Tribunal upholds CIT(A)'s decision on statutory deductions in computing book profit.

Joint Commissioner Of Income-tax. Versus Gujarat State Petroleum Corporation Limited.

Joint Commissioner Of Income-tax. Versus Gujarat State Petroleum Corporation Limited. - [2009] 308 ITR 248, ITD 123, 335, TTJ 120, 256, Issues Involved:
1. Applicability of statutory deduction under Section 42 of the Income Tax Act for computing book profit under Section 115JA.
2. Addition of income in respect of gas contract and additional revenue from Gujarat Gas Company.
3. Levy of interest under Sections 234B and 234C.
4. Deletion of income for computation of book profit as per Section 115JA.

Issue-Wise Detailed Analysis:

1. Applicability of Statutory Deduction under Section 42 for Computing Book Profit under Section 115JA:
The primary issue was whether the statutory deduction under Section 42 should be allowed while computing book profit under Section 115JA. The assessee, a government undertaking engaged in oil and gas extraction, claimed this deduction, arguing that Section 115JA did not explicitly exclude Section 42 deductions. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] rejected this claim, stating that Section 115JA operates notwithstanding any other provisions in the Act, including Section 42. The Tribunal upheld this view, referencing the Explanation to Section 115JA which defines book profit and excludes any deductions not specifically mentioned. The Tribunal also cited the Supreme Court's decision in Apollo Tyres Ltd. vs. CIT, which emphasized that the AO cannot recompute the profits shown in the profit and loss account prepared as per the Companies Act.

2. Addition of Income in Respect of Gas Contract and Additional Revenue from Gujarat Gas Company:
The assessee contested the addition of Rs. 1,81,78,084 and Rs. 2,93,326 to its income, arguing that these amounts should be taxed on an accrual basis as per the mercantile system of accounting. Both parties agreed that these additions pertain to regular assessments and not to the computation under Section 115JA. The Tribunal dismissed this issue but noted that the assessee could claim a deduction when the amounts are actually received, subject to the provisions of the Act.

3. Levy of Interest under Sections 234B and 234C:
The assessee challenged the levy of interest under Sections 234B and 234C. Both parties agreed that the levy of interest is consequential to the final tax liability. The Tribunal treated this issue as consequential and dismissed it accordingly.

4. Deletion of Income for Computation of Book Profit as per Section 115JA:
The Revenue appealed against the CIT(A)'s decision to delete an addition of Rs. 1,84,71,410 from the book profit computation under Section 115JA. The Tribunal upheld the CIT(A)'s decision, stating that the book profit should be computed based on the net profit shown in the profit and loss account prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956.

Conclusion:
The Tribunal dismissed both the assessee's and the Revenue's appeals, upholding the CIT(A)'s decisions. The key takeaway is that statutory deductions under Section 42 are not applicable for computing book profit under Section 115JA, and the computation must adhere strictly to the provisions of the Companies Act. The Tribunal also clarified that any additions or deletions in the book profit must align with the net profit shown in the profit and loss account approved by the AGM and filed with the Registrar of Companies.