Assessment – Duty of A.O. to consider normal and special provisions relating to assessee – Company – Computation of book profits – A.O. must take into account provisions of section 115JB

Assessment – Duty of A.O. to consider normal and special provisions relating to assessee – Company – Computation of book profits – A.O. must take into account provisions of section 115JB

The assessee is engaged in the business of manufacturing and trading of ossein, compound glue, gelatine, etc. On 31st October, 2002, it filed the Income-tax return for the A.Y. 2002-03 declaring a total loss of Rs. 3,59,10,946. The A.O., through an assessment order dated 3rd March, 2005 made u/s 143(3), computed the total income of the assessee at Rs. 2,99,81,060.

The Commissioner (Appeals) partly allowed the appeal. The Tribunal allowed the assessee’s appeal.

In the appeal by the Revenue, the following questions were raised:

‘1. Whether on the facts and in the circumstances of the case and also in the light of section 80AB, the Tribunal is right in holding that while computing the book profit u/s 115JB the deduction u/s 80HHC is to be computed as per minimum alternate tax provisions and not as per the normal provisions of the Income-tax Act, 1961?

2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law and fact,
(i) in presuming that the A.O. has considered clause (c) of Explanation to section 115JA in the A.Ys. 1997-98 and 1998-99;
(ii) in holding that merely because proper working is not available on record, it cannot be said that the A.O., has not considered the same; and are not the approach and the conclusion based on presumptions and suppositions perverse, arbitrary and illegal?

3. (a) Whether on the facts and in the circumstances of the case, the Tribunal is justified in directing the A.O. to reduce the net profit by the sum of Rs. 3,29,27,056 in place of Rs. 1,42,02,335 as has been done by the A.O.?
(b) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the A.O. to allow an amount of Rs. 1,87,24,721 being the provision for excise duty written back on the “presumption” that even though the provisions of minimum alternate tax were not considered as the assessments were completed applying the normal provisions of the Act; and the A.O. has considered clause (c) of Explanation to section 115JA in the A.Ys. 1997-98 and 1998-99?’

The Kerala High Court upheld the decision of the Tribunal and held as under:

“i) Once the return is filed by the assessee, it is the responsibility of the A.O. to compute the income of the assessee under normal provisions and special provisions. The income tax is collected on the income whichever is higher in these two methods, i. e., either normal provision or special provision.

ii) In the A.Ys. 1997-98, 1998-99 and 1999-2000, provision for disputed excise duty was made by the assessee. The assessment orders for the first two years were made referring to the normal provisions of the Act and the necessity to refer to the special provisions was not noticed by the A.O. The Tribunal, taking note of the fact that the assessee was subject to the slab rate of 30% for the A.Ys. 1997-98 and 1998-99, computed the tax under normal provisions.

iii) The Tribunal had rightly found that the fact that the proper working was not reflected in the respective assessment orders or the record could not lead to the conclusion that the A.O. had not considered the applicability of the special provision as well and that the omission on the part of the A.O. in referring to the special provisions ought not to deny the writing-back provision available under the second proviso to sub-section (2) of section 115JB. The denial of the benefit of writing back the provision to the assessee in these assessment years was illegal and the finding recorded by the Tribunal was valid and correct in the circumstances of this case.’