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TMI Blog2008 (6) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... DELHI] . Therefore, we find no merit in this ground of the department and the same is dismissed. In the result, the appeal filed by the revenue is dismissed. - I.P. BANSAL AND DEEPAK R. SHAH, JJ. David Z. Chawngthu for the Appellant. Ashutosh Jain for the Respondent. ORDER I.P. Bansal, Judicial Member. - This is an appeal by the revenue. It is directed against the order of the CIT(A) dated 30-4-2007 for assessment year 2003-04. Ground No. 1 reads as under : 1.Ld. CIT (A) has erred in law and in facts and circumstances of the case in deleting the disallowance made by the Assessing Officer out of depreciation of pre-operative expenses element of Rs. 9,817 on account of depreciation charged on fixed assets. 2. The Assessing Officer disallowed depreciation of Rs. 9,870 with the following observations: "As the depreciation amount of Rs. 32,268 is included in the pre-operative expenses of Rs. 2,17,662 capitalised to plant and machinery, the opening WDV of plant and machinery will be reduced by the amount of Rs. 39,268 which will mean a disallowance of depreciation on P M @ 25 per cent of Rs. 39,268 i.e., Rs. 9,817. Hence the depreciation cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such reduction should be for a sum of Rs. 32,50,760 being the amount of income credited by the assessee in its Profit Loss Account in respect of income earned by the eligible unit. The Assessing Officer did not accept such claim of the assessee on account of interpretation of clause ( ii ) of Explanation to section 115JB(2). According to the Assessing Officer the word income as appearing in clause ( ii ) of Explanation to section 115JB(2) speaks only of the income and not of the profit . Thus, the Assessing Officer is of the opinion that the reduction from the net profit as per Profit Loss Account should be of the income which is computed as per the provisions of sections 28 to 44 of the Income-tax Act, 1961 and, thus, he computed the book profit as under: Net Profit as per P L Account Rs. 1,02,55,700 Less : Income exempt under section 10B as discussed above Rs. 4,90,103 Book Profit Rs. 97,65,597 8. Before the CIT (A) reference was made to the decision of Kerala High Court in the case of CIT v. GTN Textiles Ltd. [2001] 248 ITR 372 1 and it was contended that clause (3) of Explanation to section 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956) : Provided that while preparing the annual accounts including profit and loss account, ( i )the accounting policies; ( ii )the accounting standards adopted for preparing such accounts including profit and loss account; ( iii )the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) : Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act, ( i )the accounting policies; ( ii )the accounting standards adopted for preparing such accounts including profit and loss account; ( iii )the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets); or ( iib )the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause ( iia ); or ( iii )the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation. For the purposes of this clause, ( a )the loss shall not include depreciation, ( b )the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil ; or ( iv )the amount of profits eligible for deduction under section 80HHC, computed under clause ( a ) or clause ( b ) or clause ( c ) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or ( v )the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or ( vi )the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as per the provisions of the Act. The book profit gets substituted for the total income as computed under the Act. The book profit has, therefore, to be wholly quarantined from the said total income. For the determination of book profits thus any mode and manner of computation of total income under the Act has not to be applied unless specifically provided. Explanation to section 115JB provides the manner of computation of book profit. The starting point is the book profit as disclosed in the profit and loss account prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. Such profit is subject to adjustments specified in the Explanation to said section. In terms of Explanation ( ii ) to section 115JB. The amount of income to which provisions, inter alia , of section 10A/10B apply if such amount is credited to profit and loss account, is to be reduced from the profit as per profit and loss account. The amount of income to which, inter alia, section 10A/10B applies, if such amount is credited to the profit and loss account would only refer to such amount as appearing in the books of account. 13. A careful perusal of clause ( ii ) of Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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