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TMI Blog2005 (1) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... is no mention that the profit derived by the industrial undertaking must be calculated as per the provisions of the IT Act. Therefore, in our view, the logical interpretation would be that the profits derived by the industrial undertaking as per the books of account have to be reduced from the book profits. In the present case, while computing book profits, which is in consonance with the profit loss account prepared in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, the depreciation as provided in the books of account has been considered. If while computing the profits derived by the industrial undertaking, which is required to be reduced from the book profits as per clause ( v ), the provisions of the IT Act are applied and depreciation as admissible under IT Act is deducted, it would result into an anomalous situation. While the profit derived from the industrial undertaking, which is included in the book profits has been computed as per the books and no adjustment for depreciation has been made, while computing the income eligible for exemption u/s. 80-IA, the quantum of depreciation as per the provisions of the IT Act would be substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k profits for the purpose of section 115JA. The total book profits amounted to Rs. 73,73,691, which included profits derived from the manufacturing activity at Rs. 71,32,210, which was claimed exempt under section 80-IA. Accordingly, the balance income of Rs. 2,41,481 being the book profits were considered by the assessee for the purpose of section 115JA. The Assessing Officer, while computing the profits for the purposes of section 115JA, recomputed the exemption admissible under section 80-IA as per the provisions of the IT Act, with the result that the quantum of deduction available under section 80-IA was calculated by the Assessing Officer at Rs. 16.19 lakhs as against Rs. 71.32 lakhs calculated by the assessee. This variation was mainly on account of the fact that the assessee has considered depreciation as per the books of account at Rs. 27,27,801 whereas the Assessing Officer deducted depreciation at Rs. 81,86,700 as per the provisions of the IT Act. The Assessing Officer's action has been confirmed by the ld. CIT(A) and that is how the dispute has come up before us for adjudication. 3. The ld. counsel appearing on behalf of the assessee forcefully contended that provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ratio of this case may be reproduced below from the headnote : "The invocation of section 115J and section 115JA implies two distinct procedures, (1) determination of income under the normal provisions of the Act, which include section 80A(2) and section 80B(5), relied on by the Revenue and (2) determination of the book profit subject to the specified adjustments, and a comparison of the two results obtained by the two procedures. So, section 80A(2) and section 80B(5) which are applicable only in the first procedure, have no role to play in working out the deduction under section 80HHC eligible for being reduced for arriving at the book profit in terms of clause (iii) of Explanation of section 115J or clause (viii) of Explanation to section 115JA. There was no force in the contention on behalf of Revenue that in terms of section 115JA(4), all other provisions of the Act shall apply to every assessee in respect of whom provisions of section 115JA are invoked, and so, section 80A(2) and section 80B(5) are also applicable for the purpose of determining the book profit under section 115JA. Section 115JA(4) itself makes it clear that other provisions apply only when it is not othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid Explanation further stipulates that certain income have to be excluded from the book profits and for the purpose of the present case, clause (v) is relevant, which is reproduced below: "(v) the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2) of section 80-IA, for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the profits and gains under sub-section (5) of section 80IA." From the above provisions, it is notable that under the Explanation, the book profits cannot be increased by making any adjustment on account of depreciation. Further, the book profits are required to be reduced by the amount of profit derived by the industrial undertaking which is eligible for exemption under section 80-IA. Under clause (v), there is no mention that the profit derived by the industrial undertaking must be calculated as per the provisions of the IT Act. Therefore, in our view, the logical interpretation would be that the profits derived by the industrial undertaking as per the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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