appeal preferred by Revenue is directed against order passed by learned CIT(A), Central-II, Kolkata, dt. 31st March, 2006, for asst. yr. 2004-05 on following grounds: (1) That on fact and in circumstances, learned CIT(A) erred in law in directing to allow deferred tax to determine book profit under s. 115JB of IT Act, 1961, when said deferred tax is not deductible under provision laid down in Parts II and III of Schedule VI of Companies Act, 1956, for preparing final accounts as per that Act. (2) That on fact and in circumstances, learned CIT(A) erred in law in directing to allow deferred tax to determine book profit under s. 115JB of IT Act, 1961, when deferred tax is provision of tax effect of differences between taxable income and accounting income, and so is not allowable under s. 115JB of IT Act, 1961 in determining book profit under that section. (3) That on fact and in circumstances, learned CIT(A) erred in directing to allow deferred tax in determining book profit under s. 115JB of IT Act, 1961, when accumulated provision of deferred tax is reflected in liability side of balance sheet and thus forms reserve to meet future liability of tax. (4) That on fact and in circumstances, learned CIT(A) erred in directing to allow tax paid under s. 115-O of IT Act, 1961 on distributed dividend to determine book profit, when assessee had not filed claim in original return, revised return or in revised computation filed during assessment. (5) That on fact and in circumstances, learned CIT(A) erred in directing to allow tax paid under s. 115-O of IT Act, 1961 on distributed dividend to determine book profit under s. 115JB of IT Act, 1961 citing CBDT s Circular No. 8, dt. 29th Aug., 2005 [(2005) 197 CTR (St) 85], when said circular relates to fringe benefit tax, not to tax on dividend. (6) That on fact and in circumstances, learned CIT(A) erred in directing to allow tax paid under s. 115-O of IT Act, 1961 on distributed dividend to determine book profit under s. 115JB of IT Act, 1961 citing CBDT s Circular No. 8, dt. 29th Aug., 2005, without considering fact that tax on fringe benefit is charge on business expense and tax on dividend under s. 115-O is not charge on business expense, and, therefore, not allowable to determine book profit under s. 115JB of IT Act, 1961. first three grounds raised by Revenue relate to deletion of addition by learned CIT(A), which was made by AO by adding amount of deferred tax under Expln. (c) of s. 115JB(2) for arriving at book profit. AO while adding amount of deferred tax observed as under: "The main issue appeared during hearing in respect of computation (of) MAT that deferred tax amounting to Rs. 1,28,19,137 should not be added under t h e Explanation of s. 115JB. reasons for claim submitted by assessee are (1) that defferred tax is not income-tax, payable or paid, (2) amount of deferred tax was not carried to any reserve, (3) amount of deferred tax was not amount set aside to made for meeting liabilities, (4) deferred tax was ascertained, so it cannot be said it is for meeting unascertained liability. issue is concerned. In Annual Report for 2003-04 net profit after taxation was stated at Rs. 6,048.57 lakhs. provision for taxation was declared at Rs. 1,887.92 lakhs. In P&L a/c, provision for tax was stated as below: Current Tax - Rs. 6,069.00 lakhs Deferred Tax - Rs. 1,281.92 lakhs Total - Rs. l,887.92 lakhs In balance sheet, deferred tax liability (Net) was shown as source of fund. In Schedule E of accounts details of deferred tax, deferred tax is shown as under: Depreciation on fixed assets - Rs. 9,321.21 lakhs Less: Expenses allowable for tax purposes when paid - Rs. 882.70 lakhs Net deferred tax - Rs. 8,438.51 lakhs net deferred tax at beginning of year (i.e., at end of earlier financial year) was Rs. 7,156.59 lakhs. difference of Rs. 8,438.51 lakhs (Net deferred tax of this year) and Rs. 7,156.59 lakhs (Net deferred tax of earlier year) being Rs. 1,281.92 lakhs was charged in accounts as provision for deferred tax. From account itself, it appeared that deferred tax is not actual payment of tax, but, as submitted by Authorised Representative of assessee, that according to AS-22 of Institute of Chartered Accountants of India, deferred tax is provision for tax effect of differences between taxable income and accounting income. In balance sheet, deferred tax was shown as separate entity as source of assessee business fund. fund may be used in future in meeting tax liability of tax. Authorised Representative claimed that if deferred tax is provision, it was ascertained on scientific basis. So, being ascertained liability it should not be added to net profit after tax. In this case, defferred tax is set aside to form liability to meeting future tax which was not determined during year, deferred tax cannot be said ascertained provision. In assessment order for asst. yrs. 2002-03 and 2003-04, deferred taxes were not considered deduction in computation of book profit for MAT under s. 115JB. companies account is to be prepared under Parts II and III of Schedule VI of Companies Act, 1956. As per r. 3(vi), below, P&L a/c shall set out "the amount of charge for Indian income-tax and other Indian taxation on profits, including, where practicable, with Indian income-tax any taxable imposed elsewhere to extent of relief, if any, from Indian income-tax and distinguishing where practicable, between income-tax and other tax. Nowhere in Parts II and III of Schedule VI of Companies Act, 1956, deferred tax is stated allowable to set out in P&L a/c under Companies Act, 1956. Further, deferred tax is charged not due to Act of law, but it is charged in accounts as per AS-22 of Institute of Chartered Accountants of India. Deferred tax is actually provision for tax effect of differences between taxable income and accounting income, and provision is disclosed in balance sheet as source of fund under head Deferred Tax Liability . In circumstances, claim made through revised return, is not accepted." assessee being aggrieved with such action of AO went in appeal before learned CIT(A), wherein it was submitted that as per AS-22 issued by Institute of Chartered Accountants of India, deferred tax is expense, which is required to be deducted by company while computing net profit for year. It was further contended by assessee that book profit as per s. 115JB is to be determined taking into account net profit i.e., profit as arrived at after deducting all expenses, taxes, deferred tax, etc. It was contended before learned CIT(A) that in computing book profit, adjustments, which are required to be made, have been stipulated in Explanation to s. 115JB by increasing amount referred to in cls. (a) to (f) debited to P&L a/c and as reduced by cls. (i) to (vii) as mentioned in Explanation to s. 115JB(2). assessee has thereafter submitted that AO cannot alter book profit by making any addition other than ones specifically mentioned in Explanation as mentioned in such Explanation in view of decision of Hon ble Supreme Court in case of Apollo Tyres Ltd. vs. CIT (2002) 174 CTR (SC) 521: (2002) 255 ITR 273 (SC). assessee also submitted that specified additions to be made to net profit to arrive at book profit, within which deferred tax charge to P&L a/c could be covered are as follows: (a) amount of income-tax paid or payable, and provision therefor; (b) amounts carried to any reserves, by whatever name called (other than reserve specified under s. 33AC; (c) amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities. assessee has pleaded before learned CIT(A) that amount of income-tax paid or payable and provision therefor as referred to in cl. (a) of Explanation to s. 115JB clearly refers to current tax liability. Whereas defferred tax liability as per AS-22 is not required to be added back for computation of book profit as deferred tax charge is clearly not income-tax paid or payable. Since such deferred tax is tax effect of timing differences, which means differences between taxable income and accounting income for period that originate in one period and are capable of reversal in one or more subsequent periods, same cannot be considered as provision for income-tax paid or payable and could not be added back under Expln. (a) to s. 115JB. assessee also placed reliance on various dictionaries and authority, wherein terms income-tax paid or payable are defined. assessee thereafter has explained regarding nature of liabilities considering cl. (c) to Explanation to s. 115JB(2), which requires addition of amount set aside to provisions made for meeting liabilities other than ascertained liabilities. learned counsel has submitted that deferred tax is neither provision nor unascertained liabilities as Schedule VI of Companies Act requires provision to be disclosed separately and had defferred tax liability been considered provision, same would have been disclosed under heading Current liabilities and provisions . assessee has also contended that deferred tax amount is in nature of provision made for meeting ascertained liabilities and has pleaded that matching concept dictates accounting for deferred taxes, and in accordance with matching concept, taxes on income are accrued in same period as revenue and expenses to which they relate. Giving example assessee has stated before CIT(A) that tax benefit on provision for doubtful debts is accrued in books by creating deferred tax asset though actual tax benefit would flow through in tax return when doubtful debt actually becomes bad. Thus, deferred tax charge accrues in same period and is, therefore, ascertained liability relating to same period, though point of time when tax becomes payable/chargeable/leviable is postponed. Thus, deferred tax amount is in nature of provision made for meeting ascertained liability. In support of his above contention, assessee has relied on decision of Hon ble Bombay High Court in case of CIT vs. Echjay Forgings (P) Ltd. (2001) 166 C T R (Bom) 100, wherein it was held that provision for doubtful debt and provision for gratuity based on actuarial valuation represented ascertained liability and hence need not be added back for purposes of computing book profit under s. 115JB. It was submitted by assessee before learned CIT(A) that defferred tax charge is not to be added back as amount set aside to provisions made for meeting liabilities, which are ascertained. assessee has also relied on following judgments in support of his contention before learned CIT(A): (i) Shree Sajjan Mills Ltd. vs. CIT (1985) 49 CTR (SC) 193: (1985) 156 ITR 585 (SC); (ii) CIT vs. United Motors India Ltd. (1990) 181 ITR 347 (Bom); (iii) ITO vs. Wanson (India) Ltd. (1983) 5 ITD 102 (Pune); (iv) IRC vs. Mitsubishi Motors New Zealand Ltd. (1996) 222 ITR 697 (PC). assessee also placed reliance on various dictionaries meaning of word ascertain before learned CIT(A) apart from meaning given by IAS 12 and AS-22 by ICAI. assessee has pleaded before learned CIT(A) that above provision for deferred tax charge is also not amount carried to reserve and, therefore, assessee is outside ambit of cl. (b) of Explanation to s. 115JB(2). It has been submitted that reserve can be created only if company has profit, however, deferred tax charge could arise even if company is making losses. Apart from fact that company can unilaterally transfer reserve back to P&L a/c, whereas deferred tax charge cannot be so transferred to P&L a/c. assessee has also pointed out other differences between reserve and deferred tax charge before learned CIT(A). Finally assessee has submitted before learned CIT(A) that any withdrawal from provision for deferred tax liability would be offered for tax in accordance with proviso of Expln. (i) to s. 115JB(2). Hence, Revenue would not be worse off (except timing difference) if deferred tax charge is not added back to arrive at book profit. learned CIT(A) after considering above submission of assessee has held that there is no justification for adding back deferred tax liability in computation of assessee s total income under Expln. (c) to sub-s. (2) to s. 115JB for arriving at book profit and has accordingly deleted addition. Revenue is aggrieved with such order of learned CIT(A) and has now come in appeal before us on abovementioned first three grounds of appeal before us. In appeal before us, learned Departmental Representative for Revenue Shri R.R. Sah has assailed order of learned CIT(A) and has contended that deferred tax liability is part and parcel of provision for taxes and has submitted that AS-22 issued by ICAI makes it amply clear that this is nothing but accounting for taxes on income. It has further been emphasized by Mr. Sah that AS-22 has clearly stipulated system of recognition of deferred tax liability/assets and has submitted that these should be identified and ascertained with respect to items of timing difference and where tax liability is postponed, amount equivalent to such tax liability should be set apart by charge on revenue or vice versa. learned Departmental Representative. for Revenue relying on AS-22 has submitted that AS-22 provides that deferred tax (assets or liability), which is one of limbs of expense on tax, should be measured by using tax rate and tax loss that have been enacted or substantially enacted at balance sheet date and, therefore, quantification of deferred tax is based on reasonable certainity and not at all at absolute certainity. Therefore, it makes provision for deferred tax liability as reasonably unascertained liability. learned Departmental Representative has further stated that AS-22 cast obligation on company to account for tax expenses (which) creates two major limbs on this account i.e., current tax and deferred tax. Both of these tax expenses are charged or payable to statement of P&L a/c for year, hence assuming but not admitting that deferred tax liability even if having reasonable ascertained character, is basically provision for income-tax payable arising out of timing difference and, therefore, same is very much within scope of Explanation to sub-s. (2) of s. 115JB of Act and, therefore, deferred tax charge is based on line of income-tax payable, and is required to be adjusted for arriving at book profit to be taxed as per s. 115JB. learned Departmental Representative has thereafter relied on Expln. (b) below to s. 115JB(2), which reads as under: "The book profit means net profit as shown in P&L a/c for relevant previous year under sub-s. (2), as increased by (a)---------------- (b) amounts carried to any reserves, by whatever name called (other than reserve specified under s. 33AC) or (c)--------------- (d)-----------------" learned Departmental Representative has also disputed contention of assessee before learned CIT(A) that reserve created by virtue of deferred tax charge is different than reserve as mentioned in Expln. (b) to s. 115JB(2) as such reserve is not distributed reserve and such reserve may or may not be out of appropriation of surplus profit. It has been submitted by learned Departmental Representative that moot point of consideration in this case to be taken into cognizance is to see whether any reserve has been created and whether same has been created by debit to P&L a/c and since in instant case, amount of deferred tax liability has been debited to t h e P&L a/c, same has rightly been adjusted by AO in view of Explanation to s. 115JB(2). learned Departmental Representative has further rebutted submission of assessee before learned CIT(A) that provision for deferred tax liability has to be allowed as statement has been made by assessee strictly in compliance with Companies Act which makes it mandatory on part of assessee to prepare its account as per provisions and rules given in Companies Act, which also requires adherence to Accounting Standard prescribed by ICAI for system and treatment of accounting of individual/specific/class of actual as well as notional receipts and payments. It has been pointed out by learned Departmental Representative that adjustment prescribed in s. 115JB is over and above treatment and accounting of different items of P&L a/c and balance sheet prepared as per Companies Act and plain reading of provisions under s. 115JB reveals that this is minimum tax, which company requires to cope up if net profit in P&L a/c after adjustment as per Explanation under s. 115JB results into positive book profit and it has nowhere been stipulated in provision under s. 115JB that accounts prepared in accordance with Companies Act will not require any adjustment i.e., either addition or deletion. It has been submitted that provision of IT Act under s. 115JB is overriding on provision of Accounting Standard/Companies Act so far as MAT under s. 115JB is concerned. It has, therefore, been submitted by learned Departmental Representative that amount of deferred tax liability debited to P&L a/c was rightly added back by AO while computing book profit under s. 115JB for reasons that this is not only unascertained liability but is basically provision for income-tax payable. In his rival submission, learned counsel for assessee Shri Ravi Tulsiyan has first reiterated his submission made before learned CIT(A). It has been contended by Shri Tulsiyan that learned CIT(A) after perusing all relevant clauses as mentioned in cls. (a), (b) and (c) to Explanation below s. 115JB has held that provision for deferred tax liability by assessee was neither unascertained liability nor reserve, which could attract cls. (a), (b) and (c) to Expln. 2 below s. 115JB. learned counsel has submitted that provision for deferred tax is not equivalent to provision for income-tax paid or payable since deferred tax has been defined as tax effect of timing difference by ICAI while issuing AS- 22. Shri Tulsiyan has thereafter elaborated objective and scope of issuing AS-22 by ICAI and has submitted that above AS-22 has been made mandatory by ICAI for all entrepreneurs w.e.f. 1st April, 2002, keeping in view of necessities of determining tax liabilities due to time difference. It has been pleaded by learned counsel that time differences are differences between taxable income and accounting income for period that originate in one period and are capable of reversal in one or more subsequent periods. Hence, provision for deferred tax is provision for tax effect of differences between taxable income and accounting income and not provision for income- tax paid or payable. Hence, it is not required to be added back under Expln. (a) to sub-s. (2) to s. 115JB. Shri Tulsiyan has thereafter pleaded that deferred tax liability created by assessee is also not amount carried to reserve within meaning of cl. (b) to Explanation below s. 115JB(2) as reserves are usually shown below line in P&L a/c, whereas deferred tax charge is shown above line in P&L a/c i.e., charge against profit. learned counsel has thereafter reiterated his submission before learned CIT(A) that reserve as defined in cl. (b) to Explanation below sub-s. (2) to s. 115JB is different than deferred tax charge created by assessee. Shri Ravi Tulsiyan has thereafter submitted that deferred tax charge cannot be considered as covered within cl. (c) to Explanation below s. 115JB(2) as such deferred tax charge is not unascertained liability, as deferred tax charge is computed scientifically and as per well established and accepted method in guidance of ICAI. It has been pointed out that such scientific method is not only accepted by accounting professionals in India, but being accepted almost globally and since such liabilities are ascertained same cannot be covered within cl. (c) to Explanation below s. 115JB(2). It has further been pleaded by learned counsel that from creation of deferred tax charge, Revenue would not be worse off as any withdrawal from provision for deferred tax liability would be offered for tax in accordance with provisions of Expln. 1 to s. 115JB. It has been argued by learned counsel that had this been case of deferred tax assets, same would have resulted (in) benefit to Revenue and Revenue cannot allow assessee for not including such deferred tax assets while computing book profit under s. 115JB. learned counsel in support of his above submission has relied on various decisions as already submitted before learned CIT(A). He has also relied on following decisions: (i) Srikakollu Subba Rao & Co. vs. Union of India (1988) 71 CTR (AP) 34: (1988) 173 ITR 708 (AP); (ii) Garden Silk Weaving Factory vs. CIT (1995) 125 CTR (Guj) 157: (1995) 213 ITR 10 (Guj). learned counsel has also relied on recent judgment of Panaji Bench of Tribunal in case of Salgaocar Mining Ind. (P) Ltd. vs. Jt. CIT (2006) 103 TTJ (Panaji) 824: (2006) 287 ITR (Panaji)(AT) 197, wherein it was held that IT Act maintains distinction between income-tax and interest as they are statutorily treated in different senses and hence interest cannot be construed to be part of income-tax and for this reason, it is not possible to treat interest as part of income-tax and interest on income-tax clearly falls outside scope of term income-tax as used in Expln. (a) to sub-s. (2) of s. 115JA. It has been submitted by learned counsel that in present case also, deferred tax charge should be considered as different than income-tax paid or payable as term income-tax paid and deferred tax charges have assumed and acquired separate meanings and are to be understood distinctly and differently from each other. It has, therefore, been submitted by learned counsel that it is clear from his submission that deferred tax charge is not covered by any of clauses of Explanation to sub-s. (2) to s. 115JB and, therefore, is not required to be added back in computation of book profit for purpose of s. 115JB and, therefore, AO has erred in not accepting assessee s claim regarding same, which was rightly deleted by learned CIT(A) after perusing and considering submission and spirit of Act in this regard. It has, therefore, been pleaded that order of CIT(A) is upheld. We have given our careful consideration to rival submissions made before us and have perused orders of tax authorities. We have also considered material available on record, written submissions and case laws cited before us. Revenue in this case has pleaded that deferred tax is actually provision for tax effect and is meant for formatting future tax liability. It has further been pleaded that it is not determined during year and therefore, same could not be said ascertained provision. It has further been stated before us by Revenue that such deferred tax charge is nothing but charge of income-tax, which is liable to be added in Expln. (a) to sub-s. (2) of s. 115JB or same should be treated as amount credit to reserve within meaning of Expln. (b) to sub-s. (2) of s. 115JB. assessee, on other hand, has contended that deferred tax charge is ascertained liability and same is created in accordance with AS-22 issued by ICAI, which is mandatorily to be followed by all assessees and is neither in form of reserve as stipulated in Expln. (b) to sub-s. (2) of s. 115JB nor could be treated as income-tax paid or payable within meaning of Expln. (a) to sub-s. (2) of s. 115JB, nor same could be covered under cl. (c) of said Explanation as deferred tax charge is certainly ascertained liability. We after hearing both parties find that much stress has been given on t h e adjustment as stipulated in Explanation to sub-s. (2) to s. 115JB and, therefore, find it convenient to first go through such Explanation which is being reproduced hereunder for facility of reference: "For purposes of this section, book profit means net profit as shown in P&L a/c for relevant previous year prepared under sub-s. (2) as increased by (a) amount of income-tax paid or payable, and provision therefor; or (b) amounts carried to any reserves, by whatever name called (other than reserve specified under s. 33AC); or (c) amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) amount by way of provision for losses of subsidiary companies; or (e) amount or amounts of dividends paid or proposed; or (f) amount or amounts of expenditure relatable to any income to which s. 10 or s. 10A or s. 10B or s. 11 or s. 12 apply If any amount referred to in cls. (a) to (f) is debited to P&L a/c, and as reduced by (i) amount withdrawn from any reserve or provision (excluding reserve created before 1st day of April, 1997 (otherwise than by way of debit to P&L a/c), if any such amount is credited to P&L a/c: Provided that where this section is applicable to appellant in any previous year, amount withdrawn from reserves created or provisions made in previous year relevant to assessment year commencing on or after 1st day of April, 1997, shall not be reduced from book profit unless book profit of such year has been increased by those reserves or provisions (out of which said amount was withdrawn) under this Explanation or Explanation below second proviso to s. 115JA, as case may be; or (ii) that amount of income to which any of provisions of s. 10 or s. 10A or s. 10B or s. 11 or s. 12 apply, if any such amount is credited to P&L a/c; or (iii) amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation: For purposes of this clause: (a) loss shall not include depreciation; (b) provisions of this clause shall not apply if amount of loss brought forward or unabsorbed depreciation, is nil; or (iv) amount of profits eligible for deduction under s. 80HHC, computed under cl. (a) or cl. (b) or cl. (c) of sub-s. (3) or sub-s. (3A), as case may be, of that section, and subject to conditions specified in that section; or (v) amount of profits eligible for deduction under s. 80HHE computed under sub-s. (3) or sub-s. (3A), as case may be, of that section, and subject to conditions specified in that section; or (vi) amount of profits eligible for deduction under s. 80HHF computed under sub-s. (3) of that section, and subject to conditions specified in that section, or (vii) amount of profits of sick industrial company for assessment year commencing on and from assessment year relevant to previous year in which said company has become sick industrial company under sub-s. (1) of s. 17 of Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), and ending with assessment year during which entire net worth of such company becomes equal to or exceeds accumulated losses." Whereas in instant case, specified addition could be made to n e t profit to arrive at book profit as claimed by learned Departmental Representative, in any of three following clauses of Explanation to sub-s. (2) to s. 115JB: (a) amount of income-tax paid or payable, and provision therefor; (b) amounts carried to any reserves, by whatever name called (other than reserve specified under s. 33AC; (c) amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities. Apart from above provision of Explanation to sub-s. (2) of s. 115JB, both parties have relied on various provisions laid down under AS-22 issued by Institute of Chartered Accountants of India, which makes it mandatory in respect of all enterpreneurs to follow such Accounting Standard while preparing their financial statements w.e.f. 1st April, 2002. We, therefore, also find it convenient to deal with various objectives and scope of such AS- 22. objective and scope for issuing of AS-22 by ICAI is quoted hereunder for facility of reference: Objective "The objective of this statement is to prescribe accounting treatment for taxes on income. Taxes on income is one of significant items in statement of profit and loss of enterprise. In accordance with matching concept, taxes on income are accrued in same period as revenue and expenses to which they relate. Matching of such taxes against revenue for period poses special problems arising from fact that in number of cases, taxable income may be significantly different from accounting income. This divergence between taxable income and accounting income arises due to two main reasons. Firstly, there are differences between items of revenue and expenses as appearing in statement of profit and loss and items which are considered as revenue expenses or deductions for tax purposes. Secondly, there are differences between amount in respect of particular item of revenue or expense as recognized in statement of profit and loss and corresponding amount which is recognized for computation of taxable income." Scope "This statement should be applied in accounting for taxes on income. This includes determination of amount of expense or saving related to taxes on income in respect of accounting period and disclosure of such amount in financial statements." Since deferred tax charge is basically made on account of time difference, such time difference has been defined under AS-22 in para 7 as under: "Timing differences are those differences between taxable income and "Timing differences are those differences between taxable income and accounting income for period that originate in one period and are capable of reversal in one or more subsequent periods. Timing differences arise because period in which some items of revenue and expenses are included in taxable income do not coincide with period in which such items of revenue and expenses are included or considered in arriving at accounting income. For example, machinery purchased for scientific research related to business is fully allowed as deduction in first year for tax purposes whereas same would be charged to statement of profit and loss as depreciation over its useful life. total depreciation charged on machinery for accounting purposes and amount allowed as deduction for tax purposes will ultimately be same, but periods over which depreciation is charged and deduction is allowed will differ. Another example of timing difference is situation where, for purpose of computing taxable income, tax laws allow depreciation on basis of written down value method, whereas for accounting purposes, straight line method is used." ICAI vide para 9 of AS-22 under caption recognition has advised that tax expenses for period comprising current tax and deferred tax should be included in determination of net profit or loss for period and vide paras 20 to 22, it has laid down procedure for measurement of such deferred tax charge which reads as under: "Measurement Current tax should be measured at amount expected to be paid to (recovered from) taxation authorities, using applicable tax rates and tax laws. Deferred tax assets and liabilities should be measured using tax rates and tax laws that have been enacted or substantively enacted by balance sheet date. Deferred tax assets and liabilities are usually measured using tax rates and tax laws that have been enacted. However, certain announcements of tax rates and tax laws by Government may have substantive effect of actual enactment. In these circumstances, deferred tax assets and liabilities are measured using such announced tax rate and tax laws." Whereas presentation and disclosure has been mentioned in paras 27 to 32 of said Accounting Standard, which is reproduced hereunder: "27. enterprise should offset assets and liabilities representing current tax if enterprise: (a) has legally enforceable right to set off recognized amounts; and (b) intends to settle asset and liability on net basis. enterprise will normally have legally enforceable right to set off asset and liability representing current tax when they relate to income-tax levied under same governing taxation laws and taxation laws permit enterprise to make or receive single net payment. enterprise should offset deferred tax assets and deferred tax liabilities if: (a) enterprise has legally enforceable right to set off assets against liabilities representing current tax; and (b) deferred tax assets and deferred tax liabilities relate to taxes on income levied by same governing taxation laws. Deferred tax assets and liabilities should be distinguished from assets and liabilities representing current tax for period. Deferred tax assets and liabilities should be disclosed under separate heading in balance sheet of enterprise, separately from current assets and current liabilities. break-up of deferred tax assets and deferred tax liabilities into major components of respective balances should be disclosed in notes to accounts. nature of evidence supporting recognition of deferred tax assets should be disclosed, if enterprise has unabsorbed depreciation or carry forward of losses under tax laws." Now we deal with various objections of Revenue in deleting addition made by AO. first limb of arguments by Revenue is that deferred tax charge to P&L a/c is identical to amount of income-tax paid or payable and, therefore, same is to be treated at par with cl. (a) to Explanation to sub-s. (2) of s. 115JB. It has been submitted by learned Departmental Representative that above deferred tax charge is nothing but is in nature of income-tax, which is liable to be added in view of cl. (a) to Explanation to sub- s. (2) of s. 115JB. However, in our considered opinion such objection raised by Department is devoid of any merit, as deferred tax means tax effect of timing difference due to differences between taxable income and accounting income for period that originate in one period and is capable of reversal and, therefore, such deferred tax charge is provision for tax effect of difference between taxable income and accounting income and not provision for income- tax paid or payable and, therefore, could not be covered under Expln. (a) to sub- s. (2) of s. 115JB. We have also noted down that para 30 of AS-22 clearly says that deferred tax assets and liabilities should be distinguished from assets and liabilities representing current tax for period. Panaji Bench in case of Salgaonkar Mining Ind. (P) Ltd. vs. Jt. CIT (supra) has also held that interest on income-tax and income-tax paid/payable are to be treated separately as they are separate and distinct from each other. Likewise deferred tax charge cannot be kept at par with income-tax paid/payable as both are quite different. Apart from above fact, we have also noted down objective behind enacting AS-22 by ICAI, as deferred tax charge was meant to remove difference between taxable income and accounting income arising due to difference between items of revenue and expenses as appearing in statement of P&L a/c and items which are considered as revenue expenses or deduction for tax purposes or there is difference between amount in respect of particular item of revenue or expense as recognized in statement of profit and loss and corresponding amount, which is recognised for computation of taxable income. Therefore, it is absolutely apparent that deferred tax charge could not be termed as income-tax paid or payable, which has to be paid out of profit earned by assessee for year under consideration and, therefore, in our considered opinion, first objection raised by Revenue does not hold any merit. Coming to second limb of objection by Revenue that such deferred tax charge is covered within cl. (b) to Explanation to sub-s. (2) of s. 115JB as same is in nature of reserve. However, such objection raised by Revenue is also devoid of any merit as there are many differences between term reserve as stipulated in Expln. (b) to sub-s. (2) of s. 115JB and reserve created for purpose of deferred tax charge. As reserve within meaning of Expln. (b) can unilaterally be transferred back to P&L a/c, whereas deferred tax charge cannot be so transferred to P&L a/c. Furthermore, reserve mentioned in cl. (b) can be utilized for issuing bonus shares or for declaration of dividend, whereas deferred tax charge cannot be utilised for such purposes. It is also pertinent to note that as per AS-22, deferred tax charge is treated as expense of period in which it is charged, and such expense cannot be treated as reserve within meaning of cl. (b) to Explanation to sub-s. (2) of s. 115JB. Though learned Departmental Representative has argued that such deferred tax liability should be treated at par with other reserve as same has been debited to P&L a/c and all conditions stipulated in provision are fulfilled, such contention of learned Departmental Representative could not be accepted keeping in view our observation hereinabove while observing differences between reserve as stipulated in cl. (b) to sub-s. (2) of s. 115JB and reserve created for deferred tax liability. guidelines of ICAI also advice to treat deferred tax charge separately than reserve as stipulated in cl. (b) to Explanation to sub-s. (2) to s. 115JB. We, therefore, dismiss this second limb of objection raised by Revenue while disputing order of learned CIT(A). third and last limb of objection by Revenue in this case is on account of considering such deferred tax liability to be covered under cl. (c) to Explanation to sub-s. (2) of s. 115JB contending that such amounts are unascertained liabilities. However, close perusal of clauses as mentioned in paras 20 to 23 in AS-22 makes it clear that such deferred tax charges are measured scientifically and as per strict guidelines of ICAI issued time to time and are being accepted not only in India but globally. We have also noted down fact that paras 30 and 31 of AS-22 issued by ICAI (already reproduced elsewhere in order) make it obligatory on part of assessee to give break- up of deferred tax liability into major component of respective balances in its notes of accounts which makes it clear that such deferred tax charges are being computed on scientific method and as per guidelines issued by ICAI and same is not in nature of contingent liability or are made on estimate basis, which could result into unascertained liabilities. Since in present case also, Revenue has not disputed calculation of such deferred tax charge by assessee which has been made as per guidelines stipulated in AS-22 by ICAI and computation of deferred tax charge is scientifically made and globally accepted, same could not be considered as unascertained liability within meaning of Expln. (c) to sub-s. (2) of s. 115JB. Moreover, such calculation of deferred tax charge by assessee has not been disputed by Revenue and such calculation of deferred tax liability has also been accepted as reasonable ascertained by learned Departmental Representative while arguing case for Department. We are, therefore, of view that this limb of objections raised by Revenue is also devoid of any merit. Apart from rejecting above three limbs of objection by Revenue, we have also noted down that any withdrawal from provision for deferred tax liability would be offered for tax in accordance with proviso of Expln. (i) to s. 115JB. Hence, Revenue would not be worse off (except timing difference) if deferred tax charge is not added back to arrive at book profit. In case deferred tax asset is created by crediting P&L a/c, it would be considered as part of book profit and it would result in absurdity if provision for deferred tax liability (which is debited to P&L a/c) is also added back to arrive at book profit. In fact, there might be financial statements where there is debit in P&L a/c for deferred tax charge (say Rs. 30) and simultaneously there is credit for deferred tax asset (say Rs. 100). In such case, deferred tax asset of Rs. 100 would certainly be taxed. However, if deferred tax charge of Rs. 30 is added back and also taxed, it would result in clear-cut absurdity. Since it is well settled rule of interpretation that rational construction must prevail over literal interpretation, if latter leads to absurd results. We, therefore, are of view that interpretation which results in absurdity should be avoided. We, therefore, in view of above facts and circumstances involved in this We, therefore, in view of above facts and circumstances involved in this case and after perusing material available on record and in light of above discussion, are of opinion that deferred tax charge is not covered by any of clauses of Explanation to sub-s. (2) to s. 115JB as objected by Revenue before us and therefore, in our considered opinion such deferred tax charge is not required to be added back in computation of book profit for purpose of s. 115JB and, therefore in our considered opinion, learned CIT(A) was justified in deleting addition made by AO in not accepting claim of assessee on account of such deferred tax charge. We, therefore, uphold such order of learned CIT(A) in this regard and reject ground raised by Revenue. Ground Nos. 4, 5 and 6 by Revenue relate to order of learned CIT(A) in directing AO to allow tax paid under s. 115-O of IT Act on distributed dividend to determine book profit. AO in this case has refused to entertain claim of assessee that tax on dividend distributed under s. 115-O should be deducted from net profit for determining book profit for MAT under s. 115JB. In appeal, learned CIT(A) has allowed such claim of assessee observing that Circular No. 8, dt. 29th Aug., 2005, in which it was held that fringe benefit tax is allowable deduction in computation of book profit under s. 115JB of IT Act, and learned CIT(A) has agreed with submission of assessee before him that tax on profit distributed as dividend has to be treated in similar manner as fringe benefit tax and is not to be added back in computation of book profit for purpose of s. 115JB. Revenue is aggrieved with such order of learned CIT(A) and has now come in appeal before us on abovementioned ground Nos. 4 to 6. In appeal before us, learned Departmental Representative for Revenue assailing order of learned CIT(A) has contended that claim of assessee is completely outside purview of adjustment for purpose of book profit under s. 115JB. He has further rebutted observation of learned CIT(A) in holding that dividend tax is to be treated at par with fringe benefit tax and latter being allowable deduction for purpose of book profit under s. 115JB. It has been submitted by learned Departmental Representative that fringe benefit tax is tax on expenditure whereas dividend tax is out of appropriationable surplus profit. Therefore, dividend tax is basically capital expenditure and cannot be allowed as deduction. In his rival submission, learned counsel for assessee has relied heavily on order of learned CIT(A) and has submitted that book profit as per s. 115JB is to be determined taking into account net profit i.e., profit as arrived at after deducting all expenses, taxes, deferred tax, etc. Therefore, net profit for computation of book profit as per s. 115JB shall be after deducting said tax on profit distributed as dividend paid by company. It has further been contended by learned counsel that such payment is not covered under cl. (a) to Explanation of sub-s. (2) of s. 115JB as tax on profit distributed does not fall within purview of income-tax paid or payable, as envisaged in Explanation. It has been submitted that tax on profit distributed as dividend cannot be treated as income-tax due to fact that income-tax is payable on income earned by assessee, whereas tax on dividend is application of income on which income-tax has already been paid. learned counsel has thereafter relied on Circular No. 8 by CBDT, dt. 29th Aug., 2005, in which CBDT while dealing with question No. 103 of circular has made it clear that fringe benefit tax is allowable deduction in computation of book profit under s. 115JB. learned counsel for assessee has submitted that tax on distribution of profit is identical to fringe benefit tax as both are payable at time of incurring certain expenditure and, therefore, learned CIT(A) was justified in deleting addition made by AO following above circular. It has, therefore, been pleaded that order of learned CIT(A) be upheld in this regard. We have given our careful consideration to rival submissions made before us and have perused orders of tax authorities. We have also considered paper book filed by learned counsel for assessee, written submissions by learned Departmental Representative and Circular No. 8, dt. 29th Aug., 2005, issued by CBDT. Revenue in this case has objected to claim of assessee that tax on dividend distributed under s. 115-O should be deducted from net profit for determining book profit under s. 115JB. It has been contended by learned Departmental Representative that tax on distributed profit could not be treated at par with fringe benefit tax and, therefore, action of learned CIT(A) in directing AO to allow such claim is not correct. In this case, as per objection of Revenue specified addition to be made to net profit to arrive at book profit on which tax on profit distributed as dividend to P&L a/c can be covered under cl. (a) to Explanation to sub-s. (2) of s. 115JB. However, observing nature of payment, we are of considered opinion that such tax on distributed profit as dividend could not be covered under said clause as there are basic fundamental differences between income-tax paid or payable and tax on profit distributed. Since income- tax is payable on income earned by assessee, tax on dividend as per provision of s. 115-O is paid at time of distribution of profit in form of dividend i.e., at time of application of income on which income-tax has already been paid. Furthermore, sub-s. (2) of s. 115-O makes it clear that tax on distribution of profit has to be paid by domestic company even if no income-tax is payable in year in which dividend is distributed by company. We have also considered order of Tribunal, Panaji Bench, in case of Salgaocar Mining Ind. (P) Ltd. (supra), wherein interest on income-tax was excluded from said clause as both were to be treated separately. Since in present case also tax on distributed profit is different than income-tax payable, same cannot be covered under cl. (a) to Explanation to sub-s. (2) of s. 115JB. So far as action of learned CIT(A) in deleting addition following Circular No. 8, dt. 29th Aug., 2005, by CBDT, in our considered opinion such action of learned CIT(A) was based on correct appreciation of spirit of circular. In our considered opinion, distribution of profit payable as per provision of s. 115-O of Act is of similar nature as fringe benefit tax payable under Chapter XII-H of Act, since both are payable at time of incurring certain expenditure which is in form of fringe benefit given to employees or dividend to shareholders, which are not otherwise taxable under other provisions of Act. Therefore, in our considered opinion both fringe benefit tax and tax on distribution of profit are similar in nature. Since Circular No. 8, dt. 29th Aug., 2005, issued by CBDT makes it clear that fringe benefit tax is allowable 2005, issued by CBDT makes it clear that fringe benefit tax is allowable deduction in computation of book profit under s. 115JB of Act while dealing in question No. 103, copy of which is also available on record, in our considered opinion, learned CIT(A) has rightly treated tax on profit distributed as dividend in similar manner as fringe benefit tax and has thereafter rightly directed AO not to add back such tax on distributed profit in computation of book profit for purpose of s. 115JB. We, therefore, do not see any reason to interfere with such order of learned CIT(A) and accordingly uphold his order and reject grounds raised by Revenue. In result, appeal filed by Revenue is dismissed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. BALARAMPUR CHINI MILLS LTD.