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TMI Blog2014 (11) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... d to, obviously because an AO is precluded from making any additions, deletions, or alterations to the profit and loss account, referable to Section 115J of the Act - it is only the authorities under the Companies Act that are conferred with the power to scrutinise such accounts - the mere inclusion of those amounts in the profit and loss account referable to u/s 115J of the Act for the AY 1994-95 did not make much of difference from the point of view of income tax - Bringing those amounts to tax once again, may be, u/s 115J of the Act could have resulted in anomaly if not absurdity - no provision can be understood or interpreted in such a way as to lead an absurd or anomalous situation - This principle gets attracted with added vigour, when a situation is brought about, by operation of two different enactments – the order of the Tribunal is upheld – Decided against revenue. - I.T.T.A No. 100 of 2003 - - - Dated:- 23-9-2014 - L. Narasimha Reddy And Challa Kodanda Ram,JJ. For the Appellant : Sri S.R. Ashok For the Respondent : Sri S. Ravi JUDGMENT (Per Honble Sri Justice L. Narasimha Reddy) This appeal preferred by the revenue presents an important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e component of interest from the purview of Section 115J of the Act for the assessment years 1986-87 and 1987-88. Through its common order dated 21.06.2002, the Tribunal accepted the contention of the respondent for all the four years and to that extent, it has set aside the order of the Assessing Officer. Hence, this appeal by the revenue. Sri S.R. Ashok, learned Senior Counsel for the appellant submits that whatever may have been the justification for the Commissioner and the Tribunal for excluding the interest for the assessment years 1986-87 and 1987-88 on the ground that Section 115J of the Act was not on the statute book at the relevant point of time; there was absolutely no basis for it, to allow deduction of amount for the assessment years 1988-89 and 1989-90. He submits that once the respondent has reflected the amount in the book profit, referable to Section 115J of the Act, neither the department nor the assessee has any option to ignore the same in the context of levying tax under that provision. He placed strong reliance upon the judgment of the Supreme Court in Apollo Tyres Ltd. V. Commissioner of Income-tax . The learned Senior Counsel further submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 but before the 1st day of April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). Explanation. For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by (a) the amount of income-tax paid or payable, and the provision therefore; or (b) the amounts carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) of section 80HHC or sub-section (3) of section 80HHD, as the case may be; or (iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable. (2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J. We felt it necessary to extract the entire provision to understand the concept of book profit, adopted for the purpose of that Section. From a perusal of the explanation, it becomes clear that notwithstanding the freedom given to an assessee to state its book profit in its annual report submitted as part of its obligation under the Companies Act; he is kept under obligation to be truthful. The book p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment purposes. Since this amount has already been assessed by way of regular assessment u/s.143(3) the same is not considered in the computation statement to arrive at the taxable income/loss for the year under assessment. The only basis for him to disallow the deduction was that the said amount was not reflected under Section 115J of the Act at any point of time and once they are reflected in the current assessment year, there is no way, that the amount can be ignored. The plea of the appellant that once the amount, representing the interest on corporate deposit for the four years has been subjected to tax, that cannot be brought under the purview of the tax either directly or indirectly, did weigh only in part with the Commissioner. The yardstick adopted by him was that for the two years 1986-87 and 1987-88, Section 115J of the Act was not on the statute book and as such, the interest on corporate deposits for those two assessment years cannot be the subject matter of the assessment year 1994-95. As regards the other two subsequent assessment years, he took the view that as the interest for the two years not having been reflected in the book profits under Section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations under the mechanism of the Companies Act and the same cannot be the subject matter of scrutiny by the Income Tax Assessing Officer. Even while conceding inviolability the profit and loss accounts of a company, their Lordships kept intact the freedom of Assessing Officer to undertake scrutiny with reference to explanation. The relevant portion reads as under: There cannot be two incomes one for the purpose of the Companies Act and another for the purpose of income-tax both maintained under the Companys income, then it would have stated in Section 115J that income of the company as accepted by the Assessing Officer. In the absence of the same and on the language of section 115J, it will have to held that view taken by the Tribunal is correct and the High Court has erred in reversing the said view of the Tribunal. Two aspects becomes relevant in this regard. The first is whether the interest on corporate deposits of the respondent that is mentioned in the profit and loss account for the assessment year 1994-95 can be treated as the one for the relevant previous year which expression occurs at more places than one in Section 115J of the Act. Even the Assessing Officer di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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