2006 (9) TMI 227 - AT - Income Tax

Summary

Issues involved:
- Computation of book profits u/s 115JB of the IT Act, 1961
- Additions/disallowances related to delayed payment of provident fund, depreciation on software, and sales-tax payment u/s 43B of the Act
- Levy of interest u/s 234A and 234B of the Act

Computation of book profits u/s 115JB:
The issue revolved around the starting point for computing book profits under s. 115JB. The AO contended that extraordinary items should be ignored, while the assessee argued that all expenditures should be considered. The CIT(A) referred to the Supreme Court judgment in Apollo Tyres Ltd. case and upheld the AO's computation. However, the learned counsel highlighted that the starting point should be the final balance in the P&L a/c. The Tribunal agreed, emphasizing that all items classified in the appropriation account should be included in the P&L a/c. It was held that extraordinary items must be debited to the P&L a/c, and no other adjustments are permitted by law.

Additions/Disallowances:
- Addition of Rs. 3,62,005 for delayed provident fund payment was deleted as payment was made before the end of the accounting year.
- Depreciation at 25% on software was upheld as justified by the CIT(A).
- Disallowance of Rs. 9,34,455 on sales-tax payment under s. 43B was subject to further evidence submission by the assessee for reconsideration by the CIT(A).

Levy of Interest:
The last ground related to the levy of interest u/s 234A and 234B of the Act, with the AO directed to grant consequential relief to the assessee.

In conclusion, the appeal of the assessee was partly allowed, with decisions made on various issues including computation of book profits, additions/disallowances, and levy of interest under relevant sections of the Act.