DCIT, Coimbatore V. Western India Cashew Company Pvt. Ltd., Pollachi

ITA 829/CHNY/2015

• Counselvise Citation: 82921714 RSA 2015
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R KRISHNAN
• Keywords: Capital asset; Gift; Depreciation; Capital receipt
• Section: 2(14); 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO.829/MDS/2015 / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-I, 63-A, RACE COURSE ROAD, COIMBATORE. APPELLANT) V. M/S. WESTERN INDIA CASHEW COMPANY PVT. LTD., NO.88, R.P.TOWERS, COIMBATORE ROAD, POLLACHI 642002. PAN AAACW3202B RESPONDENT) / APPELLANT BY : SHRI A.V.SREEKANTH, JCIT / RESPONDENT BY : SHRI R. KRISHNAN, CA ! / DATE OF HEARING :.29.06.2015 '# ! / DATE OF PRONOUNCEMENT : 12.08.2015 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 28 .1.2015. - - ITA 829/ 15 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT WHIL E COMPUTING THE BOOK PROFIT U/S 115JB OF THE IT ACT, THE ASSESSING OFFICER HAS FOLLOWED THE PROCEDURE LAID I N THE EXPLANATION TO PROVISO TO SEC.115JB OF THE IT A CT. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT THE ASSESSING OFFICER WAS RIGHT IN DISALL OWING THE GRANT-IN-AID AND COMPENSATION RECEIVED WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF THE IT ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECE IVED AN AMOUNT OF ` 49,92,354/- FROM THE CENTRAL GOVERNMENT AS MACHINERY GRANT FOR THE PURPOSE OF MODERNIZATION AN D DIVERSIFICATION OF THE ASSESSEES PROCESSING PLANT RELATING TO CASHEW. THE ASSESSEE FILED THE SANCTION LETTER OF GOVERNMENT OF INDIA REGARDING THE GRANT BEFORE THE AO. ACCORD ING TO THE ASSESSEE, THIS AMOUNT OF GRANT WAS RECEIVED FOR ADD ITION TO FIXED ASSETS, THE ASSESSEE ERRONEOUSLY ACCOUNTED IT UNDER THE HEAD 'OTHER INCOME' IN THE PROFIT & LOSS ACCOUNT, THEREB Y RESULTING IN AN OVERSTATEMENT OF THE REVENUE PROFITS OF THE ASSE SSEE TO THE EXTENT OF ` 49,92,354/-. SIMILAR WAS THE CASE WITH THE AMOUNT OF COMPENSATION RECEIVED FROM THE STATE GOVERNMENT TOW ARDS DAMAGES CAUSED TO THE COMPOUND WALL OF THE ASSESSEE . THE AMOUNTS RECEIVED FROM THE STATE GOVERNMENT WAS ` 64,276/-. IT - - ITA 829/ 15 3 IS SEEN THAT THE PROFIT AND LOSS ACCOUNT WAS SIGNED ON 07.09.2010 FOR ADOPTION OF THE ANNUAL GENERAL MEETI NG. THE OVERSTATEMENT OF PROFIT IN THE PROFIT & LOSS ACCOUN T WAS NOTICED WHILE FILING THE RETURN OF INCOME IN ITR VI ON 26.0 9.2010. SINCE, THE P&L ACCOUNT WAS ALREADY SIGNED ON 07.09.2010, N O CORRECTION WAS POSSIBLE WHEN THE ASSESSEE NOTICED T HE ERROR ON 26.09.2010. HOWEVER, IT IS TO BE NOTED THAT IN THE COMPUTATION OF BOOK PROFITS AND THE RETURN OF INCOME, THE ASSESSEE DEDUCTED THE AMOUNT OF ` 50,56,630/- FROM THE PROFITS FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT TAX U/S. 115JB. BEFOR E THE AO, THE ASSESSEE FILED THE COPY OF RETURN OF INCOME IN WHIC H THE ADJUSTMENT WAS CARRIED OUT UNDER THE HEAD MINIMUM A LTERNATE TAX (MAT). ON VERIFICATION OF THE OTHER DETAILS FRO M THE FIXED ASSETS SCHEDULE OF THE BALANCE SHEET BY THE AO, THE TOTAL ADDITIONS TO PLANT AND MACHINERY FOR THE YEAR 2009- 10 WAS ` 2,89,35,769/-. AS AGAINST THE ABOVE MENTIONED ADDI TIONS TO PLANT & MACHINERY, THE AMOUNT CLAIMED BY THE ASSESS EE IN THE INCOME-TAX COMPUTATION WAS ` 1,64,57,309/- ONLY. IN THE DEPRECIATION SCHEDULE FOR THE INCOME TAX COMPUTATIO N, AN AMOUNT OF ` 1,24,78,460/- WAS CLAIMED LESS BECAUSE THE - - ITA 829/ 15 4 ASSESSEE DEDUCTED THE FOLLOWING ITEMS FROM THE ADDI TIONS TO PLANT AND MACHINERY: (I) GRANT-IN-AID RECEIVED FROM THE CENTRAL GOVT. ` 49,92,354 (II) FOREIGN EXCHANGE FLUCTUATION ` 74,86,106 3.1. THE ASSESSEE PREPARED ITS PROFIT & LOSS ACCOUNT AS PER PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT , 1956, BY TREATING TO ITS PROFIT & LOSS ACCOUNT THE GOVT. GRA NT FOR MACHINERY ACQUISITION AND COMPENSATION FOR LOSS OF ASSETS. WHILE COMPUTING THE PROFIT U/S 115JB ONLY THE PROFI TS IN THE NATURE OF INCOME ARE LIABLE TO TAX AND NOT CAPITAL RECEIPTS. ACCORDING TO THE ASSESSEE, THE RECEIPTS WHICH ARE N OT TAXABLE UNDER ANY PROVISIONS OF THE ACT CANNOT ALSO BE TREA TED AS PART OF BOOK PROFITS FOR SECTION 115JB. THE ASSESSEE BECAUS E OF THE ERROR COMMITTED WHILE PREPARING THE PROFIT & LOSS A CCOUNT (IN ACCOUNTING THE MACHINERY GRANT AND COMPENSATION FOR COMPOUND WALL AS OTHER INCOME IN THE P&L ACCOUNT), THE ASSESSEE CLAIMED THE AMOUNT OF CAPITAL SUBSIDY AS D EDUCTION U/S 115JB. AN ITEM OF INCOME WHICH DOES NOT COME UNDER THE PURVIEW OF INCOME-TAX CANNOT BE SUBJECTED TO TAX UN DER ANY OF THE PROVISIONS OF THE ACT AND THEREFORE CANNOT BE I NCLUDED FOR THE - - ITA 829/ 15 5 PURPOSE OF COMPUTING BOOK PROFITS U/S 115JB. THE A SSESSING OFFICER IN HIS ORDER HAS FOLLOWED THE PROVISIONS OF SECTION 115JB AND INVOKED EXPLANATION (1) OF PROVISO TO SECTION 1 15JB AND DISALLOWED THE ADJUSTMENT CLAIMED BY THE ASSESSEE U /S. 115JB. ACCORDING TO THE ASSESSEE, IT WAS A MISTAKE/ERROR C OMMITTED BY IT WHILE CREDITING THE PROFIT & LOSS A/C WITH THE M ACHINERY GRANT RECEIVED FROM THE CENTRAL GOVERNMENT AND THE COMPEN SATION RECEIVED FROM THE STATE GOVERNMENT, THE ASSESSING O FFICER ALSO SHOULD TAKE INTO CONSIDERATION THE DEPRECIATION CLA IMED BY THE ASSESSEE BY REDUCING THE GRANT-IN-AID RECEIVED FROM THE CENTRAL GOVERNMENT FOR THE VALUE OF THE FIXED ASSETS. HOWE VER, THE AO HAS NOT AGREED WITH THE ASSESSEE AND CONSIDERED THE ABOVE ITEM OF RECEIPT FOR COMPUTING THE BOOK PROFIT. ON THE OTHER HAND, THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION OF ` 50,56,630/- AS DEDUCTION FROM THE BOOK PROFITS AND ALLOWED THE CLAIM OF THE ASSESSEE. AGA INST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR SUBMITTED THAT FOR THE PURPOSE OF SEC .115JB OF THE ACT, BOOK PROFITS MEANS THE NET PROFIT AS SH OWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PRE PARED IN - - ITA 829/ 15 6 ACCORDANCE WITH THE PROVISIONS OF PARTS II AND II O F SCHEDULE VI TO THE COMPANIES ACT, 1956 AS INCREASED BY THE ITEM S MENTIONED AS (A) TO (J). 5. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT W HILE COMPUTING THE BOOK PROFITS U/S. 115JB, THE ASSESSIN G AUTHORITY DID NOT DEDUCT AN AMOUNT OF ` 49,92,354 WHICH WAS RECEIVED FROM THE CENTRAL GOVERNMENT AS MACHINE RY GRANT BY THE ASSESSEE FOR THE PURPOSE OF MODERNIZAT ION AND DIVERSIFICATION OF THE ASSESSEE'S PROCESSING PLANT. THE ASSESSEE ENCLOSED THE SANCTION LETTER OF THE GRANT. THE ASSESSING AUTHORITY ALSO DID NOT DEDUCT AN AMOUNT O F ` 64,276 RECEIVED FROM THE GOVERNMENT BY THE ASSESSEE AS COMPENSATION TOWARDS DAMAGES TO ITS FIXED ASSETS. T HE ASSESSEE ENCLOSED THE ORDER IN THIS REGARD FOR THE COMPENSATION. THE ASSESSEE HAD EXCLUDED THESE AMOUN T WHILE COMPUTING ITS BOOK PROFITS UNDER THE FIRM BEL IEF THAT THESE ARE CAPITAL RECEIPTS WHICH ARE NOT LIABLE TO TAX UNDER SECTION 115JB. THE INTENTION OF SECTION 115JB UNDE R THE ACT IS TO TAX ONLY THE 'NORMAL BUSINESS PROFITS OF A COMPANY AND NOT TO TAX THE PROFITS OTHER THAN THE NORMAL BU SINESS - - ITA 829/ 15 7 PROFITS GENERATED WHILE CARRYING ON THE BUSINESS AC TIVITIES. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF TH E TRIBUNAL, CALCUTTA SPECIAL BENCH, IN THE CASE OF SU TLEJ COTTON MILLS LTD VS. ACIT REPORTED IN 45 ITD 22, WH EREIN THE INTENT OF THE LEGISLATURE FROM THE INCEPTION OF SEC TION 8OVVA TILL THE AMENDMENTS MADE IN THIS REGARD TO SECTION 115J HAVE BEEN CONSIDERED. THE PURPOSIVE CONSTRUCTION OF SECTION 115J WAS OBSERVED AND CONCLUDED THAT THE BO OK PROFITS ARE ONLY THOSE WHICH ARE ASSESSABLE AS INCO ME UNDER THE ACT. IN THE INTERPRETATION OF STATUTES, O NE HAS TO ADOPT A CONSTRUCTION AS WILL PROMOTE THE GENERAL LE GISLATIVE PURPOSE UNDERLYING THE PROVISION. THE GENESIS OF SE CTION 115J, THEREAFTER SECTION 115JA AND NOW SECTION 115J B WAS TO ENSURE THAT THE ASSESSE, WHILE MAKING PROFIT FRO M OPERATIONS, SHOULD NOT ENJOY TAX FREE STATUS DUE TO VARIOUS DEDUCTIONS AVAILABLE. THEREFORE, THERE WAS NEVER AN Y INTENTION OF THE LEGISLATURE TO TAX WHAT IS NOT PRO FIT FROM OPERATIONS UNDER S. 115JB OF THE ACT. 5.1 THE LD. AR FURTHER SUBMITTED THAT T HE ASSESSEE HAD PREPARED ITS PROFIT AND LOSS ACCOUNT UNDER PART II AND PART III - - ITA 829/ 15 8 OF SCHEDULE VI OF THE COMPANIES ACT, 1956 BY CREDIT ING TO ITS PROFIT AND LOSS ACCOUNT THE GOVERNMENT GRANT FO R CAPITAL ASSETS ACQUISITION AND COMPENSATION FOR LOSS OF ASS ETS. ONLY THE PROFITS IN THE NATURE OF INCOME COMMERCIAL LY UNDERSTOOD CAN BE LIABLE TO TAX UNDER SECTION L15JB AND NOT CAPITAL RECEIPTS AND COMPENSATION FOR LOSS OF CAPIT AL ASSETS WHICH MAY ADMITTEDLY NOT BE COMMERCIAL IN NATURE LI KE GIFT, AMALGAMATION RESERVE, CAPITAL RESERVE AND REVALUATI ON RESERVE IRRESPECTIVE OF THE TREATMENT IN THE BOOKS OF ACCOUNT. THEREFORE, MERELY ON ACCOUNT OF ACCOUNTING TREATMENT GIVEN TO THE PARTICULAR RECEIPT, THE NATU RE OF RECEIPT CANNOT BE DECIDED. PART-IL OF SCHEDULE-VI O F THE COMPANIES ACT DEALS WITH THE REQUIREMENT OF PROFIT AND LOSS ACCOUNT WHEREAS PART-III DEALS WITH ITS INTERP RETATION. THE SUBSIDY AND COMPENSATION RECEIPTS CANNOT BE TRE ATED AS REVENUE RECEIPTS ARISING FROM THE CARRYING ON TH E BUSINESS OF THE ASSESSEE. 5.2. ACCORDING TO THE LD. AR, A S PER THE DEFINITION OF INCOME UNDER S. 2(24) OF THE ACT, INCOME INCLUDES ANY CAPI TAL GAINS WHICH ARE NOT CHARGEABLE UNDER SECTION 45 SHALL NOT BE - - ITA 829/ 15 9 TREATED AS INCOME UNDER SECTION 2(24) OF THE INCOME -TAX ACT AND CONSEQUENTLY AS THE CHARGING SECTION I.E., SECT ION 4 OF THE INCOME-TAX ACT FAILS AND SUCH RECEIPTS SHALL NO T BE CHARGEABLE TO TAX UNDER ANY OTHER PROVISIONS OF INC OME-TAX ACT. THE SUBSIDY RECEIPTS AND COMPENSATION RECEIPTS BY THE ASSESSEE ARE NOT ASSESSED TO TAX AS CAPITAL GAINS. IN THIS REGARD, THE ASSESSEE RELIES THE DECISION OF THE SUP REME COURT IN THE CASE OF CIT VS. D.P. SANDHU BROTHERS R EPORTED IN 273 ITR 1. THE ASSESSEE THEREFORE SUBMITS THAT T HE RECEIPTS WHICH ARE NOT TAXABLE UNDER ANY PROVISIONS OF THE ACT CANNOT BE TREATED AS PART OF BOOK PROFIT UNDER SECTION 115JB AND BROUGHT TO TAX. IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITS THAT ONLY OPERATIONAL BUSINESS INC OME AS COMMERCIALLY UNDERSTOOD CAN BE LIABLE TO TAX UNDER S. 115JB AND NOT EVERY CREDIT TO THE PROFIT AND LOSS A CCOUNT. 5.3. FURTHER, THE LD. AR SUBMITTED THAT T HE EXPLANATION TO THE SECTION 115JB ALSO REFERS TO THE EXCLUSION OF INCOM E WHICH IS NOT CHARGEABLE TO TAX UNDER SECTION 10 FOR CALCU LATING BOOK PROFIT. THUS, ON THE SAME LINE, OF WHAT IS CHA RGEABLE TO TAX, IS ONLY TO BE PART OF THE OPERATING BUSINESS P ROFIT, CAPITAL - - ITA 829/ 15 10 AND COMPENSATION RECEIPTS CANNOT BE BROUGHT WITHIN THE MEANING OF BOOK PROFITS U/S. 115JB. OTHERWISE, VIRTUALLY IT WILL MEAN TAXING CAPITAL RECEIPT AS INCOME WHICH IS NOT THE INTENTION OF THE SECTION 115JB OF THE ACT. 5 .4. ACCORDING TO THE LD. AR, T HE ASSESSEE HAS DEDUCT E D THE AMOUNT OF CAPITAL SUBSIDY AND THE COMPENSATION AMOUNTS FROM THE ADDITIONS TO PLANT AND MACHINERY A ND BUILDINGS RESPECTIVELY IN THE DEPRECIATION CLAIMED FOR INCOME TAX PURPOSES. THEREFORE THE DEPRECIATION CLA IMED BY THE ASSESSEE IS DEFICIENT TO THE EXTENT OF THE SUBSIDY AND COMPENSATION RECEIVED. HAVING DONE SO, THE ASSESSEE CANNOT BE ASKED TO PAY BOOK PROFITS TAX FOR THIS SU BSIDY AND COMPENSATION WHICH WOULD RESULT IN TAXING THE ASSES SEE TWICE FOR THE SAME RECEIPTS. 5.5. THE LD. AR RELIED ON THE DECISION OF T HE ITAT COCHIN BENCH IN ACIT, KOTTAYAM VS THE NILIGIRI TEA ESTATE LTD. REPORTED IN 47 TAXMANN 329 AND SUBMITTED THAT PROFI T FROM SALE OF AGRICULTURAL LAND WHICH DOES NOT COME UNDER PURVIEW OF 'CAPITAL ASSET' AS DEFINED U/S 2(14) DOES NOT CO ME UNDER THE PURVIEW OF THE ACT AT ALL AND THEREFORE, CANNOT BE INCLUDED FOR PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB. AN - - ITA 829/ 15 11 ITEM OF INCOME WHICH DOES COME UNDER THE PURVIEW OF INCOME TAX CANNOT BE SUBJECTED TO TAX UNDER ANY OF THE PRO VISIONS OF THE ACT. ACCORDINGLY, THE PROFIT FROM SALE OF AGRIC ULTURAL LAND, WHICH IS NOT A 'CAPITAL ASSET', WAS HELD, CANNOT BE INCLUDED FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB. 5.6. TO SUPPORT HIS ARGUMENTS, THE LD. AR RELIED ON THE FOLLOWING JUDGEMENTS: 1. CADELL WEAVING MILL CO. (P) LTD. VS. CIT (249 IT R 265) (BOMBAY) 2. ACIT VS. MUKUND LTD. (ITA NO.304/MUM/2004 3. ITO V. SURAJ JEWELLERY (I) LTD. (2009) 21 SOT 79 (MUM) 4. ITO V. FRIGSALES (I) LTD. 4 SOT 376 (MUM) 5. ORIENTAL CONTAINERS LTD. VS. JCIT 19 SOT 30 (MUM ) 6. SUTLEJ COTTON MILLS LTD. VS. AC1T 45 1TD 22 (CAL ) (SB) 7. GKW LTD. V. JCIT 74 1TD 161 (CAL) 8. HITKARI FIBRES LTD. V. JCIT (90 ITD 654) 9. GKW LTD. V. JCIT (74 ITD 161(CAL.) 10.ACIT, KOTTAYAM, V. THE NILIGIRI TEA EASTE LTD. ( 47 TAXMAN.COM 329) 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL - - ITA 829/ 15 12 ON RECORD. THE MOOT QUESTION THAT NEEDS TO BE DE CIDED IS WHETHER PARTS II AND III OF SCHEDULE VI TO THE COMP ANIES ACT PERMITS THE EXCLUSION OF THE ABOVE RECEIPTS RELATIN G TO CENTRAL AND STATE GOVERNMENT GRANT. IN OTHER WORDS, CAN A PROFIT AND LOSS ACCOUNT DRAWN UP WITHOUT CONSIDERING THE ABOVE RECEIPTS SAID TO BE IN ACCORDANCE WITH THE PROVISIONS OF PAR TS II AND III OF SCHEDULE VI TO THE COMPANIES ACT OR NOT ?'. 7. IT IS TO BE NOTED THAT THE ASSESSEE HAS NOT MAD E ANY CLAIM OF DEDUCTION OF THESE RECEIPTS FROM THE BOOK PROFIT, WHICH GOES TO SHOW THAT THESE RECEIPTS AS SUCH IS NOT DED UCTIBLE FROM THE NET PROFIT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. MOREOVER, THE TAX ABILITY OF THESE RECEIPTS IS RELEVANT ONLY FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER THE NORMAL PROVISIONS OF THE INCOME-TA X ACT, AND HAS NOTHING TO DO WITH THE PREPARATION OF THE PROFI T AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. UNDER THESE CIRC UMSTANCES, AS LONG AS THESE RECEIPTS OF GRANT ARE PART OF PROF IT INCLUDED IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN PARTS II AND III OF SCHEDUL E VI TO THE - - ITA 829/ 15 13 COMPANIES ACT, IT CANNOT BE EXCLUDED FROM THE NET P ROFIT UNLESS SO PROVIDED UNDER THE EXPLANATION TO SECTION 115JB OF THE ACT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. IN THE ABSENCE OF ANY PROVISION FOR EXCLUSION OF THESE RECEIPTS IN THE COMPUTATION OF BOOK PROFIT UNDER TH E ABOVE PROVISION, THE ASSESSEE IS NOT ENTITLED TO THE EXCL USION CLAIMED. 8. IT IS THE CASE OF THE ASSESSEE THAT SINCE THES E RECEIPTS ARISING IN RELATION TO CAPITAL ASSET, THE SAME WAS EXEMPT FROM TAX AND IT SHALL NOT BE CHARGED TO TAX AND AS SUCH THE SAME IS TO REDUCE FROM THE NET PROFIT DETERMINED IN THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE WHILE COMPUTING 'B OOK PROFIT' WITHIN THE MEANING OF SECTION 115JB OF THE ACT. LEA RNED COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THAT THE PROVISIONS CONTAINED IN SUB-SECTION (5) OF SECTION 115JB OF TH E ACT THAT SINCE ALL OTHER PROVISIONS OF THIS ACT SHALL ALSO A PPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN SECTION 115 JB OF THE ACT, THE ASSESSEE IS ENTITLED TO REDUCE THESE RECEI PTS AS - - ITA 829/ 15 14 EXEMPTED UNDER NORMAL PROVISIONS OF THE ACT. FOR TH IS PROPOSITION THE ASSESSEE RELIED ON VARIOUS JUDGMENT S. WE HAVE PERUSED THE PROVISIONS OF SECTIONS 115J, 115JA AND 115JB OF THE ACT. ALL THESE SECTIONS ARE DEEMING PROVISIONS. SEC TION 115J HAS OVERRIDING EFFECT OVER ALL OTHER PROVISIONS OF THE ACT. SECTION 115JA AND 115JB HAVE ALSO OVERRIDING EFFECT OVER AL L OTHER PROVISIONS OF THE ACT TO THE EXTENT OF THE MATTER P ROVIDED IN THESE SECTIONS. SUB-SECTION (4) WAS INSERTED IN SECTION 1 15JA OF THE ACT. A PROVISION SIMILAR TO SUB-SECTION (4) OF SECT ION 115JA WAS NOT THERE IN SECTION 115J OF THE ACT. SUB-SECTION ( 4) OF SECTION 115JA READS AS 'SAVE AS OTHERWISE PROVIDED IN THIS SECTION, ALL OTHER PROVISIONS OF THE ACT SHALL APPLY'. IT IS, T HUS, CLEAR THAT ALL OTHER PROVISIONS OF THE ACT SHALL APPLY BUT SUBJECT TO THE PROVISIONS OTHERWISE PROVIDED IN SECTION 115JA OF T HE ACT. IN OTHER WORDS, THE PROVISIONS SPECIFICALLY PROVIDED I N SECTION 115JA SHALL HAVE OVERRIDING EFFECT OVER ALL OTHER PROVISI ONS OF THE ACT. THE PROVISION FOR COMPUTING BOOK PROFIT BY INCREASI NG OR REDUCING THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCO UNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT IS SPECIFICALLY PROVIDED IN SECTION 115J - - ITA 829/ 15 15 OR 115JA OR 115JB ITSELF AS THE CASE MAY BE, AND CO NSEQUENTLY ALL OTHER PROVISIONS OF THE ACT PROVIDING THE MANNE R OF COMPUTATION OF TOTAL INCOME UNDER THE NORMAL PROVIS IONS OF THE ACT CANNOT BE APPLIED WHILE COMPUTING BOOK PROFIT U NDER SECTION 115J OR 115JA OR 115JB, AS THE CASE MAY BE. WE DO N OT FIND ANY DIFFERENCE BETWEEN SECTION 115J OR 115JA OR 115 JB IN SO FAR AS METHOD OF COMPUTATION OF BOOK PROFIT AS PROVIDED IN THE EXPLANATION APPENDED THERETO IS CONCERNED. THE TRIB UNAL IN THE CASE OF ITO V. FRIGSALES (I) LTD. [2005] 4 SOT 376 HAS NOT APPLIED THE RATIO OF THE DECISION OF THE SUPREME CO URT IN THE CASE OF APOLLO TYRES LTD. [2002] 255 ITR 273. BUT THE FACT REMAINS THAT THE PROPOSITIONS LAID DOWN BY THE HON'BLE SUPR EME COURT IN THE CASE OF APOLLO TYRES LTD. [2002] 255 ITR 273 HAVE BEEN REITERATED AND RELIED UPON BY THE SUPREME COURT IN THE CASE OF HCL COMNET SYSTEMS AND SERVICES LTD. [2008] 305 ITR 409 WHICH HAS BEEN RENDERED IN THE CONTEXT OF SECTION 1 15JA OF THE ACT. AS PER SUB-SECTION (5) OF SECTION 115JB OF THE ACT, WHICH READS AS 'SAVE AS OTHERWISE PROVIDED IN THIS SECTIO N, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSE E, BEING A COMPANY, MENTIONED IN THIS SECTION'. HAVING REGARD TO - - ITA 829/ 15 16 EXPRESSION 'SAVE AS OTHERWISE PROVIDED IN THIS SECT ION' USED IN THIS SUB-SECTION (5) OF SECTION 115JB OF THE ACT, W E ARE OF THE CONSIDERED OPINION THAT THE EXPRESSION 'SAVE AS OTH ERWISE PROVIDED IN THIS SECTION 115JB' CLEARLY MEANS THAT WHAT IS PROVIDED IN SECTION 115JB SHOULD BE RELIGIOUSLY FOL LOWED AND ANYTHING OVER AND ABOVE THE MATTER PROVIDED IN SECT ION 115JB WILL BE SUBJECT TO OTHER PROVISIONS OF THE ACT. THE PROVISIONS OF SECTION 115JB HAVE AN OVERRIDING EFFECT UPON OTHER PROVISIONS OF THE ACT AS IS EVIDENT FROM THE SECTION ITSELF. THE METHOD OF COMPUTATION OF BOOK PROFIT PROVIDED IN THE EXPLANAT ION TO SECTION 115JB SHOULD BE FOLLOWED WHILE COMPUTING THE BOOK P ROFIT AND THE NORMAL PROVISIONS OF COMPUTATION OF PROFIT UNDE R ANY HEAD OF THE ACT SHALL NOT BE APPLICABLE. IT IS ALSO HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF JINDAL THERMAL POWER CO. LTD. V. DEPUTY CIT REPORTED IN [2006] 286 ITR 182 , THAT EXCEPT FOR SUBSTITUTION OF THE TAX PAYABLE UNDER THE PROVISION S AND MANNER OF COMPUTATION OF BOOK PROFITS, ALL THE PROVISIONS OF THE TAX INCLUDING THE PROVISION RELATING TO CHARGE, DEFINIT IONS, RECOVERIES, PAYMENT, ASSESSMENT, ETC., WOULD APPLY IN RESPECT O F THE - - ITA 829/ 15 17 PROVISIONS OF THIS SECTION AND IN VIEW OF THE SCHEM E OF THE INCOME-TAX ACT. 9. LEARNED COUNSEL FOR THE ASSESSEE DID NOT BRING A NY AUTHORITY ON RECORD FOR HOLDING THAT THESE IMPUGNED RECEIPTS ARE TO BE REDUCED FROM THE NET PROFIT SHOWN IN THE PROF IT AND LOSS ACCOUNT PREPARED UNDER THE COMPANIES ACT FOR THE PU RPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE AC T. IF SUCH REDUCTION IS ALLOWED FROM THE NET PROFIT DETERMINED IN THE PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF COMPUTING 'BOOK PROFIT' UNDER SECTION 115JB OF THE ACT, THE SAME WOULD CERT AINLY BE AGAINST THE ABOVE REFERRED DECISIONS LAID DOWN BY T HE HONOURABLE SUPREME COURT IN THE CASE OF APOLLO TYRE S LTD. [2002] 255 ITR 273 AND HCL COMNET SYSTEMS AND SERVICES LTD. [2008] 305 ITR 409 WHEREIN THE POWERS OF THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSE OF SECTION 115J OR 115JA WERE LIMITED AS DISCUSSED ABOVE. THE CASE LAW RELIED UPON BY LEARNED COUNSEL FOR THE ASSESSEE, SEVERAL C ASES WERE RENDERED BEFORE THE DECISION OF THE APEX COURT IN T HE CASE OF APOLLO TYRES LTD. [2002] 255 ITR 273 AND HCL COMNET SYSTEMS AND SERVICES LTD. [2008] 305 ITR 409 AND THE REST OF THE CASES, - - ITA 829/ 15 18 THE FACTS ARE DISTINGUISHABLE IN VIEW OF DECISION O F SPECIAL BENCH, HYDERABAD IN THE CASE OF RAIN COMMODITIES L TD. V. CIT [4 ITR (TRIB) 551]. EVEN DECLARATION OF DIVIDEND I S NOT A MUST FOR APPLICATION OF SECTION 115JB. THE PURPOSE OF THIS S ECTION IS TO TAX COMPANIES WHICH WERE MAKING PROFITS BUT NOT PAYING TAXES DUE TO SO MANY EXEMPTIONS AND DEDUCTIONS. THE REFERENCE TO THE DECLARATION OF DIVIDEND IN THE CONTEXT OF SECTION 1 15JB BY THE FINANCE MINISTER OR BY THE CIRCULARS ARE MERELY EXP LANATIONS TO THE KIND OF MALAISE THAT THE SECTION SOUGHT TO ADDR ESS. FOR INVOKING THIS SECTION, THERE IS NO PREREQUISITE CON DITION THAT THE COMPANY SHOULD HAVE DECLARED DIVIDEND TO THE SHAREH OLDERS. 10. IT IS NOT THE INTENTION OF THE LEGISLATURE TO S UBSTITUTE THE OTHER PROVISIONS OF THE ACT IN PLACE OF WHAT IS SPE CIFICALLY MADE AVAILABLE IN SECTION 115JB IN SO FAR AS THE COMPUTA TION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT IS CONCERNED. THE ENTIRE MECHANISM FOR THE COMPUTATION OF BOOK PROFIT IS CLE ARLY SET OUT IN SUB-SECTION (1) OF SECTION 115JB READ WITH EXPLANAT ION THERETO. THE STARTING POINT BEING THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVIS IONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT BUT ALSO THE ITEMS, - - ITA 829/ 15 19 WHICH ARE TO BE INCREASED AS STIPULATED IN CLAUSES (A) TO (H), AND THE ITEMS, WHICH ARE TO BE REDUCED AS SPECIFIED IN CLAUSES (I) TO (VII), FIND SEPARATELY MENTIONED IN THE SCHEME OF T HE SECTION ITSELF. SO, THE COMPUTATION OF BOOK PROFIT IS TO BE DONE STRICTLY AS PER THE EXPLANATION TO SECTION 115JB OF THE ACT AND HENCE, NO ASSISTANCE FROM ANY OTHER SECTION OF THE ACT CAN BE TAKEN FOR THAT PURPOSE. THE DECISIONS RELIED UPON BY THE LEARNED D EPARTMENTAL REPRESENTATIVE IN THE CASES OF APOLLO TYRES LTD. [2 002] 255 ITR 273 AND HCL COMNET SYSTEMS AND SERVICES LTD. [2008] 305 ITR 409 HAD CLEARLY LAID DOWN A LAW THAT THE ASSESSING OFF ICER HAS ONLY LIMITED POWER OF MAKING INCREASES AND REDUCTIO NS TO THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT AS PROVIDED FOR IN THE EXPLANATION TO SECTION 115J OR 115JA OF THE ACT. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE, IT IS CLEAR TH AT THE ASSESSING OFFICER, WHILE COMPUTING THE BOOK PROFIT OF A COMPA NY UNDER SECTION 115JB OF THE ACT, HAS ONLY THE POWER OF EXA MINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE A UTHORITIES UNDER THE COMPANIES ACT AS HAVING BEING PROPERLY MA INTAINED IN ACCORDANCE WITH THE COMPANIES ACT, AND THE ASSESSIN G OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASE S AND - - ITA 829/ 15 20 REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO SE CTION 115JB OF THE ACT. THESE RECEIPTS IN QUESTION ARE NOT COVERED BY ANY OF THE CLAUSES (I) TO (VII) OF EXPLANATION 1 TO SECTION 11 5JB OF THE ACT AND IN OUR OPINION, IT CANNOT BE REDUCED FROM BOOK PROFITS U/S.115JB OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED. ORDER PRONOUNCED ON WEDNESDAY, THE 12 TH OF AUGUST, 2015 AT CHENNAI. SD/- SD/- ( $% &'( ) ) ( $ ( * + ) ,-.//.0.12345.65.7.48 ,-.345.699:.5 ;8 ' )< /JUDICIAL MEMBER ! )<=>>9?3@.3@A2BC25 $' /CHENNAI, D) /DATED, THE 12 TH AUGUST, 2015. MPO* )E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I8 /CIT(A) 4. I /CIT 5. GJ& K /DR/ 6. &LM /GF.