COMMISSIONER OF INCOME TAX - III V. THE RIDDHI SIDDHI GLUCO BOILS LIMITED

TAXAP/1940/2010

AI Insights

The case involves the Commissioner of Income Tax - III as the appellant and The Riddhi Siddhi Gluco Boils Limited as the respondent. The core issue was whether the pre-operative interest expenses should be included in the computation of book profit under Section 115JB of the Income Tax Act, 1961. The Assessing Officer initially included these expenses, but the Commissioner of Income Tax reversed this decision, which was later upheld by the Income Tax Appellate Tribunal. The Tribunal's decision was based on judicial precedents that restrict the Assessing Officer's ability to alter the profit and loss account prepared in accordance with the Companies Act, unless specifically allowed by the Income Tax Act.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 729471 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 28-06-2012
• Assessment Year: misc
• Other Referred Cases: Apollo Tyres Ltd. vs. Commissioner of Income-Tax, Quality Biscuits Ltd. vs. CIT, CIT vs. Rubamin P. Ltd., Commissioner of Income-Tax vs. HCL Comnet Systems and Services Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SWATI SOPARKAR
• Assessee Lawyers: MAUNA BHATT
• Keywords: Assessing Officer; Book profit; Commissioner of Income Tax; Income tax appellate tribunal; Pre-operative interest expenses
• Section: 115JB

Judgement Text

"TAXAP/1940/2010 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1940 of 2010 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment? No 2 To be referred to the Reporter or not? No 3 Whether their Lordships wish to see the fair copy of the judgment? No 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder? No 5 Whether it is to be circulated to the civil judge? No ========================================================= COMMISSIONER OF INCOME TAX - III - Appellant(s) Versus THE RIDDHI SIDDHI GLUCO BOILS LIMITED - Opponent(s) ========================================================= Appearance : MRS MAUNA M BHATT for Appellant(s) : 1, MRS SWATI SOPARKAR for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 28/06/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1.0 We have heard Mr. M. R. Bhatt, learned senior standing counsel for Mrs. Mauna Bhatt, learned counsel for Revenue and Mr.S. N. Soparkar, TAXAP/1940/2010 2/4 JUDGMENT learned senior counsel for Mrs. Swati Soparkar, learned counsel for the respondent. 2.0 The Revenue has proposed the following question. “Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer not to include the pre­ operative interest expenses while recomputing the book profit u/s.115JB?” 3.0 From the order of the Assessing Officer dated 10.02.2006, it appears that under Section 150JB pre­operative interest of Rs.2,19,92,647/­ and pre period expenses were added for the purpose of computing book­profit. The Commissioner Income Tax allowed the appeal and deleted the pre­operative interest and prior period expenses for computing book­profit. The order has been confirmed by the Income Tax Appellate Tribunal in ITA No. 286/Ahd/2007 on 31.03.2011. The Tribunal has considered the argument of the assessee and department on the question whether pre­operative interest expenses would be included while computing book­profit under Section 115JB. The Tribunal has made following observations in paras:6 and 7 as under:­ “6. Coming to ground No.2, the Tribunal in assessee's own case in ITA No.404/Ahd/2002 and others for Assessment Year 1997­98 and others held as under: “5. Having heard both sides, we have carefully gone through the impugned orders of the authorities below. Considering the facts and circumstances of the case, we find that the case of Apollo Tyres Limited 255 ITR 273 (SC) is squarely applicable, wherein it is held that while assessing a company for income tax under section 115J the correctness of the P&L A/c. prepared by the assessee company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Part II and III of Scheduled VI to the Companies Act cannot be TAXAP/1940/2010 3/4 JUDGMENT examined by the Assessing Officer. The AO does not have the jurisdiction to go behind the net profit shown in the P&L A/c. except to the extent provided in the Explanation to section 115J. Moreover, in the case of Quality Biscuits Ltd. vs. CIT (243 ITR 519). Hon'ble Karnataka High Court has held that for the purpose of section 115J r.w.s. 205(1)(b) of the Companies Act the expression 'loss' under the Companies Act is to be reckoned after allowance of depreciation. In the case of CIT vs. Rubamin P . Ltd., Hon'ble Gujarat High Court following the decision of Hon'ble Supreme Court in the case of Apollo Tyres vs. CIT (255 ITR 273) held that for the purpose of section 115J of the Act, only those adjustments, which are specified in the explanation to section 115J can be made from the book profits and depreciation not being one of them and further the accounts of the company having been prepared in accordance with Schedule VI to the Companies Act, the Assessing Officer was in error in disallowing the depreciation as claimed by the company. In view of such judicial pronouncements, we do not find any infirmity in the impugned order of the learned CIT(A) in this regard and as such, the same needs no interference. Ground No.1 of the Revenue, is, therefore, dismissed.” 7. We, therefore, following the aforesaid decision of Tribunal in assessee's own case (supra), incline to uphold the order of the learned CIT (Appeals) and direct the Assessing Officer not to include the pre­operative interest expenses and prior period expenses while computing book profit u/s.115JB of the I.T.Act, 1961. Thus, the ground of appeal of Revenue is rejected.” 4.0 A Division Bench of this Court in Tax Appeal No.109 of 2010, decided on 13.12.2011, has held in para:10 that the Assessing Officer could not have varied the Profit and Loss Account of the company duly audited and prepared in terms of the provisions contained in the Companies Act which is extracted as under: “10. In that view of the matter, as rightly pointed out by the counsel for the assessee, in view of the decisions of the Apex Court in the case of Apollo Tyres Ltd. vs. Commissioner TAXAP/1940/2010 4/4 JUDGMENT of Income­Tax reported in [2002] 255 ITR 273 and in the case of Commissioner of Income­Tax vs. HCL Comnet Systems and Services Ltd. reported in [2008] 305 ITR 409(SC), the Assessing Officer, could not have varied the Profit and Loss Account of the company duly audited and prepared in terms of the provisions contained in the Companies Act. 5.0 In view of the above, we are of the view that no substantial question of law arises in this Tax Appeal for consideration of this Court. Therefore, this Tax Appeal is dismissed. Notice is discharged. [V . M. SAHAI, J.] [N. V . ANJARIA, J.] Amit "