ITO, Ward - 6(4), Kolkata , Kolkata V. M/s. West Bengal Manufacturing Co. Pvt. Ltd., Kolkata

ITA 2250/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9320 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Keywords: Business income; Earning of tax free income; Deemed to accrue or arise in india; Set aside
• Section: 143(3); 115JB; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.2250/KOL/2017 ( / ASSESSMENT YEAR:2014-15) ITO, WARD-6(4), KOLKATA VS. M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. 14 TH DIAMOND HERITAGE, 16, STRAND ROAD, KOLKATA-700001. ./ ./PAN/GIR NO.: AAACW 2819 A (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI ROBIN CHOUDHURY, ADDL. CIT SR. DR RESPONDENT BY : SHRI RAVI TULSIYAN, FCA / DATE OF HEARING : 05/03/2019 /DATE OF PRONOUNCEMENT : 03/04/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAIN ING TO ASSESSMENT YEAR 2014-15, IS DIRECTED AGAINST AN ORDER PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISES OUT OF ASSESSMENT AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 28 .12.2016. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS F OLLOWS: 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE, LD. CIT(A) ERRED IN ALLOWING THE EXEMPT INCOME U/S 10(1) OF THE ACT READ WITH RULE 8 OF THE I.T. RULES AT RS.1,89,28,966/- INSTEAD OF RS. 47,74 ,629/- BEING 60% OF PROFIT FROM BUSINESS OF RS. 79,57,715/-. M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 2 22 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT AND ALLOWING RS.1,89,28,96 6/- I.E. 60% OF GROSS PROFIT OF RS.3,15,48,276/- WHICH IS NOT ALLOWABLE A S PER LAW. 3. THAT IS HUMBLY REQUESTED TO SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE BACK THE ASSESSMENT ORDER PASSED BY THE A.O. 4. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELE TED, AMEND OR MODIFY ANY GROUND BEFORE OR AT THE TIME OF APPELLATE PROCEEDIN GS. 3. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE AS SESSMENT PROCEEDINGS, THEASSESSEE COMPANY HAS SHOWN COMPUTATION OF HIS INCOME UNDER N ORMAL PROVISIONS AND MINIMUM ALTERNATE TAX (MAT) COMPUTATION UNDER SECTI ON 115JB OF THE ACT, WHICH IS GIVEN BELOW: M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 3 33 3 IT IS SEEN FROM THE ABOVE COMPUTATION OF MAT THAT A PART FROM CLAIMING DIVIDEND, THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION OF RS. 1 ,89,28,966/- AS EXEMPT U/S 10(1) AS 60% OF 3,15,48,276/- (RS. 3,15,48,276/-, I S NET PROFIT AS PER P&L A/C). THE AO NOTED THAT ASSESSEE HAS GOT THIS NOTION THAT 60% OF HIS NET PROFIT AS PER PROFIT AND LOSS ACCOUNT IS EXEMPT U/S 10(1) VIDE R ULE 8 OF I.T. RULE, 1962. BUT, THE CLAIM OF THIS EXEMPTION IN CALCULATION OF MAT IS NO T ACCEPTABLE. BECAUSE, THE PROFIT SHOWN IN PROFIT AND LOSS ACCOUNT OF RS. 3,15 ,48,276/- IS INCLUDING BUSINESS INCOME OF TEA, PROFIT ON TEA MANUFACTURED FROM BOUG HT LEAF, INCOME OF OTHER HEADS SUCH AS LOSS ON SALE OF DEPRECIABLE ASSET AND EXEMP T INCOME SUCH AS DIVIDEND ETC. AND THEREFORE, IT IS 60%, CANNOT BE SAID AS AGRICUL TURE INCOME EXEMPT U/S 10(1). DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSE SSEE WAS ASKED TO EXPLAIN AS TO WHY THIS CLAIM OF RS.1,89,28,966/- SHOULD NOT BE DI SALLOWED. IN RESPONSE, THE ASSESSEE SUBMITTED THE FOLLOWING REPLY: ' WITH REFERENCE TO THE DISCUSSION DURING THE HEARI NG ON 22.11.2016 WE SHALL LIKE TO MENTION THAT WHILE COMPUTING THE PROFIT FOR CALC ULATION OF MAT U/ S 115JB NEITHER YOU ARE REQUIRED TO COMPUTE TOTAL PROFIT FR OM BUSINESS AS PER IT ACT AND RULE NOR TO TAKE THE FIGURE OF PROFIT COMPUTED FROM THERE BUT TO TAKE BOOK PROFIT FROM P&L A/C PREPARED FOR THE RELEVANT PREVIOUS YEA R IN ACCORDANCE WITH THE PROVISION OF PART 11 OF SCHEDULE VI TO THE COMPANIE S ACT 1956. AFTER TAKING THIS PROFIT YOU ARE REQUIRED TO DEDUCT THE EXEMPTED INCO ME U/ S 10 OF IT ACT' 4. HAVING GONE THROUGH THE ABOVE REPLY OF THE ASSES SEE, THE AO NOTED THAT THE THEORY PART OF THE ABOVE EXPLANATION OF THE ASSESSE EWAS CORRECT BUT THE CALCULATION MADE BY THE ASSESSEE IN ITS ABOVE SUBMISSION AND CO MPUTATION OF MAT IS NOT CORRECT AND NOT ACCEPTABLE.FROM THE PLAIN READING O F SECTION 115JB OF THE ACT, LD AO POINTED OUT THE FOLLOWINGS: M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 4 44 4 (I). IF INCOME-TAX PAYABLE ON TOTAL INCOME (AS COMP UTED AS PER I.T. ACT) IS LESS THAN 18.5% OF BOOK PROFIT THAN THE ASSESSEE IS SUB JECTED TO PAYMENT OF MAT @ 18.5% OF BOOK PROFIT. (II). BOOK PROFIT HAS BEEN DEFINED IN EXPLANATION B ELOW THIS SECTION. AS PER EXPLANATION (1), BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UND ER SUB-SECTION (2), AS INCREASED AND DECREASED BY CERTAIN ITEM MENTIONED THEREIN. (III). AS PER SUB-SECTION(2), NET PROFIT IS ARRIVED AT BY PREPARING ASSESSEES PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956) OR IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY. (IV).FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE H AS FIRST TO CALCULATE HIS BOOK PROFIT BY ADJUSTING (INCREASING AND DECREASING CERTAIN ITE MS AS MENTIONED IN THE EXPLANATION) HIS NET PROFIT PREPARED AS PER PROVISI ON OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956) OR IN ACCORDANC E WITH THE PROVISIONS OF THE ACT, GOVERNING SUCH COMPANY (IN THE CASE OF THE ASS ESSEE, IT IS AS PER PROVISION OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956). FROM THE CALCULATION OF MAT FURNISHED BY THE ASSESSEE, IT IS SEEN THAT FOR ARRI VING AT THE FIGURE OF BOOK PROFIT, THE ASSESSEE HAS DECREASED CERTAIN ITEMS (SUCH AS D IVIDEND AND AGRICULTURAL INCOME) TO HIS NET PROFIT. THE ASSESSEE IS ELIGIBLE TO ADJUST HIS NET PROFIT BY REDUCING SUCH ITEMS THAT ARE EXEMPT U/S 10 OF I.T. ACT. BUT, WHILE ADJUSTING THE NET PROFIT, THE ASSESSEE HAS WRONGLY CLAIMED 60% OF NET PROFIT BEING EXEMPT U/S 10(1) INSTEAD OF 60% OF COMPOSITE INCOME AS MENTIONED IN RULE 8 AND CIRCULAR NO. 495 DATED 22ND SEPTEMBER, 1987. IT IS PERTINENT TO MENT ION HERE THAT RULE 8 OF I.T. RULES,1962, DETERMINES THE TAX LIABILITY FROM THE I NCOME DERIVED FROM THE TEA GROWING AND MANUFACTURING ACTIVITY. THE RULE READS AS BELOW : 08. (1) INCOME DERIVED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUTED AS IF IT WERE INCOME DER IVED FROM BUSINESS, AND FORTY PER CENT OF SUCH INCOME SHALL BE DEEMED TO BE INCOM E LIABLE TO TAX. THE ABOVE RULE (READ WITH CIRCULAR NO. 495 DATED 22 ND SEPTEMBER, 1987) SPELLS OUT THAT 40% OF SUCH INCOME WILL BE TAXED AND REMAI NING 60% WILL BE TREATED AS M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 5 55 5 AGRICULTURE INCOME. 'SUCH INCOME' MENTIONED HERE RE FERS THE 'COMPOSITE INCOME' AS DETERMINED FOR THE PURPOSE OF DETERMINING INCOME LI ABLE TO TAX, BEFORE ADDING THE PROFIT CALCULATED ON BOUGHT LEAF. IN THE CASE OF TH E ASSESSEE, THE COMPOSITE INCOME (AS CALCULATED BY THE ASSESSEE HIMSELF) COMES TO RS 79,57,715/- AND 60% OF THIS COMPOSITE PROFIT, WHICH COMES TO RS. 47,74,629/ - H AS BEEN REPORTED AS AGRICULTURE INCOME. AND AS PER CALCULATION OF RULE 8, AGRICULTU RE INCOME COMES ONLY 47,74,629/ -, (60% OF COMPOSITE PROFIT OF RS 79,57, 715/ -) WHICH IS EXEMPT U/S 10(1) BEING AGRICULTURE INCOME. FOR THE CALCULATION OF BUSINESS PROFIT, THE ASSESSEE HAS CLAIMED ONLY 40% OF COMPOSITE PROFIT AND PROFIT ON BOUGHT LEAF. THUS, REMAINING 60% OF COMPOSITE PROFIT HAS BEEN LEFT BEI NG EXEMPT U/S 10(1),BUT, IN CALCULATION OF MAT THE ASSESSEE HAS CLAIMED 60% OF NET PROFIT (60% OF 3,15,48,276 = RS. 1,89,28,966/-) AS EXEMPT U/S 10(1 ). 5. THE AO NOTED THAT THE ASSESSEE IS ELIGIBLE TO RE DUCE THE BOOK-PROFIT BY THE AMOUNT OF AGRICULTURAL INCOME TO REACH AT THE FIGUR E OF ADJUSTED BOOK PROFIT. BUT, IN THE INSTANT CASE, 60% OF THE TOTAL COMPOSITE IN COME WHICH COMES TO RS. 47,74,629/- ONLY, [NOT 60% OF TOTAL NET PROFIT], WA S TO BE DECREASED FROM BOOK PROFIT BEING EXEMPT UNDER SECTION 10(1) AS, RULE 8 AND CIRCULAR 495 CONSIDERS ONLY 60% OF BOOK PROFIT OR NET PROFIT. BUT, THE ASS ESSEE COMPANY ADJUSTED DEDUCTION OF RS. 1,89,28,966/- (60% OF BOOK PROFIT) WHICH IS NOT ALLOWABLE, HENCE THE SAME WAS DISALLOWED BY AO AND 60% OF COMPOSITE INCOME WHICH COMES TO RS. 47,74,629/- ONLY WAS ALLOWED BY AO TO BE REDUCE D FROM BOOK PROFIT BEING EXEMPT U/S 10(1) OF THE ACT. THUS, MAT OF THE ASSES SEEWAS CALCULATED BY AO, AS FOLLOWS: M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 6 66 6 THIS WAY, LD AO COMPUTED THE BOOK PROFIT UNDER SECT ION 115JB OF THE ACT TO THE TUNE OF RS.2,67,29,847/-, AGAINST THE BOOK PROFIT COMPUTED BY ASSESSEE OF RS.1,25,75,510/-. 6. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WITH SUC CESS. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. BEFORE US,THE LD. DR FOR THE REVENUE HAS PRIMARI LY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOT ED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE DEFENDED THE ORDER PASSED BY THE LD CIT(A) . 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE LD COUNSEL SUBMITTED BEFORE US THAT IT WAS EXPL AINED TO THE LEARNED AO THAT WHILE COMPUTING THE PROFIT FOR CALCULATION OF-MAT U NDER SECTION 115JB OF THE ACT, THE ASSESSEE IS NOT AT ALL REQUIRED TO TAKE TH E FIGURE OF PROFIT AS COMPUTED UNDER NORMAL PROVISIONS. FOR COMPUTATION OF BOOKS P ROFITS, THE ASSESSEE HAS TO TAKE THE NET PROFIT AS PER THE PROFIT AND LOSS ACCO UNT PREPARED FOR THE YEAR IN ACCORDANCE WITH THE PROVISION OF PART 11 OF SCHEDUL E VI TO THE 'COMPANIES ACT, 1956. MORE SO, SECTION 115JB IS A COMPLETE CODE IN ITSELF FOR THE PURPOSES OF COMPUTING BOOK PROFIT. HOWEVER, THE LEARNED AO WAS NOT SATISFIED WITH THE SUBMISSIONS MADE BY THE ASSESSEE DURING THE ASSESSM ENT PROCEEDINGS. HE REFERRED TO PROVISIONS OF SECTION 115JB OF THE ACT IN THE AS SESSMENT ORDER AND HELD AS FOLLOWS: 'THE ASSESSEE IS ELIGIBLE TO ADJUST HIS NET PROFIT BY REDUCING SUCH ITEMS THAT ARE EXEMPT U/S 10 OF THE I. T. ACT. BUT WHILE ADJUSTING THE NET PROFIT, THE ASSESSEE HAS WRONGLY CLAIMED 60% OF NET PROFIT BEING EXEMPT U/S 10(1) INSTEAD OF 60% OF THE COMPOSITE INCOME AS MENTIONED IN RULE 8 AND CIRCULA R NO.495 DATED 22ND SEPTEMBER, 1987. WHILE CALCULATING THE BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961, ONLY THE AMOUNT REFERRED TO IN EXPLANATION 1 TO SEC. 115JB(2 ) OF THE INCOME TAX ACT, 1961 M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 7 77 7 CAN BE ADDED BACK TO THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE PREVIOUS YEAR TO THE RELEVANT YEAR. 9. WE NOTE THAT CBDT CIRCULAR NO.495 DATED 22ND SE PTEMBER; 1987 READ AS FOLLOWS: 'IN THE CASE OF A TEA COMPANY WHERE INCOME IS DERIV ED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER, ONLY 40 PER CENT OF SUCH INCOME IS LIABLE TO TAX UNDER RULE 8 OF THE INCOME-TAX RULES, 1962. 60 PER CENT OF THE INCOME, WHICH IS DISREGARDED FOR THE PURPOSES OF TAXATION IS CONSIDE RED TO BE AGRICULTURAL INCOME AND IS, THEREFORE, EXEMPT UNDER THE PROVISIONS OF C HAPTER III. THE NET PROFIT DETERMINED IN ACCORDANCE WITH SCHEDULE VI TO THE CO MPANIES ACT, 1956, HAS TO BE ADJUSTED, INTER ALIA, IN ACCORDANCE WITH CLAUSE (F) AND SUB-CLAUSE (II) OF THE EXPLANATION TO SECTION 115J(1). IN THE CASE OF THE TEA COMPANIES, THE BOOK PROFIT SHOULD BE COMPUTED BY MAKING ALL THE ADJUSTMENTS RE FERRED TO IN THE EXPLANATION. HOWEVER, NO ADJUSTMENT IN RESPECT OF CLAUSE (F) AND SUB-CLAUSE (II) OF THE EXPLANATION IS TO BE MADE FOR THE AGRICULTURAL INCO ME EARNED BY COMPANIES FROM TEA BUSINESS. 40 PER CENT OF THE ADJUSTED AMOUNT AR RIVED AT IN THIS MARKET WILL BE THE BOOK PROFIT OF THE TEA COMPANY IN ACCORDANCE WI TH RULE 8 OF THE INCOME TAX RULES. WE NOTE THAT THE ABOVE MENTIONED CIRCULAR OF CBDT READ WITH SECTION 115JB OF THE ACT, CLEARLY STATES THAT AGRICULTURAL INCOME EX EMPT U/S 10(1) OF THE ACT READ WITH RULE 8 OF THE RULES FOR THE PURPOSE OF COMPUTA TION BOOK PROFIT SHOULD BE COMPUTED BY MAKING ALL THE ADJUSTMENTS REFERRED TO IN IN EXPLANATION TO SECTION 115JB OF THE ACT EXCEPT CLAUSE (F) AND SUB-CLAUSE ( II) OF THE SAID EXPLANATION. 60% OF THE ADJUSTED AMOUNT IS EXEMPT U/S 10(1) OF THE A CT. NO ADJUSTMENT WOULD BE MADE OTHER THAN THE ADJUSTMENTS STIPULATED IN THE E XPLANATION TO SECTION 115JB OF THE ACT. 10. WE NOTE THAT THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE CO-ORDINATE BENCH IN I.T.A. NO. 731/KOL/2015 FOR ASSESSMENT YEA R 2010-11 ORDER DATED 03.02.2017 IN THE CASE OF LAXMI CO. LTD, WHEREIN TH E FACTS OF THE CASE WERE SIMILAR TO THE CASE OF THE ASSESSEE, THE RELEVANT P ORTION OF THE SAID ORDER IS REPRODUCED BELOW FOR REDAY REFERENCE: M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 8 88 8 22. IT IS CLEAR FROM THE CBDT CIRCULAR THAT THERE IS NO PROVISION FOR BIFURCATING INCOME FROM GROWING, MANUFACTURING AND SALE OF TEA AND INCOME FROM MANUFACTURING AND SALE OF TEA OUT OF LEAVES PURCHAS ED FROM THIRD PARTIES. IN OTHER WORDS, THE PROPOSED ADJUSTMENT IN THE IMPUGNED ORDE R U/S 263 OF THE ACT WAS BEYOND THE SCOPE OF DETERMINING OF BOOK PROFIT U/S 115JB OF THE ACT R.W. CBDT CIRCULAR NO.495 DATED 22.09.1987 AS WELL AS THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES (SUPRA). IN APOLL O TYRES LTD. (SUPRA), THE HONBLE SUPREME COURT HAD TO DECIDE THE FOLLOWING Q UESTION OF LAW: CAN AN ASSESSING OFFICER WHILE ASSESSING A COMPANY FOR INCOME TAX UNDER SECTION 115-J OF THE INCOME TAX ACT QUESTION THE CORRECTNESS OF THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE CO MPANY AND CERTIFIED BY THE STATUTORY AUDITORS OF THE COMPANY AS HAVING BEE N PREPARED IN ACCORDANCE WITH THE REQUIREMENTS OF PARTS II AND II I OF SCHEDULE VI TO THE COMPANIES ACT ? THE HONBLE SUPREME COURT AFTER EXTRACTING THE PROV ISIONS OF SEC.115J OF THE ACT FOUND THAT THE INTENT AND PURPOSE OF SEC.115J OF TH E ACT, AS EXPLAINED BY THE HONBLE FINANCE MINISTER WHEN HE INTRODUCED THE REL EVANT BILL CONTAINING THE SAID PROVISIONS, WAS THAT HIGHLY PROFITABLE COMPANI ES WERE SHOWING NIL INCOME FOR THE PURPOSE OF INCOME TAX CALLING THEM AS 'ZERO -TAX' COMPANIES AND THAT THE PROVISIONS OF SEC.115J WERE BEING INSERTED SO THAT ALL PROFITABLE COMPANIES PAY SOME TAX AND HENCE A PROVISION WHEREBY EVERY COMPAN Y WILL TO HAVE TO PAY A 'MINIMUM CORPORATE TAX' ON THE PROFITS DECLARED BY IT IN ITS OWN ACCOUNTS WAS BEING INTRODUCED. THE HONBLE COURT THEREAFTER HELD THAT FOR THE SAID PURPOSE, SECTION 115-J MAKES THE INCOME REFLECTED IN THE COM PANIES BOOKS OF ACCOUNTS AS THE DEEMED INCOME FOR THE PURPOSE OF ASSESSING THE TAX. THE BOOKS OF ACCOUNTS OF THE COMPANY IS PREPARED IN ACCORDANCE WITH THE PROV ISIONS OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT. THE HONBLE COURT HELD THAT WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, AN ASSESSING OFFI CER UNDER THE IT ACT HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERE NCE TO THE PROVISIONS OF THE COMPANIES ACT WHICH OBLIGATES THE COMPANY TO MAINTA IN ITS ACCOUNT IN A MANNER PROVIDED BY THE COMPANIES ACT AND THE SAME TO BE SC RUTINISED AND CERTIFIED BY STATUTORY AUDITORS AND WILL HAVE TO BE APPROVED BY THE COMPANY IN ITS GENERAL MEETING AND THEREAFTER TO BE FILED BEFORE THE REGIS TRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EXAMINE AND SATISFY TH AT THE ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT. IT WAS ALSO HELD THAT IF THE LEGISLATURE INTENDED THE ASSE SSING OFFICER TO REASSESS THE COMPANY'S INCOME, THEN IT WOULD HAVE STATED IN SECT ION 115-J THAT 'INCOME OF THE COMPANY AS ACCEPTED BY THE ASSESSING OFFICER'. THE FINAL CONCLUSION OF THE HONBLE SUPREME COURT ON THE ISSUE WAS: 9. THEREFORE, WE ARE OF THE OPINION, THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 115-J HAS ONLY T HE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIE S BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAI NTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OF FICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTION S AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFF ERENTLY, THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PR OVIDED IN THE EXPLANATION TO SECTION 115-J. M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 9 99 9 23. THEREFORE THE AO HAS TO ACCEPT THE PROFIT AS PE R THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT AND T HEREAFTER HE CAN PROCEED TO MAKE THE ADDITIONS AND DELETIONS SET OUT IN THE E XPLANATION TO SEC.115JB OF THE ACT. HE CANNOT MAKE ANY ADJUSTMENT WHICH IS NOT PER MITTED UNDER EXPLANATION TO SEC.115JB OF THE ACT. THE INTERPRETATION AS ABOVE B Y THE HONBLE SUPREME COURT WILL EQUALLY APPLY TO THE PROVISIONS OF SEC.115JB O F THE ACT AS WELL, AS THOSE PROVISIONS ARE IDENTICAL TO THE PROVISIONS OF SEC.1 15J OF THE ACT WITH CERTAIN VARIATIONS, WHICH DOES NOT IN ANY WAY ALTER THE STA RTING POINT OF COMPUTATION OF BOOK PROFIT U/S.115J OF THE ACT. IF THE CBDT CIRCUL AR REFERRED TO ABOVE AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F APOLLO TYRES (SUPRA) ARE READ TOGETHER, THE ONLY CONCLUSION THAT CAN BE REAC HED THAT THE COMPUTATION OF BOOK PROFIT AS DONE BY THE ASSESSEE IS CORRECT AND CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 24. WE ALSO FIND THAT SIMILAR COMPUTATION HAS BEEN ACCEPTED BY THE REVENUE EVEN IN A.Y.2012-13 TO 2014-15. ORDERS OF ASSESSMENT FOR A.Y.2013-14 AND 2014-15 HAVE BEEN PASSED AFTER ORDER PASSED U/S 263 OF THE ACT. WE THEREFORE ARE OF THE VIEW THAT THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISION U/S 263 OF THE ACT, IN SO FAR AS IT RELATES TO DETERMINATION OF BOOK PROFI T U/S 115JB OF THE ACT. 11. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF CO- ORDINATE BENCH IN THE CASE OF LAXMI CO. LTD (SUPRA) . THE LD. DR FOR THE REVENUE DID NOT BRING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF THE TRIBUNAL IN THE CASE OF LAXMI CO. LTD. (SUPRA) AND THERE IS NO ANY CHANGEIN FACTS AND IN LAW. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF T HE CO-ORDINATE BENCH IN LAXMI CO. LTD (SUPRA), WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A). 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 03.04.2019 SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 03 /04/2019 ( SB, SR.PS ) M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. ITA NO.2250/KOL/2017 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-6(4), KOLKATA 2. M/S WEST BENGAL MANUFACTURING CO. PVT. LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES