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TMI Blog2014 (6) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... under the same Act for the purpose of section 32AB. After arriving at profits of business or profession of the assessee, as stipulated in sub-section (3) of section 32AB, the said provision also provides for addition to such income as stipulated therein. After such additions, the authority has to determine the profits of business or profession for the purpose of extending the benefit under section 32AB. In the instant case, even if in the profit and loss account a sum of ₹ 32,22,067 paid as customs duty had been deducted by virtue of sub-section (3) of section 32AB as it is a contingent liability and not a ascertained liability, it has to be added. In the instant case, as the said amount was not deducted, the question of adding would not arise. The assessing authority was justified in upholding the claim of the assessee who had not excluded the same from the profit of business or profession. Hence, the orders passed by the revisional authority as well as the appellate authority are not in accordance with law and they are required to be set aside, accordingly set aside. - Decided in favour of assessee. - ITA NO.218/2008 - - - Dated:- 16-6-2014 - MR. N.KUMAR AND MR. B.MAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited under section 32AB. It was also observed that there was a valid order from the Department of Customs levying a duty of ₹ 11,25,400. The assessee did not agree with the levy and moved the High Court. The High Court did not set aside the order levying the duty, it merely stayed the recovery of the levy subject to certain conditions, one of them was the due payment of 25 per cent. of the duty. That 25 per cent. of the duty amounts to ₹ 32,33,067. The revisional authority was of the view that the assessee ought to have debited to the profit and loss account this amount according to the accountancy principles. 3. Part II of the Sixth Schedule to the Companies Act enjoins on the assessee to disclose in the profit and loss account, the expenditure incurred on, among others, rates and taxes, excluding tax on income. The assessee should have disclosed by way of debit the customs duty paid of ₹ 32,33,067 according to the Sixth Schedule and, therefore, the revisional authority rejected the claim of the assessee and the Assessing Officer was directed to modify the assessment by recomputing the relief under section 32AB of the Act and withdrawing the excess relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of business or profession of an assessee for the purposes of sub-section (1) shall be an amount computed in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act, 1956, and, therefore, the question of computing the profits in accordance with the Income-tax Act as held by the Tribunal is not correct. In terms of Part II of Schedule VI, what the assessee is expected to do is to disclose the information regarding the expenditure incurred on rates and taxes. If the said rates and taxes are ascertained, the same shall be deducted from the profits if it is not an ascertained liability. If it is disputed claim, there is no obligation to deduct the said amount out of the profits for the purpose of getting benefit under section 32AB. 6. Per contra, learned counsel appearing for the Revenue submitted that when the assessee in its profit and loss account as prescribed under the Companies Act has expressly mentioned about the liability of payment of customs duty and has also shown that a sum of ₹ 32,22,067 has been paid in terms of the court order in ascertaining the profit for the purpose of section 32AB, the said amount is to be deducted and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any other person, if it was not at any time previous to the date of such acqui sition owned by any person resident in India ; (iii) new machinery or plant includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India ; (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee ; (iv) 'Tea Board' means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953). (3) The profits of business or profession of an assessee for the purposes of sub-section (1) shall be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with the provisions of sub-section (1) of section 32 from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. 8. The said provision provides an incentive to an assessee who is carrying on business or profession, a deduction out of the total income 20 per cent. of the profits and gains of business or profession. If the said amount is deposited with the Development Bank or utilised for the purchase of any new machinery or plant without depositing any amount in an account under clause (a), how the profits of business or profession to be calculated for the purpose of section 32AB of the Act is found under sub-section (3), which is extracted above. 9. From a reading of the aforesaid provision it is clear that the profits of business or profession of an assessee for the purposes of sub-section (1) is to be arrived at on the basis of the profits computed in accordance with the requirements of Part II of the Sixth Schedule to the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the deductions at all. The provisions of the Companies Act expressly states what the assessee is expected to do is to disclose the information. What is deductible out of rates and taxes is the ascertained liability. If the liability is disputed and still the amount is paid in terms of the court order, that is the amount to be added under sub-section (3) of section 32AB for the purposes of determining the profits of business or profession for the purposes of section 32AB. Therefore, computation of profits under the Income-tax Act is totally different from the computation of profit under the Companies Act. The Tribunal was of the view that the profits as computed under the Income-tax laws alone is to be taken into consideration. 14. The apex court in the case of Apollo Tyres Ltd. v. CIT reported in [2002] 255 ITR 273 (SC) dealing with the object of introducing section 115J in the Income-tax Act held that section 115J makes the income reflected in the company's books of account the deemed income for the purpose of assessing the tax. The words in accordance with the provisions of Part II of Schedule VI to the Companies Act was made for the limited purpose of empowering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 15. Therefore, while deciding the benefit to which the assessee is entitled to under section 32AB of the Act, the Assessing Officer has only power to examine 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. Therefore, he cannot apply the principles under the Income-tax Act for the purpose of determining the profit of the assessee from business or profession for the purpose of section 32AB. In other words, there cannot be two incomes one for the purpose of the Companies Act and another for the purpose of the Income-tax Act maintained under the same Act for the purpose of section 32AB. After arriving at profits of business or profession of the assessee, as stipulated in sub-section (3) of section 32AB, the said provision also provides for addition to such income as stipulated therein. After such additions, the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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