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TMI Blog2016 (11) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... normal provisions of the Act. The Assessing Officer (AO) computed the 'book profit' under section 115JB of the Act at Rs. 73,76,84,930/- in view of the following additions thereto: - (i) Interest income Rs. 99,93,000/- (ii) Profit on sale of units of Mutual Funds Rs. 1,49,68,000/- In coming to this view, the AO placed reliance on the decisions of the Hon'ble Bombay High Court in the case of Veekaylal Investment Company Pvt. Ltd. reported in 249 ITR 597 and of the Coordinate Bench of this Tribunal in the case of Kopran Pharmaceuticals Ltd. (119 ITD 355) (ITAT, Mumbai) to hold that these two items (supra) are to be considered while computing the 'book profits' under section 115JB of the Act as they had not been routed through the Profit & Loss Account as per the provisions of Parts II & III of the Schedule-VI of the Companies Act, 1956. 2.2 Aggrieved by the order of assessment dated 29.03.2013 for A.Y. 2010-11, the assessee preferred an appeal before the CIT(A)-9, Mumbai. The learned CIT(A) dismissed the assessee's appeal vide the impugned order dated 12.11.2014 and upheld the AO's order following the same judicial pronouncements, as relied on by the AO, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some circumstances, during the setting up of the qualifying asset concerned, idle funds are often temporarily invested pending their expenditure on the qualifying asset. In determining the amount of borrowing costs eligible for capitalisation during the said period, any income earned on temporary investment of those idle borrowings, is to be deducted from borrowing costs incurred. The learned A.R. contends that as these items; i.e. interest income and income on sale of Mutual Funds, have been correctly considered in Capital WIP, they do not form part of the Profit & Loss Account and consequently do not fall for consideration under MAT, which is also in keeping with the provisions of section 211(3A) of the Companies Act. It is further submitted that 'Book Profits' under section 115JB has to be computed as per the net profit as per the Profit & Loss Account prepared under the provisions of Part-II and Part-III of Schedule VI of the Companies Act. The learned A.R. contends that once the accounts have been prepared as per the provisions of Companies Act, referred to above, and are adopted by the AGM of the company, the net profit disclosed in such accounts cannot be tinkered with by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany Pvt. Ltd. is misplaced. This decision of the Coordinate Bench has been upheld by the Hon'ble Bombay High Court in ITA No. 1609 of 2013 dated 12.08.2015. The learned A.R. prayed that in the factual and legal matrix of the case on hand, the assessee's appeal be allowed in view of the decisions. 3.3 Per contra, the learned D.R. for Revenue placed strong reliance on the orders of the authorities below. 3.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited. The facts of the matter as emanate from the record before us are that in the period under consideration the assessee-company was in the process of expanding its power generating plant and all expenditure incurred in this pre-commencement stage was reflected under the head Capital WIP and pre-operative expenses in its books of account. For the purpose of investment in the expansion of its power generation plant, the assessee had availed of bank loans from future procuring of plant and machinery and those funds that remained idle temporarily during the period under consideration were invested by it resulting in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judicial pronouncements (supra) and find that the Coordinate Bench of this Tribunal in the case of Forever Diamonds Pvt. Ltd. in ITA No. 5720/Mum/2011 dated 23.01.2013 has considered the aforecited decisions cited by both Revenue and the assessee and has decided this issue in favour of the assessee holding as under at paras 4 to 4.2 thereof: - "4. We have perused the records and considered the rival contentions carefully. The dispute raised in this appeal is regarding adjustment made by AO to the book profit computed under the provisions of section 115JB. Under the said provisions, in case, the total income computed under the normal provisions of the Act is less than specified percentage of book profit, the book profit is deemed to be the total income on which tax is required to be levied at a specified rate. The book profit under section 115JB is required to be computed on the basis of P&L Account prepared in accordance with the provision of Part II and Part-III of Schedule VI of the Companies Act and, to such profit, certain adjustments as provided in the Explanation-1 to Section 115JB(2) is required to be made. The issue is whether the AO has power to re-cast the accounts pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court is reproduced below as a ready reference. "The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, 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 section 115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the Explanation. The use of the words "in accordance with the provision of Parts II and III of Schedule VI to the Companies Act" in section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Adbhut Trading Co. P. Ltd. (supra) in which the Hon'ble High Court following the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) have allowed the claim of the assessee. In the case of Appolo Tyres Ltd. (supra), it has been clearly held that the AO has only power of examination whether books of account prepared under the Companies Act have been certified by the authorities under the Companies Act and, therefore, he could only make adjustments as provided in Explanation to Section 115JB(2) of the Act. It is thus clear that once accounts are prepared under the Companies Act and have been certified by the authorities, the AO cannot tinker with the accounts and make any changes while computing book profit except making adjustments as provided in Explanation to Section 115JB. The addition made by AO and confirmed by CIT(A) on account of profit on sale of asset not disclosed in the P&L Account prepared under the Companies Act cannot, therefore, be sustained. We, therefore, set aside the order of CIT(A) and delete the addition made." This decision of the Coordinate Bench has been upheld by the Hon'ble Bombay High Court in its order in ITA No. ..... 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