WADINAR POWER COMPANY LTD, MUMBAI V. ADDL CIT 5(3), MUMBAI

ITA 131/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3038 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIPAK KUMAR SINHA
• Keywords: Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 131/MUM/2015 (ASSESSMENT YEAR: 2010-11) M/S. VADINAR POWER COMPANY LTD. VS. ADDITIONAL CIT - 5(3) 5 TH FLOOR, TOWER - II, EQUINOX BUSINESS PARK, OFF BANDRA KURLA COMPLEX, LBS MARG, KURLA (W) MUMBAI 400070 AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 PAN - AAACV5226C APPELLANT RESPONDENT APPELLANT BY: SHRI ANUJ KISNADWALA RESPONDENT BY: SHRI DIPAK KUMAR SINHA DATE OF HEARING: 24.08.2016 DATE OF PRONOUNCEMENT: 21.09.2016 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 9, MUMBAI DATED 12.11.2014 FOR A.Y. 2010-11. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS O F POWER GENERATION, FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 30.0 9.2010 DECLARING TOTAL INCOME OF ` 4,27,77,222/- UNDER THE NORMAL PROVISIONS OF THE IN COME TAX ACT, 1961 (IN SHORT 'THE ACT') AND BOOK PROFITS A T ` 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 TH E 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. T HE ASSESSING OFFICER (AO) COMPUTED THE BOOK PROFIT UNDER SECTI ON 115JB OF THE ACT AT ` 73,76,84,930/- IN VIEW OF THE FOLLOWING ADDITIONS T HERETO: - ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 2 (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 T HE DECISIONS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF VEEKAYLAL INVESTMENT COMPANY PVT. LTD. REPORTED IN 249 ITR 597 AND OF THE COORDI NATE BENCH OF THIS TRIBUNAL IN THE CASE OF KOPRAN PHARMACEUTICALS LTD. (119 ITD 355) (ITAT, MUMBAI) TO HOLD THAT THESE TWO ITEMS (SUPRA) ARE TO BE CONSIDERED WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT AS THEY HAD NOT BEEN ROUTED THROUGH THE PROFIT & LOSS ACCOUNT A S PER THE PROVISIONS OF PARTS II & III OF THE SCHEDULE-VI OF THE COMPANIES ACT, 1956. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 29.0 3.2013 FOR A.Y. 2010-11, THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A)-9, MUMBAI. THE LEARNED CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 12.11.2014 AND UPHELD THE AOS ORDER FO LLOWING THE SAME JUDICIAL PRONOUNCEMENTS, AS RELIED ON BY THE AO, I. E. VEEKAYLAL INVESTMENT COMPANY PVT. LTD. (SUPRA) AND KOPRAN PHARMACEUTICAL S LTD. (SUPRA). 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-9, MUMBAI DATED 12.11.2014 FOR A.Y. 2010-11, THE ASSESSEE HAS PREFERRED THIS APPEA L RAISING THE FOLLOWING GROUNDS: - 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) -9, MUMBAI HEREINAFTER REFERRED AS CIT(A), ERRED IN CONFIRMI NG THE ACTION OF ASSESSING OFFICER WHILE ADDED BACK INTEREST INCOME AND INCOME FROM SALE OF UNIT OF MUTUAL FUND ORIGINALLY REDUCED FROM CAPITAL WORK IN PROGRESS IN COMPUTATION OF BOOK PROFIT U/S 115JB. 2) THE APPELLANT REQUESTS THAT IT MAY BE PERMITTED TO ALTER OR WITHDRAW ANY OF THE ABOVE GROUNDS AND TO ADD ANY OT HER GROUND AT THE TIME OF APPEAL. 3.2.1 THE CONTENTION OF THE ASSESSEE IN THE GROUND RAISED (SUPRA) IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE AO THAT INTEREST INCOME AND INCOME FROM SALE OF UNITS OF MUTUAL FUND S, WHICH WERE ORIGINALLY REDUCED FROM CAPITAL W.I.P, WAS TO BE IN CLUDED WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. ACCORD ING TO THE LEARNED A.R. FOR THE ASSESSEE, IN THE PERIOD UNDER CONSIDERATION , THE ASSESSEE-COMPANY WAS IN THE PROCESS OF EXPANSION OF ITS POWER GENERA TING PLANT AND ALL ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 3 EXPENDITURE INCURRED N THE PRE-COMMENCEMENT STAGE W AS REFLECTED UNDER THE HEAD CAPITAL WORK-IN-PROGRESS (WIP) AND PREOPER ATIVE EXPENSES IN THE BOOKS OF ACCOUNT, AS THE PROJECT WAS UNDER CONSTRUC TION AND FOR THIS PURPOSE BANK LOANS WERE TAKEN. IN THIS PERIOD OF CO NSTRUCTION, THE ASSESSEE-COMPANY HAD INVESTED IDLE FUNDS WHICH WERE TO BE USED IN FUTURE PROCUREMENT OF PLANT AND MACHINERY AND CONSTRUCTION , WERE UTILISED/INVESTED RESULTING IN GENERATION OF INTERE ST INCOME AND INCOME FROM SALE OF MUTUAL FUNDS. IT IS SUBMITTED THAT ACC ORDINGLY THE ASSESSEE- COMPANY 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 BEE N DONE IN ACCORDANCE WITH AS-16 AND ACCOUNTING STANDARD ON AC COUNTING FOR FIXED ASSETS. AS PER POINT NO. 11 - BORROWING COST OF AS- 16, FINANCING ARRANGEMENTS FOR A QUALIFYING ASSET MAY RESULT IN A N ENTERPRISE OBTAINING BORROWED FUNDS. IN SOME CIRCUMSTANCES, DURING THE S ETTING UP OF THE QUALIFYING ASSET CONCERNED, IDLE FUNDS ARE OFTEN TE MPORARILY INVESTED PENDING THEIR EXPENDITURE ON THE QUALIFYING ASSET. IN DETERMINING THE AMOUNT OF BORROWING COSTS ELIGIBLE FOR CAPITALISATI ON DURING THE SAID PERIOD, ANY INCOME EARNED ON TEMPORARY INVESTMENT OF THOSE IDLE BORROWINGS, IS TO BE DEDUCTED FROM BORROWING COSTS INCURRED. THE LEAR NED A.R. CONTENDS THAT AS THESE ITEMS; I.E. INTEREST INCOME AND INCOM E ON SALE OF MUTUAL FUNDS, HAVE BEEN CORRECTLY CONSIDERED IN CAPITAL WI P, THEY DO NOT FORM PART OF THE PROFIT & LOSS ACCOUNT AND CONSEQUENTLY DO NOT FALL FOR CONSIDERATION UNDER MAT, WHICH IS ALSO IN KEEPING W ITH THE PROVISIONS OF SECTION 211(3A) OF THE COMPANIES ACT. IT IS FURTHER SUBMITTED THAT BOOK PROFITS UNDER SECTION 115JB HAS TO BE COMPUTED AS PER THE NET PROFIT AS PER THE PROFIT & LOSS ACCOUNT PREPARED UNDER THE PR OVISIONS OF PART-II AND PART-III OF SCHEDULE VI OF THE COMPANIES ACT. THE L EARNED A.R. CONTENDS THAT ONCE THE ACCOUNTS HAVE BEEN PREPARED AS PER TH E PROVISIONS OF COMPANIES ACT, REFERRED TO ABOVE, AND ARE ADOPTED B Y THE AGM OF THE ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 4 COMPANY, THE NET PROFIT DISCLOSED IN SUCH ACCOUNTS CANNOT BE TINKERED WITH BY THE AO WHILE COMPUTING THE BOOK PROFITS, EXCEPT FOR ADJUSTMENTS SPECIFIED AS PER EXPLANATION-I TO SECTION 115JB(2) OF THE ACT. IT IS ALSO SUBMITTED THAT FORM NO. 29B HAS BEEN ISSUED CERTIFY ING THAT THE ASSESSEES PROFIT & LOSS ACCOUNT HAS BEEN MAINTAINE D IN ACCORDANCE WITH THE PROVISIONS OF PARTS II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. 3.2.3 THE LEARNED A.R. FOR THE ASSESSEE ARGUED THAT THE JUDICIAL PRONOUNCEMENTS RELIED ON BY THE AUTHORITIES BELOW, I.E. VEEKAYLAL INVESTMENT COMPANY PVT. LTD. REPORTED IN 249 ITR 59 7 (BOM) AND KOPRAN PHARMACEUTICALS LTD. (119 ITD 355) (MUMBAI ITAT) AR E FACTUALLY DIFFERENT AND DO NOT APPLY TO THE ASSESSEES CASE. IT IS ARGU ED THAT THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (2002) (255 ITR 273) (SC) SUPPORTS THE ASSESSEE IN THE CASE ON HAND AND HAS LAID DOWN THE BASIC PRINCIPLE THAT WHILE COMPUTING BOOK PROFITS UNDER S ECTION 115JB OF THE ACT, THE AO HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNTS ARE CERTIFIED BY THE CONCERNED AUTHORITIES, AS HAVING B EEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT AND THEREAFTER HE HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS ONLY AS PR OVIDED IN THE EXPLANATION TO SECTION 115JB(2) OF THE ACT. IT IS C ONTENDED THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF VEE KAYLAL INVESTMENTS COMPANY PVT. LTD. (SUPRA), NO LONGER HOLDS THE GROU ND AS IT HAS BEEN NEGATIVED/REVERSED BY THE HON'BLE BOMBAY HIGH COURT IN A SUBSEQUENT JUDGMENT IN THE CASE OF AKSHAY TEXTILES TRADING AND AGENCIES P. LTD. (2008) 304 ITR 401 (BOM) ON THE SIMILAR ISSUE, BY FOLLOWIN G THE DECISION 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'B LE BOMBAY HIGH COURT IN THE CASE OF ADBHUT TRADING CO. P. LTD. (2011) 338 I TR 94 (BOM). IT WAS FURTHER SUBMITTED THAT A COORDINATE BENCH OF THIS T RIBUNAL 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 I N 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 TR ADING CO. PVT. LTD. (SUPRA), HAS HELD THAT THE RELIANCE PLACED BY REVEN UE ON THE DECISION OF THE ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 5 HON'BLE BOMBAY HIGH COURT IN THE CASE OF VEEKAYLAL INVESTMENT COMPANY PVT. LTD. IS MISPLACED. THIS DECISION OF THE COORDI NATE 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 FAC TUAL AND LEGAL MATRIX OF THE CASE ON HAND, THE ASSESSEES 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 CONTENTIONS OF BOTH T HE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; IN CLUDING THE JUDICIAL PRONOUNCEMENTS CITED. THE FACTS OF THE MATTER AS EM ANATE FROM THE RECORD BEFORE US ARE THAT IN THE PERIOD UNDER CONSIDERATIO N THE ASSESSEE-COMPANY WAS IN THE PROCESS OF EXPANDING ITS POWER GENERATIN G PLANT AND ALL EXPENDITURE INCURRED IN THIS PRE-COMMENCEMENT STAGE WAS REFLECTED UNDER THE HEAD CAPITAL WIP AND PRE-OPERATIVE EXPENSES IN ITS BOOKS OF ACCOUNT. FOR THE PURPOSE OF INVESTMENT IN THE EXPANSION OF I TS POWER GENERATION PLANT, THE ASSESSEE HAD AVAILED OF BANK LOANS FROM FUTURE PROCURING OF PLANT AND MACHINERY AND THOSE FUNDS THAT REMAINED IDLE TE MPORARILY DURING THE PERIOD UNDER CONSIDERATION WERE INVESTED BY IT RESU LTING IN THE GENERATION OF INTEREST INCOME AND INCOME FROM SALE OF MUTUAL FUND S. ADMITTEDLY, THESE AMOUNTS SO EARNED WERE OFFERED TO TAX UNDER THE HEA D INCOME FROM OTHER SOURCES UNDER THE NORMAL PROVISIONS OF THE ACT SIN CE THE INTEREST EARNED WAS REVENUE IN NATURE. THE SAME INCOMES WERE, HOWEV ER, NOT PART OF THE BOOK PROFITS, COMPUTED BY THE ASSESSEE UNDER SECT ION 115JB OF THE ACT, AS THE ASSESSEE WAS OF THE VIEW THAT THE TREATMENT FOR INTEREST INCOME AND INCOME FROM SALE OF MUTUAL FUNDS BEING ACCOUNTED FO R IN ACCORDANCE WITH AS-16 HAVE BEEN CORRECTLY CONSIDERED CAPITAL WIP AN D NOT FORMING A PART OF THE PROFIT & LOSS ACCOUNT PREPARED UNDER THE PROVIS IONS OF PART-II AND PART- III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND C ONSEQUENTLY WOULD NOT FALL FOR CONSIDERATION UNDER MAT PROVISIONS. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE HAS FILED A COPY OF FORM NO. 29B ISSUE D CERTIFYING THAT THE ASSESSEES ACCOUNTS HAVE BEEN MAINTAINED IN ACCORDA NCE WITH THE PROVISIONS OF PART-II AND PART-II OF SCHEDULE VI OF THE COMPANIES ACT. ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 6 3.4.2 IN THE CONTEXT OF THE ABOVE MENTIONED FACTS O F THE MATTER, THE QUESTION BEFORE US IS WHETHER OR NOT THE ASSESSEE I S REQUIRED TO TAKE INTO ACCOUNT THE INTEREST INCOME AND INCOME FROM SALE OF MUTUAL FUNDS FOR COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT. IN THE CASE ON HAND, THE AUTHORITIES BELOW HAVE HELD THAT THE ASSE SSEE IS REQUIRED TO TAKE THE INTEREST INCOME AND CAPITAL GAINS INCOME ON SAL E OF MUTUAL FUNDS AS PART OF THE COMPUTATION OF BOOK PROFITS UNDER SEC TION 115JB OF THE ACT, RELYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF VEEKAYLAL INVESTMENT COMPANY PVT. LTD., WHICH HAS B EEN SUBSEQUENTLY DISTINGUISHED AS NOT APPLICABLE BY THE HON'BLE BOMB AY HIGH COURT IN LATER JUDGEMENT IN THE CASES OF AKSHAY TEXTILES TRADING A ND 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 CERTIFI ED BY AUTHORITIES UNDER THE COMPANIES ACT, IT IS NOT OPEN TO THE AO TO CONT END THAT THE SAME HAS NOT BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT, EXCEPT AS PROVIDED IN THE EXPLANATION TO SECTION 11 5JB(2) OF THE ACT. 3.4.3 WE HAVE RESPECTFULLY PERUSED THESE JUDICIAL P RONOUNCEMENTS (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 2 3.01.2013 HAS CONSIDERED THE AFORECITED DECISIONS CITED BY BOTH R EVENUE AND THE ASSESSEE AND HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSE E HOLDING AS UNDER AT PARAS 4 TO 4.2 THEREOF: - 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS APPEAL IS REG ARDING ADJUSTMENT MADE BY AO TO THE BOOK PROFIT COMPUTED UNDER THE PR OVISIONS OF SECTION 115JB. UNDER THE SAID PROVISIONS, IN CASE, THE TOTAL INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN SPECIFIED PERCENTAGE OF BOOK PROFIT, THE BOOK PROFIT IS DEEME D TO BE THE TOTAL INCOME ON WHICH TAX IS REQUIRED TO BE LEVIED AT A S PECIFIED RATE. THE BOOK PROFIT UNDER SECTION 115JB IS REQUIRED TO BE C OMPUTED ON THE BASIS OF P&L ACCOUNT PREPARED IN ACCORDANCE WITH TH E PROVISION OF PART II AND PART-III OF SCHEDULE VI OF THE COMPANIE S ACT AND, TO SUCH PROFIT, CERTAIN ADJUSTMENTS AS PROVIDED IN THE EXPL ANATION-1 TO SECTION 115JB(2) IS REQUIRED TO BE MADE. THE ISSUE IS WHETH ER THE AO HAS ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 7 POWER TO RE-CAST THE ACCOUNTS PREPARED AND CERTIFIE D BY THE AUTHORITIES UNDER THE COMPANIES ACT. THE CASE OF TH E REVENUE IS THAT, IN CASE, ACCOUNTS ARE NOT PREPARED IN ACCORDANCE WI TH THE PROVISIONS OF PART-II AND PART-III OF SCHEDULE VI OF THE COMPA NIES ACT, THE AO HAS THE POWER TO GO INTO ACCOUNTS AND RE-CAST THE SAME AS PER REQUIREMENT OF THE COMPANIES ACT. THE ASSESSEE ON T HE OTHER HAND HAS ARGUED THAT THE ACCOUNTS PREPARED UNDER THE COM PANIES ACT AND CERTIFIED BY THE AUTHORITIES UNDER THE SAID ACT CAN NOT BE TINKERED WITH BY THE AO AND HAVE TO BE ACCEPTED FOR COMPUTATION O F THE BOOK PROFIT. 4.1 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECT S OF THE MATTER. WE FIND THAT THE ISSUE RAISED BEFORE US HAS ALREADY BE EN CONSIDERED AND DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT(255 ITR 273). IN THAT CASE, THE ASSESSEE HA D CLAIMED ARREARS OF DEPRECIATION IN THE P&L ACCOUNT PREPARED UNDER THE COMPANIES ACT. THE AO HELD THAT THE ACCOUNTS PREPARED WERE NOT IN ACCORDANCE WITH PART-II AND PART-III OF SCHEDULE-VI OF THE COMPANIE S ACT AND, THEREFORE, DISALLOWED THE ARREARS OF DEPRECIATION WHICH HAD BE EN UPHELD UP TO THE LEVEL OF THE HIGH COURT. THE HON'BLE SUPREME CO URT OBSERVED THAT SECTION 115J PROVISIONS OF WHICH WERE SIMILAR TO TH OSE OF 115 JB WAS INTRODUCED IN THE INCOME TAX ACT WITH A DEEMING PRO VISION WHICH MADE COMPANIES LIABLE TO PAY TAX AT LEAST 30% OF BOOK PR OFIT AS SHOWN IN ITS OWN ACCOUNTS. FOR THE SAID PURPOSE, THE SECTION 115 J MADE INCOME REFLECTED IN THE COMPANYS BOOKS OF ACCOUNT, THE DE EMED INCOME FOR THE PURPOSE OF ASSESSING THE TAX. THE HON'BLE SUPREME C OURT FURTHER OBSERVED THAT THE USE OF THE WORDS IN ACCORDANCE W ITH THE PROVISIONS OF PART-II AND PART-III OF SCHEDULE-VI OF THE COMPA NIES ACT WAS MADE FOR THE LIMITED PURPOSE OF EMPOWERING THE ASSESSING AUTHORITY TO RELY UPON THE AUTHENTIC STATEMENT OF ACCOUNTS OF THE COM PANY AND WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, THE AO HA D 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 WHE THER BOOKS OF ACCOUNT ARE CERTIFIED BY AUTHORITIES UNDER THE COMP ANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE PRO VISIONS OF THE COMPANIES ACT. THE AO, THEREAFTER, HAS LIMITED POWE R OF MAKING ADJUSTMENTS AS PROVIDED IN EXPLANATION TO SECTION 1 15J. THE RELEVANT PORTION OF THE JUDGMENT OF THE HON'BLE SUPREME COUR T IS REPRODUCED BELOW AS A READY REFERENCE. THE ASSESSING OFFICER, WHILE COMPUTING THE BOOK PR OFITS 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 A UTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER, THEREAFTER, H AS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO SECTION 115J. THE ASSESSING OFFICER DOES NOT HAVE THE JURIS DICTION TO GO BEHIND THE NET PROFITS SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION. THE USE OF THE WORDS IN ACCORDANCE WI TH THE PROVISION OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT IN SEC TION 115J WAS MADE FOR THE LIMITED PURPOSE OF EMPOWERING THE ASSESSING OFFICER TO RELY UPON THE AUTHENTIC STATEMENT OF ACCOUNTS OF THE COMPANY. WHILE SO LOOK ING INTO THE ACCOUNTS OF THE ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 8 COMPANY, THE ASSESSING OFFICER HAS TO ACCEPT THE AU THENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES A CT, WHICH OBLIGATE THE COMPANY TO MAINTAIN ITS ACCOUNTS IN A MANNER PROVID ED BY THAT ACT AND THE SAME TO BE SCRUTINISED AND CERTIFIED BY STATUTORY A UDITORS AND APPROVED BY THE COMPANY IN GENERAL MEETING AND THEREAFTER TO BE FIL ED BEFORE THE REGISTRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EX AMINE AND BE SATISFIED THAT THE ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT. SUB-SECTION (1A) OF SECTION 115J DOES NOT EMPOWER THE ASSESSING OFFICER TO EMBARK UPON A FRES H ENQUIRY IN REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY . 4.2 THE REVENUE HAS RELIED ON THE JUDGMENT OF HON' BLE HIGH COURT OF BOMBAY IN THE CASE OF VEEKAYLAL INVESTMENT CO. P. L TD. (SUPRA), BUT THE SAID JUDGMENT HAD BEEN DELIVERED PRIOR TO THE J UDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. (SUP RA) AND, THEREFORE RELIANCE ON THE JUDGMENT OF HON'BLE HIGH COURT OF B OMBAY IS MISPLACED. THE HON'BLE HIGH COURT OF BOMBAY, SUBSEQ UENT TO THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF APOLLO TYRES LTD. (SUPRA), HAVE RECONSIDERED THE ISSUE AND HAVE HELD IN CASE OF CIT VS. AKSHAY TEXTILES TRADING AND AGENCIES P. LTD. (SUPRA ), THAT CAPITAL GAIN NOT SHOWN IN THE P&L ACCOUNT UNDER THE COMPANI ES ACCOUNT CANNOT BE ADDED WHILE COMPUTING TO THE BOOK PROFIT. THE SAME POSITION WAS REITERATED BY THE HON'BLE HIGH COURT I N CASE OF CIT VS. ADBHUT TRADING CO. P. LTD. (SUPRA) IN WHICH IT WAS HELD THAT ONCE ACCOUNTS INCLUDING THE P&L ACCOUNT HAD BEEN PREPARE D AND CERTIFIED BY AUTHORITIES UNDER THE COMPANIES ACT, IT WAS NOT OPEN FOR THE AO TO STATE THAT P&L ACCOUNT HAS NOT BEEN PREPARED IN ACC ORDANCE WITH THE PROVISIONS 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 CORRECTL Y PREPARED. ARGUMENTS ADVANCED BY THE REVENUE HAVE NO MERIT IN VIEW OF THE ISSUE HAVING BEEN ALREADY SETTLED BY THE JUDGMENT O F THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. (SUP RA), AS POINTED OUT EARLIER. MOREOVER, THE TRIBUNAL IN THE CASE OF SUME R BUILDERS (P) LTD. (SUPRA) HAD NO OCCASION TO CONSIDER THE LATEST JUDG MENT 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 T HE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES L TD. (SUPRA) HAVE ALLOWED THE CLAIM OF THE ASSESSEE. IN THE CASE OF A PPOLO TYRES LTD. (SUPRA), IT HAS BEEN CLEARLY HELD THAT THE AO HAS O NLY POWER OF EXAMINATION WHETHER BOOKS OF ACCOUNT PREPARED UNDER THE COMPANIES ACT HAVE BEEN CERTIFIED BY THE AUTHORITIES UNDER TH E COMPANIES ACT AND, THEREFORE, HE COULD ONLY MAKE ADJUSTMENTS AS P ROVIDED IN EXPLANATION TO SECTION 115JB(2) OF THE ACT. IT IS T HUS CLEAR THAT ONCE ACCOUNTS ARE PREPARED UNDER THE COMPANIES ACT AND H AVE BEEN CERTIFIED BY THE AUTHORITIES, THE AO CANNOT TINKER WITH THE ACCOUNTS AND MAKE ANY CHANGES WHILE COMPUTING BOOK PROFIT EX CEPT MAKING ITA NO. 131/MUM/2015 M/S. VADINAR POWER COMPANY LTD. 9 ADJUSTMENTS AS PROVIDED IN EXPLANATION TO SECTION 1 15JB. THE ADDITION MADE BY AO AND CONFIRMED BY CIT(A) ON ACCO UNT OF PROFIT ON SALE OF ASSET NOT DISCLOSED IN THE P&L ACCOUNT PREP ARED UNDER THE COMPANIES ACT CANNOT, THEREFORE, BE SUSTAINED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION M ADE. THIS DECISION OF THE COORDINATE BENCH HAS BEEN UPHE LD BY THE HON'BLE BOMBAY HIGH COURT IN ITS ORDER IN ITA NO. 1609 OF 2 013 DATED 12.08.2005. 3.4.4 RESPECTFULLY FOLLOWING THE DECISIONS OF THE H ON'BLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (255 ITR 273) (SC), OF TH E HON'BLE BOMBAY HIGH COURT IN THE CASES OF AKSHAY TEXTILE TRADING CO. P . LTD. (2008) 304 ITR 401 (BOM), ADBHUT TRADING CO. P. LTD. (2011) 338 IT R 94 (BOM) AND THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF FOREVER DIAMONDS PVT. LTD. IN ITA NO. 5720/MUM/2011 DATED 2 3.11.2013, WE DECIDE THE ISSUE BEFORE US IN FAVOUR OF THE ASSESSE E, I.E. THAT THE ASSESSEES INTEREST INCOME AND PROFIT ON SALE OF MUTUAL FUNDS WOULD NOT FORM PART OF THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115 JB OF THE ACT AND CONSEQUENTLY REVERSE THE DECISION OF THE AUTHORITIE S BELOW. THE GROUNDS AT S.NOS. 1 & 2 RAISED BY THE ASSESSEE ON THIS ISSUE A RE ALLOWED. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2010- 11 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016. SD/ - SD - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST SEPTEMBER, 2016 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -9, MUMBAI 4. THE CIT - 5, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.