ITAT, AHMEDABAD `B’ BENCH
Gujarat State Petroleum Corpn. Ltd. v. JCIT
ITA Nos. 2359 & 2360/Ahd/2000
January 31, 2008
11. The Scheme of the Income-tax Act was to levy tax on the total income of an assessee for any assessment year at a prescribed rate. The above income had been classified in Chapter IV under various heads. Under each head of income deductions and allowances had been provided for the purpose of computation of income under that head. In order to compute the total income of the assessee, it was necessary to classify and assess income under each appropriate head, where the assessee was engaged in the business of prospecting for or extraction or production of mineral oil which included, petroleum products and natural gas, his income was to be assessed under the head income from business. Therefore, where the condition laid down in section 42 were fulfilled the appellant was to get benefit under that section in the computation of his business income. But this deduction was available in so far as the computation of total income from head business was concerned. In the process of computation of total income, if any relief had been given to an assessee under any other section that too was to be allowed. But section 42 could not override section 115JA which has introduced a legal fiction by which 30% of the book profit of an assessee were deemed to be his total income. This was so because section 115JA did not levy tax on the business income of the assessee but on his total income. Section 42 could be applicable only when the computation of profit and loss of business income was to be considered. No doubt the legal fiction has been created in “sec.42 but that fiction was relevant only so far as the computation of income under the head business income was concerned. If the legal fiction created in sec.42 was to be extended and telescoped into the provisions of sec.115J then the entire purpose of introducing minimum alternate lax u/s 115JA would have been defeated. The two legal fictions had to exist hormonally and are not meant to destroy each other as being claimed by the appellant. It is evident from the fact? mentioned in the assessment order and the Annual Report of the company, copy of which has been made available during the course of appellate proceedings that the book profit of the appellant for the year as computed in accordance with the provisions of the Co. Act, 1956 stood at Rs,3,25,85,894/ -The claim of the appellant that the book profit should be reduced by the deduction available to the appellant u/s 42 of the I.T. Act for the purpose of computing the book profit u/s 115JA is misconceived in view of the language of sub section (1) of section 115JA which reads under:-
“Notwithstanding anything contained in any other, provisions of this Act where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1 st day of April, 1997 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.”
The above sub-section clearly state that the provisions of this section are in total exclusion of this thing contained any other provision of this Act. The above sub-section clearly states that first the total income of the appellant being a Company is to be computed under the provisions of this Act allowing the appellant all deductions, rebates and concessions to which he is entitled as per the provisions of the Income-tax Act. The A.O is, therefore, required to consider the total income so computed with reference to the book profit of the appellant. In case, the income computed by the A.O is less than the book profit then the total income will be replaced by 30% of such book profit. The explanation to section I15JA defines the book profit which leaves no scope for further interpretation with a view to ‘introduce from back door such deduction or concession which are otherwise not available to the total income of the appellant under the head income from business or profession as required to be computed in accordance with the provisions of section 28 to 43 contained in part *D’ of Chapter IV. Obviously, section 42 which form part of the above computation of business income has to exist in the frame work of computation of business income and cannot travel beyond its scope. In other words, deductin claimed by the appellant under section 42 cannot be considered for the purpose of computing the income under section 115JA.
13. As the Hon’ble Apex Court has already answered that the Assessing Officer, while determining book profit u/s 115JA could not recompute the profits in the profit and loss account by excluding provisions made for arrears of depreciation and sub-section 1A of sec.H5JA does not empower the Assessing Officer to embark upon fresh enquiry in regard to the entries made in the books of account of the company. Finally Hon’ble Apex Court held that the Assessing Officer has to accept authenticity of the accounts with reference to the provision of Companies Act, 1956 which company has to maintain its accounts in a manner provided by the Act and the same to be scrutinised and certified by statutory auditors and approved by the company in its annual general meeting and thereafter to be filed before Registrar of companies and as a statutory authority ROC is under obligation to examine and to be Satisfied with the accounts of the company which are maintained in accordant with the requirement of the Companies Act. Similar is the situation in the present case, where the assessee also again placed before the Assessing Officer the accounts which are not laid before the AGM of the company and not approved by the auditors and registrar of companies. The Assessing Officer was very well within his rights to accept only the accounts which are approved by AGM and placed before the auditor of the company as well registrar of companies. The Id Counsel of the assessee relied on the case law of Hon’ble Gujarat High Court in the case of Nagri Mills Co Ltd v. CIT  131 ITR 257 but after going through this case law it is seen that the issue before the Hon’ble Gujarat High Court is entirely different from the present case. Before the High Court issue was as regards to a claim for deduction is not dependent upon whether relevant entries have been made in the books of account or not. What determines the claim for deduction is the right accruing to the assessee under the law in regard to such deduction i.e deduction u/s 36(i)(v) as regards to payment of gratuity towards an approved gratuity fund claim the same as expenditure. Whereas in the present case before us the issue is, whether the assessee can claim deduction u/s 42 of the Act even though the income is computed is 115JA of the act, particularly when the assessee in its accounts it has not claimed the deduction and declared book profit. The id Counsel of the assessee has further relied on the case law of Modern Woilens Ltd v. DCIT, , 47 ITD 154 (Bombay Bench) Bangalore Bench 69 ITD 156, in the case of 1TO v. Patkai Mining & Engg Co. (P) Ltd, ,82 ITD 109 (Guwahati Bench Third Member case). But it is seen that after all these case laws and in view of the facts of the present case, the issue is already covered by the decision ofHon’ble Apex Courtin the case of Appollo Tyres, supra. As the facts in present case are clear that the assessee company has computed book profit u/s 115JA after reducing book profit by an amount which was statutory deduction available u/s 42 of the Act. The assessee has prepared a revised profit and loss account for the purpose of computation of book profit u/s 115JA, which has introduced legal fiction by which 30% of the book profit of the assessee were made to be his total income and this was so because sec. 15JA did not depend on the business income of the assessee but his total income. Sec.42 could be applicable only when computation of income of business was to be considered no doubt a legal fiction has been created in sec.42 That section is relevant only for the purpose of computation of income under the head business. For that legal fiction created in sec 42 was to be extended into the provisions of sec.115JA then the entire purpose of introducing minimum alternate tax u/s 115JA will be defeated. The two legal fictions had to exist harmoniously and are not meant to destroy each other as claimed by assessee company. It is evident from the facts mentioned in the assessment order as well as the first appellate order and the annual report of the company as well as second set of accounts prepared by the assessee company which is not placed before AGM and not filed with the Registrar of Companies, that the assessee for the relevant assessment year has computed book profit, should be reduced the deduction claimed u/s 42 of the Act. After going through the above provision and case law of Hon’ble Apex Court in the case of Appollo Tyres supra as well as Nico Resources Ltd , supra, the claim of the assessee that from the book profit deduction claimed u/s 42 should be reduced, for the purpose of computing the book profit under section 115JA is misconceived and cannot he allowed. Accordingly, we feel that the deduction claimed by the assessee u/s 42-eannot be considered for the purpose of computing the deemed income u/s 115JA of the Act. Accordingly, this issue of the assessee’s appeal is decided against assessee and in favour of Revenue.