1994 (8) TMI 70 - AT - Income Tax

Issues Involved:
1. Quantum of book profit for the purpose of Section 115J of the IT Act, 1961.
2. Inclusion of refund of countervailing duty in book profit.
3. Deduction of additional depreciation in book profit computation.
4. Validity of adjustments made by the Assessing Officer under Sections 143(1) and 154 of the IT Act.
5. Computation of book profit under Section 115J in different appeals.

Detailed Analysis:

1. Quantum of Book Profit for the Purpose of Section 115J of the IT Act, 1961:
The primary issue in these appeals is the determination of the correct quantum of book profit under Section 115J of the IT Act, 1961 for the assessment year 1989-90. The assessee initially filed a computation of book profit excluding certain items but later revised it. The Assessing Officer (AO) made several additions to the book profit, which were contested by the assessee.

2. Inclusion of Refund of Countervailing Duty in Book Profit:
The AO included the entire refund of countervailing duty (CVD) amounting to Rs. 1,88,01,243 in the book profit. The CIT(A) directed to consider only the CVD refund relatable to the assessment year 1989-90. The Tribunal observed that the refund of CVD should be included in the profits of the year under review as per Clause 2(b) of Part II of Schedule VI to the Companies Act. However, the Tribunal noted that the sum of Rs. 1,00,62,986 was already embedded in the starting figure of Rs. 87,95,707, hence a double addition was made by the AO, which was incorrect.

3. Deduction of Additional Depreciation in Book Profit Computation:
The AO added additional depreciation of Rs. 75,46,881 to the book profit. The Tribunal found that this amount was treated as a prior period expense in Schedule 9 to the profit and loss account and should not have been added back by the assessee in its second computation. The Tribunal directed the deletion of this adjustment as it was an error.

4. Validity of Adjustments Made by the Assessing Officer Under Sections 143(1) and 154 of the IT Act:
The Tribunal examined whether the adjustments made by the AO under Sections 143(1) and 154 were legally sustainable. It was held that the adjustments made by the AO were not within the purview of Section 115J, and the AO was obliged to consider the book profit as disclosed in the profit and loss account. The Tribunal found that the AO's adjustments were not justified except for the initial profit figure correction.

5. Computation of Book Profit Under Section 115J in Different Appeals:
The Tribunal addressed the computation of book profit in different appeals, noting that similar issues had been decided in ITA No. 400 (Coch)/91. The Tribunal upheld the CIT(A)'s decision to include the sum of Rs. 1,00,62,986 and exclude Rs. 87,38,257 from the book profit. The Tribunal also directed the AO to consider the correct depreciation amount and recompute the book profit accordingly.

Conclusion:
The Tribunal's judgment provided a detailed analysis of the computation of book profit under Section 115J, addressing the inclusion of CVD refund, additional depreciation, and the validity of AO's adjustments. The Tribunal upheld the CIT(A)'s decisions with modifications and directed the AO to recompute the book profit as per the Tribunal's findings. The assessee's appeal was partly allowed, and the Departmental appeals were dismissed.

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