Commissioner Of Income Tax Iii vs The Riddhi Siddhi Gluco Boils Limited Opponents

(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, 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 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 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.] Amit [N. V. ANJARIA, J.]