A REVISED PROFIT AND LOSS ACCOUNT DURING THE COURSE OF THE SET ASIDE PROCEEDINGS BEFORE THE A.O. IN THE SAID PROFIT AND LOSS ACCOUNT CLAIMED TO BE PREPARED AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956, THE SURPLUS ON CONVERSION OF LAND INTO STOCK IN TRADE W AS NOT CREDITED BY THE ASSESSEE- COMPANY. THIS REVISED PROFIT & LOSS ACCOUNT FURNIS HED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE AGAIN MADE THE ADDITION ON ACCOUNT SURPLUS ON CONVERSION OF LAND INTO STOCK IN TRADE W HILE COMPUTING THE BOOK PROFIT U/S.115JA FOR THE FOLLOWING REASONS GIVEN IN THE FR ESH ASSESSMENT ORDER PASSED U/S. 143(3) READ WITH SECTION 254 DATED 19.9.2006: ASSESSEE CANNOT PREPARE DIFFERENT SET OF P&L ACCOU NT AND BALANCE SHEET ETC. ONE FOR INCOME TAX PURPOSE, ONE FOR THE PURPOSE OF SECTION 115JA(2) AND ONE FOR REQUIREMENT OF COMPANI ES ACT. THE P&L ACCOUNT ALONG WITH ORIGINAL RETURN OF INCOME WA S AUDITED AND CERTIFIED BY STATUTORY AUDITORS AND APPROVED BY BOA RD OF DIRECTORS AND ALSO BY SHAREHOLDERS AT THE AGM HELD. THIS ANN UAL REPORT CONTAINING P&L ACCOUNT AND BALANCE SHEET WERE USED BEFORE MANY AGENCIES INCLUDING SHAREHOLDERS, FINANCIAL INSTITUT ION, INCOME TAX DEPARTMENT AND OTHER GOVERNMENT AUTHORITIES. ASSESS EE CANNOT CHANGE THE FIGURE IN P&L ACCOUNT AND BALANCE SHEET WHICH HAVE BECOME FINAL. THERE IS NO REQUIREMENT OF PREPARING P&L ACCOUNT AND BALANCE SHEET FOR THE SOLE PURPOSE OF SECTION 115JA (2) OF THE ACT. THE P&L ACCOUNT PREPARED IN ACCORDANCE WITH THE PRO VISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956) WOULD HOLD GOOD FOR THE PURPOSE OF 115JA(2) OF THE ACT. THIS IS THE STATUTORY POSITION. AS PER ORDER OF I.T.A.T DTD.8.1 2.2005, THE ASSESSMENT WAS SET ASIDE FOR THE REASON THAT TWO PR OVISOS CONTAINED IN SECTION 115JA(2) HAVE NOT BEEN CONSIDERED IN ASS ESSEES CASE. THESE TWO PROVISOS WHICH DEAL WITH DEPRECIATION HAV E NO APPLICABILITY TO THE ASSESSEES CASE. THE CHANGES MADE IN P&L ACCOUNT ALSO ARE NOT RELATED TO THE ITEMS CONTAINED IN PROVISO. IF THERE IS NO DIFFERENCE AS PER TWO PROVISOS WHICH AR E INCLUDED IN SECTION 115JA, THE PROVISIONS OF THE ACT ARE SAME A S THAT OF SECTION 115J. HENCE, THE DECISION OF APEX COURT IN THE CASE OF M/S. APOLLO TYRES LTD. 255 ITR 273 IS SQUARELY APPLICABLE TO TH E ASSESSEE. IN VIEW OF THE ABOVE, DEEMED TOTAL INCOME OF THE ASSES SEE IS DETERMINED AT THE SAME FIGURE AS ORIGINALLY ARRIVED AT VIDE ORDER UNDER SECTION 143(3) DTD.31.01.2001 AT RS.3,80,35,6 30/-. 5. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER 143(3) READ WITH SECTION 254, AN APPEAL WAS PREFERRED BY THE ASSESSE E BEFORE THE LEARNED CIT(A) ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 5 CHALLENGING THE ADDITION MADE BY THE A.O. ON ACCOUN T OF SURPLUS ON CONVERSION OF LAND INTO STOCK IN TRADE FOR THE PURPOSE OF COMPUTA TION OF BOOK PROFIT UNDER SECTION 115JA. AFTER TAKING INTO CONSIDERATION THE ELABORA TE SUBMISSION MADE BY THE ASSESSEE ON THIS ISSUE BEFORE HIM AS WELL AS THE MA TERIAL AVAILABLE ON RECORD, INCLUDING THE ORDER OF THE TRIBUNAL RESTORING THE M ATTER TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION GIVING SPECIFIC DIRECTI ON, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO ACCEPT THE REVISED ANNUAL ACCO UNTS FILED BY THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARA 5 OF HIS ORDER: THE ARGUMENT OF THE APPELLANT AND FACT OF THE CASE HAVE BEEN CONSIDERED. THE HONBLE TRIBUNAL HAS DIRECTED THE A PPELLANT COMPANY FIRSTLY, TO FILE THE PROFIT AND LOSS ACCOUNT AND BA LANCE SHEET, WHICH ARE PREPARED IN ACCORDANCE WITH PARTS II & III OF S CHEDULE VI TO THE COMPANYS ACT, 1956, AS MANDATED BY THE PROVISIONS OF SECTION 115JA(2). SECONDLY, IT MEANS THAT, AFTER FINALIZING THE SAME AS PER THE PARTS II AND III OF SCHEDULE VI OF THE COMPANY S ACT, 1956, THE ASSESSEE MUST ENSURE THAT THE SAID ANNUAL ACCOUNTS ARE IN CONFORMITY WITH THE PROVISOS TO SECTION 115JA(2). A ND IF THAT IS NOT SO, THE NET PROFIT IS FURTHER REQUIRED TO BE ADJUST ED AS PER THE MANNERS STATED W.R.T. RATES DEPRECIATION AND CONSI STENCY IN ACCOUNTING POLICIES. THE RECASTED ACCOUNTS HAD BEEN REJECTED BY THE A.O. ON THE GROUND THAT THEY ARE UNSIGNED. FROM THE COPIES OF THE RECASTED ACCOUNTS, AS FILED WITH THE A.O. AND ALSO SUBMITTED DURING THE APPELLATE PROCEEDINGS, AND COMPARING THE SAME W ITH THE PUBLISHED ACCOUNTS, AS FILED ALONG WITH THE RETURN OF INCOME, IT CAN BE SEEN THAT THE ONLY CHANGE WHICH IS MADE IS BY SH OWING THE SURPLUS ON CONVERSION OF LAND IN TO STOCK IN TRADE UNDER THE HEAD RESERVES * SURPLUS & NOT ROUTED THE SAME THROUGH THE PROFIT & LOSS ACCOUNT. THIS TREATMENT IS IN CONFORMITY WITH THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND ACCOUNTING STAND ARDS. EVEN PARTS II AND III OF SCH. VI DOES NOT REQUIRE THE SA ME TO BE PART OF CURRENT YEARS INCOME. THUS, APART FROM THE ABOVE C HANGE, THERE WAS NO OTHER CHANGE BETWEEN THE PUBLISHED ACCOUNTS AND THE RE- CASTED ONE. THE HONBLE I.T.A.T HAS SPECIFICALLY OB SERVED THAT FOR BOOK PROFITS, THE P/L A/C HAS TO BE AS PARTS II & III OF SCHEDULE VI. THUS THE OUTRIGHT REJECTION OF THE ACCOUNTS IS WRON G AND AGAINST THE SPECIFIC ORDERS/DIRECTIONS/OBSERVATIONS OF THE I.T .A.T. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS A CLEAR FACT T HAT THE AO HAD TOTALLY RELIED ON THE DECISION PASSED IN THE APPELL ANT COMPANYS CASE ON THE EARLIER OCCASION AND HAVE NOT PUT FORTH ANY CONCRETE ARGUMENT WITH REGARD TO THE APPLICATION OF SECTION 115JA. THE RELIANCE PLACED BY THE AO ON THE DECISION OF THE SU PREME COURTS DECISION IN THE CASE OF THE APOLLO TYRES LTD. IN IT S ASSESSMENT IS TOTALLY IN CONTRADICTION TO THE FINDINGS OF THE HON BLE I.T.A.T. IN THE PRESENT ORDER THE AO HAS STRICTLY REQUIRED TO FOLLO W THE DIRECTION GIVEN BY THE HONBLE I.T.A.T WHICH SEEMS TO HAVE BE EN MISUNDERSTOOD BY THE AO. THE LEGAL ISSUE FOR APPLIC ABILITY OF MAT ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 6 U/S.115JA IN THE APPELLANTS CASE WAS VERY WELL CON CLUDED BY THE HONBLE I.T.A.T. AS PER THE DIRECTION OF THE I.T.A. T, FIRSTLY THE ACCOUNTS OF ANY COMPANY MUST BE DRAWN AS PER PART I I & III OF SCHEDULE VI & THE ADJUSTMENT TO THE EXTENT PRESCRIB ED UNDER THE PROVISION OF SETION 115JA(2) IS TO BE MADE IF NECES SARY. ON THE BASIS OF THE ACCOUNTING GUIDELINES IT IS FOUND THAT THE A PPELLANT COMPANY HAD CORRECTLY TRANSFERRED THE GAIN ON CONVERSION OF LAND TO REVALUATION RESERVE AS PRESCRIBED & PREPARED ITS AN NUAL ACCOUNTS AS PER PART II & III OF SCHEDULE VI WHICH THE AO MUST HAVE CONSIDERED. THUS, IT IS HELD THAT THE AO MUST CONSIDER THE REVI SED ANNUAL ACCOUNTS FILED BY THE APPELLANT COMPANY. THERE IS ALSO FORCE IN THE ARGUMENT OF THE APPELLANT COMPANY THAT THE ADJUSTME NT IN THE CASE IS NECESSARY, WHERE THE ACCOUNTS ARE NOT PREPARED A S PER THE PROVISIONS OF PART II & III OF SCHEDULE VI OF THE C OM;PANYS ACT, 1956. IN VIEW OF THE ABOVE IT IS HELD THAT, THE BO OK PROFIT IN THE PRESENT APPELLANT CASE MUST BE TAKEN AFTER EXCLUDIN G THE GAIN ON CONVERSION OF LAND WHICH IS A COMPONENT REVALUATION . THE LEARNED CIT(A) THUS DELETED THE ADDITION MADE BY THE AO ON ACCOUNT GAIN/SURPLUS ON CONVERSION OF LAND INTO STOCK IN TR ADE WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE COMPANY U/S.115JA AND ALLOWE D THE APPEAL OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), T HE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE MAIN ISSUE WHICH A RISES FOR OUR CONSIDERATION IN THE PRESENT APPEAL IS WHETHER IT IS PERMISSIBLE FO R THE ASSESSEE TO REVISE THE ANNUAL ACCOUNTS FOR THE PURPOSE OF COMPUTATION OF B OOK PROFIT U/S.115JA AND WHETHER THE REVISED ANNUAL ACCOUNTS FILED BY THE AS SESSEE ARE IN ACCORDANCE WITH THE REQUIREMENTS OF PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. IN THIS REGARD, IT IS PERTINENT TO NOTE AT THE OUTSET, THAT WHILE RESTORING THE MATTER TO THE FILE OF THE AO VIDE ITS ORDER DATED 8.12.2005(S UPRA), A SPECIFIC DIRECTION WAS GIVEN BY THE TRIBUNAL TO THE ASSESSEE TO PREPARE AN D FURNISH SEPARATE PROFIT & LOSS ACCOUNT AS PER THE REQUIREMENTS OF PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND THE AO WAS DIRECTED TO DECIDE THE IS SUE AFTER TAKING INTO CONSIDERATION SUCH REVISED PROFIT & LOSS ACCOUNT PR EPARED AND FURNISHED BY THE ASSESSEE. THERE IS NOTHING BROUGHT ON RECORD BEFOR E US TO SHOW THAT THE ORDER OF ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 7 THE TRIBUNAL DATED 8.12.2005 (SUPRA) HAS BEEN CHAL LENGED BY THE REVENUE AND THUS THE DIRECTION GIVEN BY THE TRIBUNAL HAVING BEC OME FINAL, THE AO, IN OUR OPINION, WAS NOT JUSTIFIED IN NOT ACCEPTING THE REV ISED PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE AS PER THE DIRECTION OF THE TRIBUNA L AS RIGHTLY HELD BY THE LEARNED CIT(A). 8. AT THE TIME OF HEARING BEFORE US, THE LEARNED DE PARTMENTAL REPRESENTATIVE HAS SOUGHT TO SUPPORT AND SUBSTANTIA TE THE ACTION OF THE AO IN NOT ACCEPTING THE REVISED PROFIT & LOSS ACCOUNT FURNISH ED BY THE ASSESSEE BY SUBMITTING THAT THE SAME WAS NEITHER SIGNED ON BEHA LF OF THE ASSESSEE NOR AUDITED. HOWEVER, AS DEMONSTRATED BY THE LEARNED C OUNSEL FOR THE ASSESSEE FROM THE COPY OF THE REVISED ANNUAL ACCOUNTS PLACED AT P AGES 44 TO 49 OF HIS PAPER BOOK, THE REVISED PROFIT & LOSS ACCOUNT AND BALANCE SHEET PREPARED AND FURNISHED BY THE ASSESSEE WERE NOT ONLY SIGNED BY ITS MANAGIN G DIRECTOR AND DIRECTOR BUT THE SAME WERE ALSO DULY AUDITED BY THE AUDITOR OF THE ASSESSEE COMPANY. IT IS OBSERVED THAT SIMILAR ISSUE HAD COME UP FOR CONSIDE RATION IN THE CASE OF DY.CIT VS. ARVIND MILLS LTD. (314 ITR 251 (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WHEREIN A REVISED PROFIT & LOSS ACCOUNT PR EPARED IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956, WAS FILED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S.115J. THE AO FOUND THAT THERE WAS VARIATION IN THE SAID PROFIT & LOSS ACCOUNT ON ACC OUNT OF CERTAIN DEFERRED REVENUE EXPENSES WHICH WERE ORIGINALLY DEBITED BY THE ASSES SEE TO THE PROFIT & LOSS ACCOUNT. THE AO HELD THAT FOR THE PURPOSE OF COMPUT ATION OF BOOK PROFIT U/S.115J OF THE ACT ONLY THE FIGURE OF BOOK PROFIT APPROVED AT THE ANNUAL GENERAL MEETING HAD TO BE CONSIDERED. THE COMMISSIONER UPHELD THE O RDER OF THE AO. THE TRIBUNAL, HOWEVER, HELD THAT THE PROFIT & LOSS ACCOUNT PREPAR ED IN ACCORDANCE WITH PART II & III OF THE COMPANIES ACT, 1956, WHICH WAS DIFFERE NT FROM THE PROFIT & LOSS ACCOUNT APPROVED AT THE AGM, WAS PERMISSIBLE. ON FU RTHER APPEAL, THE HONBLE ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 8 GUJARAT HIGH COURT HELD THAT THE PREPARATION OF THE PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956, WHICH WAS DIFFERENT FROM THE P& L ACCOUNT APPROVED AT THE AGM, WAS PERMISSIBLE. THE HONBLE GUJARAT HIGH HELD THAT THE AO WAS NOT VESTE D WITH ANY POWER TO IGNORE THE ACCOUNTS PREPARED IN ACCORDANCE WITH THE REQUIR EMENTS OF PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. 9. AS REGARDS THE OTHER ISSUE AS TO WHETHER THE REV ISED P&L ACCOUNT FILED BY THE ASSESSEE WITHOUT INCLUDING THE SURPLUS/GAIN ON CONVERSION OF LAND INTO STOCK IN TRADE WAS IN ACCORDANCE WITH THE REQUIREMENTS OF PA RT II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956, THE AO IN HIS ORDER AS WEL L AS THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THE TIME OF HEARING BEFORE US HAS TAKEN A STAND THAT THE EXCLUSION OF SUCH GAIN IS NOT IN ACCORDANCE WITH TH E SAID REQUIREMENTS AND THE ASSESSEE COMPANY OUGHT TO HAVE CREDITED THE SAID G AIN TO THE P&L ACCOUNT INSTEAD OF TAKING THE SAME DIRECTLY TO THE RESERVES IN THE BALANCE SHEET AS DONE IN THE REVISED P&L ACCOUNT. HOWEVER, AS RIGHTLY SUBMIT TED BY THE LEARNED COUNSEL FOR THE ASSESSEE, AS PER THE REQUIREMENT OF ACCOUNTING STANDARD 10 (AS-10) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, AN Y INCREASE IN NET BOOK VALUE ARISING ON REVALUATION OF FIXED ASSETS IS REQUIRED TO BE CREDITED DIRECTLY TO THE OWNERS INTEREST UNDER THE HEADING OF REVALUATION RESERVES AND THE SAME IS TO BE REGARDED AS NOT AVAILABLE FOR DISTRIBUTION. IN THE CASE OF ITO VS. GALAXY SAWS P.LTD. DECIDED BY THE CO-ORDINATE BENCH OF THIS TRI BUNAL VIDE ITS ORDER DATED 11.3.2011 PASSED IN ITA NO. 3747/M/2010 CITED BY TH E LEARNED COUNSEL FOR THE ASSESSEE, IT WAS HELD IN THE CONTEXT OF COMPUTATION OF BOOK PROFIT U/S.115JB THAT THE COMPANIES ACT, 1956 REQUIRES THAT WHILE PREPARI NG THE ACCOUNTS, THE ACCOUNTING STANDARDS HAVE TO BE FOLLOWED AND AS PRO VIDED IN PARA 13.7 OF AS-10 ANY INCREASE IN THE NET BOOK VALUE ON ACCOUNT OF RE VALUATION HAS TO BE TAKEN TO THE CAPITAL ACCOUNT AS REVALUATION RESERVE. IT WAS HELD THAT THE TREATMENT GIVEN BY ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 9 THE ASSESSEE BY TAKING THE REVALUATION RESERVE DIRE CTLY TO THE BALANCE SHEET WAS IN CONFORMITY WITH THE ACCOUNTING STANDARD AND THERE W AS NO VIOLATION OF ANY REQUIREMENT OF THE COMPANIES ACT, 1956 BY THE ASSES SEE. 10. KEEPING IN VIEW, THE DECISION OF THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF GALAXY SAWS P.LTD. (SUPRA) AS WELL AS T HE AS-10 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WE HOLD THAT THE SURPLUS/GAIN ON CONVERSION OF LAND INTO STOCK IN TRADE WAS RIGHTLY TAKEN BY THE ASSESSEE COMPANY TO ITS BALANCE SHEET AND THE REVISED P& L ACCOUNT PREPARED BY IT W ITHOUT INCLUDING THE SAID GAIN/SURPLUS WAS IN ACCORDANCE WITH THE REQUIREMENT S OF PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. THE LEARNED CIT(A), IN OUR OPINION, THEREFORE WAS FULLY JUSTIFIED IN DIRECTING THE AO TO ACCEPT THE R EVISED ANNUAL ACCOUNTS PREPARED AND FURNISHED BY THE ASSESSEE FOR THE PURPOSE OF CO MPUTATION OF BOOK PROFIT U/S.115JA AND IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF SURPLUS/GAIN ON CONVERSION OF LAND INTO STOCK IN TRADE WHILE COM PUTING SUCH BOOK PROFITS. IN THAT VIEW OF THE MATTER, WE UPHOLD THE IMPUGNED OR DER OF THE LEARNED CIT(A) ON THIS ISSUE AND DISMISS THIS APPEAL FILED BY THE REV ENUE. 11. AT THE TIME OF HEARING BEFORE US THE LEARNED CO UNSEL FOR THE ASSESSEE HAS NOT PRESSED THE GROUNDS RAISED BY THE ASSESSEE COMP ANY IN ITS CROSS OBJECTION. THE CROSS OBJECTION FILED BY THE ASSESSEE COMPANY I S ACCORDINGLY DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 3 RD DAY OF JUNE, 2011. SD. SD. (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 3 RD JUNE, 2011. ITA NO.4203/M/2007 & CO NO. 217/M/07 SWAN MILLS LTD. 10 COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-7, MUMBAI 4. THE CIT(A)-VII, MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ KN/ ASST. REGISTRAR, ITAT, MUMBAI