9911796707
TMI Blog2011 (8) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... and cross objections by this consolidated order as issues are common. 2. The first common issue in revenue's appeal in ITA No 1470/K/2009 for Assessment Year 2006-07 and assessee's appeal in ITA No.1275/K/2010 for Assessment Year 2007-08 is as regards to computation of income u/s. 1 15JB of the Act for both years. For this, assessee as well as revenue have raised following grounds: "Grounds in Assessee 's appeal in ITA No 1275/K/2010: 1.0. Confirming the action of Assessing Officer in determining the Book Profit u/s. 115JB of the Act for the year under appeal at Rs.1823380456 as against Rs. 'Nil' declared in the return on the alleged ground that there was no Brought Forward Business loss & Depreciation as per books of account available for reducing from the net profit as shown in the profit and loss account under clause (iii) of Explanation 1 to Sec. 115JB(1). 1.1. Holding that the adjustment of Rs.381.55 cr. being the loss incurred by the appellant company in the earlier years, against the Share Premium account/Revaluation Reserve, pursuant to scheme sanctioned by the High Courts is not in contravention to the provisions of Companies Act. 1.2. Not appreciating that set off o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs.56,25,04,996/- Net effect (-) Rs.56,25,04,996/- Balance i.e. adjusted Book Profit u/s. 115JB NIL Tax payable u/s. 115JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115JB either to resort to any provision of the companies Act, so far as the reduction as per clause (iii) supra is concerned. As regards the claim of the assessee that the Net profit is to be recalculated as provided in Sub-section(2) of section 115JB is also not tenable since the accounts of the assessee company are audited and certified by the Auditors and the same has been adopted by the general meeting. In this respect, decision of the Hon 'ble Supreme Court in the case of CIT Vs. Apollo Tyres Ltd. [2002] 255 ITR 273(SC) is relied upon. Regarding the assessee's claim of computation of Book Profit u/s.115JB for A.Y.2005- 06 and loss/depreciation brought forward as per reworking, there is no provision for brought forward of any loss or unabsorbed depreciation if any determined u/s.115JB, and this year's assessment for Block period is separate and res-judicate is not applicable. Besides, any error in earlier assessment can be subjected to remedial measures. In fact, remedial measure is being taken for the A. Y. 2005-06." 4. Aggrieved against action of AO, assessee preferred appeal before CIT(A), who allowed the claim of assessee by going through auditors certificate vide p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was further noted in Notes Accounts No. 1: "Pursuant to the Scheme sanctioned by the Hon 'ble High Courts of Orissa and Gujarat, debit balance of Profit and Loss Account as on 30th September 2000 amounting to Rs. 381 55 crores transferred to Balance Sheet and stands adjusted to the extent of Rs. 281.55 crores against Share Premium Account and Rs.100.00 crores against Revaluation Reserve. These adjustments have been carried out as per the Orders of the said High Courts, implementation whereof is binding on the company." The compromise is an agreement with the creditors, with statutory backing Nevertheless, it was remarked that the compromise provision was "not in line with the generally prevailing accounting practices". This is contemporary evidence of the view taken by the auditors about the accounting treatment of debit balance as on the date of compromise by orders of the High Court. 6.4. Thereafter, item 5 of Notes on Accounts , Part B in Schedule 19 of Auditors Report for financial year 2006-07 refers to provision for taxation including the MAT as follows: "No provision for taxation including MAT is considered necessary since the loss is being carried over for ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of book profit for determination of the MAT liability. The Assessing Officer cannot revise the auditors' version of Profit & Loss Account. But the auditor himself has proposed two sets of Profit & Loss A/c : one incorporating the directions of the order of the High Court u/s 391(2) of the Companies Act and the other without such directions but under normal accounting practice. The auditors report that the latter must be adopted for the purpose of profit u/s 115JB. The Assessing Officer would not revise the audited accounts following the Supreme Court judgment. But according to the assessing officer, following the same judgment the auditor also would not he permitted to comment on the Profit & Loss A/c prepared by it. In my opinion, the Supreme Court judgment denies the right of rewriting the accounts to the Assessing Officer even on the ground that they are not in conformity with Parts II & III of Schedule VI of the Companies Act since auditors are expected to take care of this. But the judgment does not deny the auditors the right to observe that certain adjustments entries in the Profit & Loss A/c and Balance sheet are not in conformity with the normal accounting practice and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account. The auditor's certificate is reproduced here: 'T() WHOMSOEVER IT MAT CONCERN We Lodha & Co. Chartered Accountants, the Statutory Auditors of J K Lakshmi Cement Ltd., formerly J K Corp. Ltd. (the Company) have checked up books of accounts and other documents of the Company. Based on our checking we certify chat the Company had debit balance of Rs.381.55 crores as on 30.09.2000 in Profit and Loss Account of the Company, which Pursuant to the Scheme of Compromise and/or Arrangements sanctioned by the Hon 'ble High Courts of Orissa and Gujarat was transferred to Balance Sheet and stood adjusted against balance in Share Premium Account and Revaluation Reserve. We have been asked by the Company to work out status of losses and unabsorbed depreciation without considering above adjustment, adjustment of Debit Balance in Profit & Loss Account made against balance available in General Reserve, transfer of other reserves as available to/from profit & loss account and Deferred Tax Credit, accordingly the position of losses and unabsorbed depreciation as on 31-3-2004 is as under:- Financial Year (April-March) Asstt. Year Losses Cr./Rs. Unabserbed Dep. CriRs. Total Cr./Rs. 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it & loss A/c not prepared "in line with the generally accepted accounting practices" in F.Y 99-2000, which they had certified in implementation of a High Court order. The auditors further certify to the assessing officer in A.Y. 2005-06 that there is brought forward loss available for set off in A.Y. 2005-06 if the P & I. accounts of AY. 2000-01 to 2005-06 are recast in accordance with normal accounting principles & practices. The view in .the case of the: Apollo Tyres is that the profit & loss Account certified by the auditors cannot be revised by the assessing officer since it is presumed that auditors prepare the annual accounts in conformity with Part II & III Schedule VI of the Companies Act. But auditors themselves testify that a certain profit and loss Account in the earlier assessment year incorrectly removed the debit balance from the profit & loss account. It was necessary for the purpose implementing the High Court Order. But it need not determine the loss to be carried forward to the following assessment years. The losses to brought forward year after year for the purpose of the MAT provisions, should disregard the set off of debit balance in the P & L Accounts of FY. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated in the scheme was prejudicial to the interest of any party it could have been put up for reconsideration before the Hon 'ble Courts itself. However once the scheme is approved it is binding on all concerns and has to be implemented in totally Further whether the scheme of sanctioned by the Hon "ble High Courts of Orissa and Gujarat was in accordance with the provision of the Company Law or not is not at all relevance for determining the issue in question. Once the effect to the High Court order has been given and necessary adjustments has been made in the books of accounts maintained as per requirement of Company Law, the book profit of the Company for the purpose of section 115JB of the Act has to be calculated on the basis of the Balance sheet and P& L a/c subsequently prepared on the basis of the relevant books of accounts. 8.1 The decision of the Apex Court relied by the assessee is not applicable as the fact of the case is totally different. Moreover the principle laid in the case that neither any fresh enquiry can be made in regard to the entries made in the books of the accounts of the company nor the audited accounts certified by statutory auditors and approved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred to Balance Sheet and stood adjusted against balance in Share Premium Account and Revaluation Reserve. We have been asked by the Company to work out status of losses and unabsorbed depreciation without considering above adjustment, adjustment of Debit Balance in Profit & Loss Account made against balance available in General Reserve, transfer of other reserves as available to/from profit & loss account and Deferred Tax Credit, accordingly the position of losses and unabsorbed depreciation as on 31-3-2004 is as under:- Financial Year (April-March) Asstt. Year Losses CriRs. Unabserbed Dep. Cr./Rs. Total CriRs. 1997-98 1998-99 34.07 45.58 79.65 1998-99 1999-00 114.02 61.81 175.83 1999-00 2000-01 - 63.99 63.99 2000-01 2001-02 111.22 48.62 159.84 2001-02 2002-03 12.84 50.36 63.20 2002-03 2003-04 - 36.39 36.39 2003-04 2004-05 - 24.68 24.68 272.15 331.43 603.58 8.3. From the perusal of the said letter it is clear, that it has not been issued by the statutory Auditors under requirement of any statutory Act or rule. It is a general calculation of status of losses and unabsorbed depreciation as on 30.09.2000 made by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 200 1-02, debit balance of Rs.381.55 crore in assessee's Profit and Loss Account as on September 30, 2000 was adjusted to the extent of Rs.281.55 crore against Share Premium Account and remaining Rs.100 crore was adjusted against Revaluation Reserve with appropriate disclosure in the accounts including by way of Notes on Accounts. In final accounts of assessee company in respect of said adjustment, statutory auditors in their report dated September 29, 2001 to the shareholders of the assessee, stated as under:- "Regarding adjustment of debit balance in Profit and Loss Account, attention is invited to Note 1 - Schedule 20, according to which the debit balance in Profit and Loss Account has been adjusted against Share Premium and Revaluation Reserve amounting to Rs.281.55 crores and Rs.100.00 crores respectively pursuant to the sanction of Scheme of Compromise and/or Arrangement by Hon'ble High Courts of Orissa and Gujarat which though not in line with the generally accepted accounting practices has been carried out as per the Orders of the said High Courts, implementation whereof is binding on the Company". (emphasis added) The assessee during assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein, that assessee persisted with same stand and in its computation of book profit, adjusted the profit after depreciation of Rs.56.25 crore by identical amount claiming it to be an adjustment in terms of clause (iii) of Explanation to section 115JB(2) of the Act on account of brought forward loss. The assessee claimed that brought forward loss was Rs.246.53 crore which was lower than the amount of unabsorbed depreciation and as such the profit of Rs.56.25 crore for the assessment year 2006-07 was correctly reduced by brought forward loss. In support of its stand, assessee drew attention of AO to qualified auditors' report in respect of accounts as on September 30, 2000 with regard to adjustment made in terms of sanctioned scheme and explained reasons for statutory auditors' qualification. Assessee contended that the adjustment of debit balance in Profit and Loss account with Share Premium Account and Revaluation Reserve was contrary to accounting standards/principles and was not to be taken into account in computing the book profit under section 1 15JB of the Act. It was contended that provisions of sanctioned scheme did not bind computation under the Act and the computation had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vily relied on decisions of Hon'ble Supreme Court in the case of Apollo Tyres (supra) and also in the case of Malayala Manorama Co. Ltd. Vs. CIT (2008) 300 ITR 251 (SC) and stated that AO had only power of examining whether the books of account were certified by the authorities under Companies Act as having been properly maintained in accordance with Companies Act. He stated that in instant case, books of account were so certified and as such, AO had no jurisdiction to go beyond the net profit shown in Profit and Loss Account or to make any adjustment not provided for by Explanation to section 115JB(2) of the Act. Ld. Counsel Shri M. P. Agarwal cited several decisions in support of proposition that res judicata was not applicable in taxation matters and determination made by AO for assessment year 2005-06 was not binding in any subsequent year. He further argued that, in any event, such determination was erroneously made and had since been rectified under section 154 of the Act by an order dated April 18, 2011. In support of contempt of court Shri M. P. Agarwal cited the case law of Hon'ble Supreme Court of R. L. Kapur Vs. State of T. N. AIR 1972 SC 858 and referred that jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India on treatment of reserve created on revaluation of fixed assets and Accounting Standard 10 relating to "Accounting for Fixed Assets". He elaborated that according to sub-section (1) of section 78 of Companies Act, 1956, provisions relating to reduction of share capital were applicable in respect of Share Premium Account as if Share Premium Account were paid up share capital of the company. According to him, scheme of arrangement neither provides for reduction of share capital of assessee nor provisions of Companies Act, 1956 in that behalf followed and further, assessee' s case did not fall within any of exceptions specified in sub-section (2) of section 78 of Companies Act, 1956. Thus, adjustment of debit balance in Profit and Loss Account against Share Premium Account did not have statutory backing though permitted by sanctioned scheme as part of debt restructuring exercise. Merely because Hon'ble High Courts had permitted such adjustment, it did not imply that the same was in accordance with accounting standards or that books of account containing such adjustment were in conformity with the requirements of company law. The scheme sanctioned by Hon'ble High Courts, unlike a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in terms of clause (iii) of Explanation on the basis of statutory auditors' opinion. In terms of sub-section (6) of section 211 of the Companies, 1956, the Balance Sheet and Profit and Loss Account included notes thereon and documents annexed thereto and such notes and documents could not be ignored by AO in computing book profit under section 115JB. Ld. Counsel Sh J.P. Kaithan placed reliance on judgment of Hon'ble Delhi High Court in CIT v Sain Processing and Weaving Mills P Ltd (2010) 325 ITR 565 (Del) and on the decision of Mumbai Bench of Tribunal in DCIT v Bombay Diamond Company Ltd (2010) 33 DTR 59(Mumbai) (Trib) in support of proposition that where accounts were not prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956, AO had powers to go beyond book profit as per audited accounts. It was argued that though principle of res judicata was not applicable in taxation matters, but rule of consistency required that a different view should not be taken in a subsequent year on the selfsame facts and law. Relying upon the said principle, it was argued that AO should not have for the assessment years 2006-07 and 2007-08 departed from the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profit as per Profit and Loss Account of assessee. (ii) Whether, in the given facts and circumstances of the case, for the purpose of computation of book profit adjustment under Explanation (iii) of section 115JB of the Act books of account are to be adjusted as per additional information in accordance with the provisions of Part II & III of Schedule VI of Companies Act, 1956. The provisions enacted in Chapter XII-B i.e special provisions relating to certain companies are that if the assessee be a company and its total income determined under the Act in respect of previous year is less than specified book profit, fictionally it will be deemed that the total income is chargeable to tax will be such book profit. This new Chapter XII-B, containing section 1 15J has been inserted by the Finance act 1987 w.e.f 1st April 1988 and this new section makes provision for levy of minimum tax on book profit of certain companies. This provision was enacted as a measure of equity, as certain companies which have, in fact, large profits in its books but, for the purpose of the Act, by virtue of various deductions which have been claimed, very little taxable income is disclosed. It is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tyres (supra), has laid down the principle that whether books of accounts are certified by authorities under Companies Act as having been properly maintained in accordance with Companies Act. Hon'ble Supreme Court in Apollo Tyres (supra) at page 280 of 255 ITR held as under: "Therefore, we are of the opinion, the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J." (emphasis added) But what if books of account are not so certified and statutory auditors have given a qualified report adversely commenting upon some accounting made by the company, assessee must then take note of auditors' qualification and make such working as is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier year for obtaining a tax advantage for itself. That however cannot make the principle to be applied any different irrespective of who stands to gain, if auditors' opinion in an earlier year reflects upon correctness of amount of loss/unabsorbed depreciation appearing in the books of account of a subsequent year, the AO must take into consideration such opinion and determine correct amount of brought forward loss/unabsorbed depreciation in computing the book profit of such subsequent year. 12. Another facet of argument is as regards the effect of orders of Hon'ble High Courts sanctioning the scheme of compromise/arrangement which provided for adjustment. In our view, Company Court whilst sanctioning scheme under sections 391 and 394 of Companies Act, 1956 does not determine how company before it should be assessed under provisions of the Act consequent to implementation of such scheme. That is a matter which can only be decided in appropriate proceedings under the Act. A scheme sanctioned under sections 391 and 394 of Companies Act does not have any over-riding effect or dispense with provisions of any other law including Companies Act. Such a scheme, unlike a scheme sanctioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ama Synthetics (I) Ltd (supra) held as under:- We agree with the Assessing Officer. Under the provisions, as they then existed, certain adjustments were required to be made to the net profit as shown in the profit and loss account. One such adjustment stipulated that the net profit shall be reduced by the amount(s) withdrawn from any reserves, if any such amount is credited to the profit and loss account. Thus, if the reserves created had gone to increase the book profits in any year when the provisions of section 115JB were applicable, the assessee became entitled to reduce the amount withdrawn from such reserves if such withdrawal is credited to the profit and loss account. Now, from the above facts, it is clear that neither the said amount of Rs. 288,58,19,000 nor Rs. 26,11,74,000 had ever gone to increase the book profits in the said year ending March 31, 2000 (being the financial year). Thus, when such amount(s) has not gone to increase the book value at the time of creation of reserve(s), there is no question of reducing the amount transferred from such revaluation reserves to the profit and loss account. Thus, the proviso to clause (i) of the Explanation to section 115JB(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute to the fact that the assessee in the impugned assessment year has earned gross profit of Rs. 10,38,13,765 on account of sale of its rights in an immovable property. There is also no dispute to the fact that this income has not been passed through the P&L a/c but has directly been taken to the balance sheet as capital reserve. According to the AO since the assessee has not prepared its accounts in the manner provided in Part II and Part III of Sch. VI to the Companies Act, therefore, the amount of Rs. 10,38,13,765 having not routed through the P&L a/c has to be added to the book profit for the purpose of provisions of s. 115JB. It is the submission of the learned counsel for the assessee that in view of the decision of Hon 'ble Supreme Court in the case of Apollo Tyres Ltd. (supra), the decision of the Hon 'ble Bombay High Court in the case of Kinetic Motor Co. Ltd. (supra) and the decision of the Co-ordinate Bench of the Tribunal in the case of Orson Trading (P) Ltd. (supra) the AO has no power to go beyond the accounts adopted in the AGM. 17. We find Part II and Part III of Sch. VI to the Companies Act read as under: "PART II Requirements as to P&L a/c 1. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g nature in amount. 19. However, in the instant case we find although the assessee has earned a profit of Rs.10,38,13,765 from the sale of rights in an immovable property the same has not been routed through the P&L a/c and has directly been credited to the balance sheet. Therefore, in our opinion, accounts are not prepared in *accordance with the manner provided in Part II and Part III of VI to the Companies Act. 20. The various decisions relied on by the learned counsel for the assessee are not applicable to the facts of the present case. In the case of Apollo Tyres Ltd. (supra) the question No. (i) before the Hon 'ble Supreme Court was as under: "(i) Can an AO while assessing a company for income-tax under s. 115J of the IT Act question 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 Parts II and III of Sch. VI to the Companies Act ?" 21. From the above it is clear that the issue before the Hon 'ble Supreme Court was under the provisions of s. 115IJ and when the accounts of the company are prepared in accordance with the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the provisions of s. 115JA and it has not been held that even if the accounts are not prepared in the manner prescribed as per Part II and Part III of Sch. VI of the Companies Act, 1956, the AO has no power to disturb the book profit declared by the assessee. 24. The various other decisions relied on by the learned CIT(A) in his order are also not applicable. In none of the case it has been held that even where the accounts are not prepared in the manner provided as per Part II and Part III of Sch. VI to the Companies Act, 1956 the AO has no power to go beyond the book profit as per the audited accounts. In our opinion, the AO cannot go beyond the book profits as per the audited accounts provided they are prepared as per the manner in Part II and Part III of Sch. VI to the Companies Act, 1956 and are adopted in the AGM. However, in the instant case, admittedly the accounts are not prepared in the manner provided in Part II and Part III of Sch. VI to the Companies Act, 1956 since the profit on sale of investments amounting to Rs. 10,38,13,765 which is a material amount, has not been routed through the P&L a/c. Therefore, the AO, in our opinion has the power to re-work th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hool which was included in employee's welfare expenses. The details of such expenses are as under: 1. Expenses & Subsidy to Staff Workers Club at Jaykaypura Rs. 1,35,1 70 2. Expenses & subsidy to Ladies Club at Jaykaypuram, Sirohi Rs.32,105 3. Expenses for running school at Jaykaypuram Rs.10,25,370 Rs.11,92,645 17. The assessee before Assessing Officer contended that major payment to school was in the nature of subsidy to employees as the school is run being near to assessee' s cement manufacturing unit at Jaykaypuram, Rajasthan. According to Assessing Officer, these expenses are directly falling under mischief of section 40A(9) of the Act and accordingly, he disallowed the same. Another reason for disallowance was that assessee was requested to submit details of students of school, school running expenses, number of employees' children admitted in school etc. but assessee could not submit any details. Hence, entire expenditure was disallowed by Assessing Officer. Aggrieved, assessee preferred appeal before CIT(A), who relying on ITAT's order for Assessment Year 1999-2000 allowed the claim of assessee vide para 2.2 of his appellate order as under: "2.2. It was poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of notional interest of Rs.3,82,500/- and Rs.5,00,000/- have listed following facts and reasons: "The Assessee Company had made deposit of Rs.40 lacs. The assessee has submitted that "this represents deposit of Rs. 1500000 given to M/s Oswal Food Limited which carried interest rate of 25.5% and Rs.2500000 to M/s HMG Financial Services Limited which carried interest rate of 20%. The two parties defaulted in repayment of the amount deposited and the legal case was filed by us. In view of the fact that principal deposit amount recovery itself was doubtful, we had not provided for the notional interest on the said deposit in the accounts under consideration and the amount principal was written off in the previous year relevant to Asstt Year 2006-0 7. The facts/ status is the same which was recorded under Para 4 of Sec.143(3) order dt.29.12.2006 for Asstt. Year 2005-06 (t Page 672 of Paper Book dt.10.05.2010) which is as under: Interest bearing - Inter-Corporate Deposits Amount Lac/Rs. Oswal Foods Ltd. (Legal Suit Filed) - Interest on ICD was @ 25.50% p.a. - Notional Interest works-out to Rs.382500 for financial year 3.82 Ending March 2004. HMG financial Services Ltd.(Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts Ltd. and Rs.500000/- on ICD of Rs.25 lacs given to M/s H.M.G.financial Services Pvt. Ltd. definitely accrued at the year-end especially because assessee had legal right in enforcing the collection of accrued amount. As such interest of Rs. 882500/- is treated as income on accrual basis." We find that this issue is squarely covered in favour of assessee and against the revenue by Tribunal's decision in earlier four years in assessee's appeal starting from Assessment Years 2001-02 to 2005-06 in ITA No759/K/2007, ITA No.2074/K/2007, ITA No.530/K/2008, ITA No. 531/K/2008 and ITA No.2124/K/2008. Respectfully following the Tribunal's decision in earlier years as cited above, we find that the facts are exactly identical, hence this ground of assessee' s CO is allowed. 21. Next common issue in this C.O. of assessee and ground no.2 of assessee's appeal in ITA No.1275/K/2010 is against the order of CIT(A) in not adopting the opening WDV as computed for the purpose of allowance of depreciation. For this assessee has raised following ground no.2 in its CO and ground nos. 2 and 2.1 in its appeal being ITA No.1275/K/2010: "C.O 69/K/2009 2. On the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the closing WDV of the immediately preceding year (i.e. As on 01.04.06) which the A.O. in his order dated 19,12,2007 for A.Y 2005-06 has recorded at Rs.1557645289. The A.O will recompute the depreciation allowable for A.Y 2006-07 by adopting the opening WDV at Rs. 1557645289. Accordingly, this issue of the assessee' s appeal is allowed for statistical purposes. 23. The next common issue in this C.O. and ITA No.1275/K/2010 of assessee is against the order of CIT(A) upholding the action of Assessing Officer charging interest u/s. 234B of the Act. For this, the assessee has raised following ground no.3 in its CO and following ground No.3.0 in its ITA No.1275/K/2010 : "C. O. No.69/K/2009 3. On the facts and in the circumstances of the case Ld. CIT(a) erred in not holding that the provisions of Sec. 234B of the Act are not applicable since in the impugned order dt. 05.12.2008 passed u/s. 143(3), the tax payable was computed u/s. 115JB of the Act. ITA No. 1275/K/2010 3.0. On the facts and in the circumstances of the case and in law, Ld. CIT(a), Central-1, Kolkata erred in not directing the Assessing Officer not to charge interest u/s. 234B and u/s. 234D of the Act on tax comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has raised following ground no.4: "4. On the facts and in the circumstances of the case Ld. CIT(A) erred in not directing the Assessing Officer that the tax computed as payable u/s. 115JB in the impugned order dt. 05.12.2008 passed u/s. 143(3) should have been quantified as available for credit u/s. 115JAA of the Act and is to be carried forward/set off in accordance with provisions of Sec. 115JAA of the Act." 26. We have heard rival contentions and gone through facts and circumstances of the case. We find that the CIT(A) has dismissed the issue by stating as under:"Since ground no.3 is allowed, ground No. 5 and 6 do not remain relevant. They are treated as dismissed." But we are of the view that MAT credit quantification as made in the order u/s. 143(3), which is to be carried forward/set off in accordance with the provisions of section 115JAA of the Act, is to be further carried forward accordingly. Accordingly, we direct the AO to make quantification of the same as per the provisions of section 1 15JAA of the Act. Accordingly, AO will quantify the MAT credit. 27. The next issue in ITA No.1417/K/2010 of revenue's appeal is against the order of CIT(A) deleting the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, had incurred losses and cases were pending before the BIFR suggesting that both the parties had negative net worth of capital. The Ld. Commissioner (Appeals) came to the conclusion that when the recovery of principal itself was in doubt, the waiver of interest could be considered to be in the interest of business and not conferring any favour by transferring profits to the debtors. The departmental appeal was dismissed. Hon 'ble Delhi High Court in the case of CIT vs. Goyal MG Gases P. Ltd. [303 ITR 159] held - when principal amount itself not recoverable and interest amount not recorded in the books of account, no real income accrued to the assessee by way of interest even if assessee was following mercantile system of accounting. Hon 'ble Supreme Court in the case of Mercantile Bank Ltd. Vs. CIT [283 ITR 84] held that where, for the assessment year 1978-79, the assessee, which was following the mercantile system of accounting, had credited interest on doubtful advances to the interest suspense account, the interest could not be brought to tax. 7. Considering the facts and circumstances in the light of various judgments cited by both the parties at bar as well as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional interest. This issue of revenue's appeal is dismissed. 29. The next issue in this appeal of revenue in ITA No.1417/K/2010 is regarding the order of CIT(A) allowing deduction u/s. 35(1)(ii). For this, revenue has raised following ground no.3: "3. i) That, the Ld. CIT(A), C-1, Kol has erred in allowing deduction claimed u/s. 35(1)(ii) by the assessee on account of donation made to Pushpawati Singhania Research Institute (PSRI). ii) That the Ld. CIT(A) has failed to consider that such associations requires to be notified and also to be approved for the time being by the appropriate authority. Mere notification is not sufficient for getting the allowance u/s. 35(1)(ii). iii) That, the Ld. CIT(A) has erred in giving relief to the assessee in violation of Rule 46A of the Act." 30. We have heard rival contentions and gone through facts and circumstances of the case. We find that, according to Ld. Counsel for assessee, in the Paper Book Assessee has enclosed CBDT's Notification dated.12.04.2007, which notified the donee i.e. Pushpawati Singhania Research Institute under Section 35(1)(ii) of the Act and this Certificate was made effective retrospectively from 1.4.2001 which ..... 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