123 ITD 335 Per Mahavir Singh, Judicial Member. - Out of these 3 appeals, 2 pertain to assessee and one pertains to department and these are arising out of t w o different orders of CIT(A)-IX, Ahmedabad in CIT(A)-IX/23/GNR/2000-01, dated 12-9-2000 for assessment year 1998-99 and in appeal No. CIT(A)- IX/22/GNR/2000-01, dated 11-9-2000 for assessment year 1997-98. For both years assessments were framed by Jt. Commissioner of Income-tax, Gandhi Nagar, Special Range under section 143(3) of Income-tax Act, 1961 (hereinafter referred to as Act ) vide different dated 21-3-2000 and 29-3- 2000. 2. assessee has raised following common grounds (Except quantum) and same reads as under: 1.1 learned C.A. grossly erred in law and on facts in ignoring/not accepting claim of appellant founded on ground that profit and loss account determining book profit for purpose of Minimum Alternate Tax (MAT) may be different from one placed before Annual General Meeting as held by Tribunal in case of Atul Ltd. v. ACIT 69 ITD 187 and Arvind Mills Ltd. v. Dy. CIT (Asst.) [ITA No. 4636/Ahd./1998]. 1.2 learned C.A. grossly erred in law and on facts in ignoring fact that claim for deduction under section 42 of Act was set out in note appended to Schedule H item (IV) inasmuch as notes appended to accounts were required to be treated as part of profit and loss account as held under binding decision of Hon be Gujarat High Court in case of Nagri Mills Co. Ltd. v. Dy. CIT [1981] 131 ITR 257. 1.3 learned C.A. grossly erred in law and on facts in levying additional tax on basis of book profit under section 115JA of Act ignoring claim for statutory deduction under section 42 of Act amounting to Rs. 12,50,72,810 as result of which book profits stood at Loss of Rs. 3,12,25,652. appellant states that learned C.A. was wholly unjustified both in law as well as on facts of case in ignoring claim for statutory deduction under section 42 of Act and thereby levying tax on basis of book profit under section 115JA of Act. 1.4 learned C.A. grossly erred in law and on facts in rejecting contention of appellant founded on ground that since section 42 of Act created fiction, said fiction has to be given effect to and fiction enacted under section 115JA of Act vould not operate qua deduction permissible under section 42 of Act on basic principle that there can be no fiction on fiction. learned C.A. grossly erred in finding that fiction created in section 42 is relevant only so far as computation of business income is concerned. 3. briefly stated facts leading to this issue are that assessee is Government undertaking owned by State Government of Gujarat engaged in business of extraction of oil, gas and exploration. For assessment years under appeal, assessee has filed its return of income and Assessing Officer during course of assessment proceedings noticed from annual accounts duly approved by Board of Directors and shareholders in AGM vide which net profit disclosed was Rs. 9,38,47,158. Assessing Officer noticed that provisions of section 115JA of Act is applicable and during course of assessment proceedings, Assessing Officer required assessee t o provide working of book profit under section 115JA of Act. assessee along with return of income filed computation of income and as per this computation book profit under section 115JA was declared loss of Rs. 3,12,25,652. relevant computation as reproduced by CIT(A) in his order is again reproduced for sake of clarity: Book profit under section 115JA Book profit as per Rs. Companies Act, 1956 9,38,47,158 Less: Statutory deductions claimed under section 42 of Income- Rs. tax Act. 12,50,72,719 (- Rs. ) 3,12,25,652 30 per cent of Book (- Rs. profit under section 115JA ) 93,67,696 4. Assessing Officer noticed that assessee has claimed deduction under section 42 out of book profit disclosed in accounts as approved by AGM. Assessing Officer issued show-cause notice as to why deduction under section 42 of Act as claimed should not be disallowed, as no such deduction has been provided under section 115JA. Assessing Officer during course of assessment has not accepted contention of assessee that deduction under section 42 of Act was available for determining book profit under section 115JA and computed assessee s income under section 115JA as per book profit shown in annual accounts subject to other additions and thereby computed total income at 30 per cent of book profit at Rs. 3,36,95,570. computation is given in orders of lower authorities and same is being reproduced as it is: 1. Book profit as Rs. per P & L A/c 9,38,47,158 2. Add. (i) income Rs. not accounted in 1,81,78,084 respect of Gas Contract (ii) Additional revenue from Gujarat Rs. Gas Co. 2,93,326 Rs. 1,84,71,410 BOOK PROFIT Rs. 11,23,18,568 Rs. 3,36,95,570 5. Aggrieved against action of Assessing Officer for recomputation of book profit after inclusion of statutory deduction claimed under section 42 of Income-tax Act, in computation of income as enclosed with return of income, assessee preferred appeal before CIT(A). CIT(A) upheld action of Assessing Officer after going through provisions of section 115JA and section 42 of Act. CIT(A) after going through sub-section (1) of section 115J held that this section clearly states that provisions of this section are in total exclusion of anything contained under any other provisions of this Act. According to him in view of this sub-section which clearly states that first total income of assessee, being company, is to be computed under normal provisions of Act, and allowing assessee of deductions, rebates and concessions to which it is entitled as per provisions of Act. Thereafter Assessing Officer is required to consider total income so computed with reference to book profit of assessee and if income computed by Assessing Officer is less than book profit then total income will be replaced by 30 per cent of such book profit. Explanation of section 115JA defines book profit which leaves no scope for further interpretation. With view to introduce from backdoor, such deductions or concessions which are otherwise not available to total income of assessee under head Income from business or profession as required to be computed in accordance of sections 28 to 43 as contained in para D of Chapter IV. As per CIT(A), section 42 of Act which forms part of above computation of business income has to exist in frame work of computation of business income and cannot travel beyond its scope. Finally, he held that deduction claimed by assessee under section 42 cannot be considered for purposes of computing book profit under section 115JA of Act. Accordingly, he rejected claim of assessee. 6. ld. senior counsel S.N. Soparkar, first of all drew our attention to assessee s paper book consisting pages 1 to 28, he referred to facts and figures for assessment year 1998-99 and he argued that, whether statutory deduction under section 42 of Act has to be claimed while computing book profit under section 115JA of Act or not. ld. counsel of assessee referred to provision of section 115JA to claim that by overriding provisions as enacted in case of Companies Act, 1956, where total income is computed under Act was less than 30 per cent of book profit, total income of such assessee chargeable to tax for relevant previous year by fiction was due to be amount equal to 30 per cent of book profit. He argued that section 115JA did not deal with provisions of section 42 of Act, though amount was required to be adjusted in manner stood in Explanation and proviso as appended to sub-section (2) of section 115JA of Act, said provisions did not predicate any exclusion of amount of expenditure fictionally allowable under section 42 of Act. Accordingly, he argued that assessee has rightly calculated total income after computing book profit under section 115JA by claiming deduction under section 42 of Act out of book profits of assessee-company as computed as per provisions of Companies Act, 1956. He referred to profit and loss declared for year under consideration. ld. counsel of assessee further argued that assessee-company while filing return and has made necessary adjustments i n respect of fictional deduction as admissible under section 42 of Act and also placed revised profit and loss account worked out in accordance with Parts II and III of Schedule VI of Companies Act, 1956. He further argued that Companies Act did not prohibit allowance for claim of deduction in manner claimed by assessee. On other hand, ld. Departmental Representative argued that assessee-company has prepared two set of accounts and first set of accounts, i.e., approved by annual general meeting of Board of Directors in their meeting and second was not placed before annual general meeting. He argued that assessee has claimed deduction under section 42 and second set of accounts has not been approved in term of Parts II and III of Schedule VI of Companies Act, 1956 by AGM. assessee claimed deduction under section 42 and in its revised computation of income also assessee claimed deduction under section 42 in term of revised accounts. He argued that there is loss in assessee s case and Assessing Officer has compulsorily to re-work computation in term of provisions of section 115JA of Act. As per provisions of section 115JA, deduction claimed by assessee under section 42 of Act is not to be allowed. Accordingly, he argued that Assessing Officer as well as CIT(A) has rightly recomputed book profit as per provisions of section 115JA of Act and asked Bench to uphold same. 7. We have heard rival contentions, gone through relevant documents and facts and circumstances of case. We have also gone through assessment order as well as order of CIT(A). We have also gone through paper book filed by ld. counsel of assessee consisting pages 1 to 28. assessee-company is company of Government of Gujarat and it had entered into production sharing contract with Government of India and in joint venture with Niko Resources Ltd. and HOEC Ltd. assessee in his return of income claimed special deduction under section 42 of Act, which provides for special provision for deduction in case of prospecting, etc., of mineral oils. provisions of section 42 of Act provide for deduction on account of mineral oils in relation to which Central Government had entered into agreement and deduction is allowable under this Act as specified in agreement. assessee referred that other provisions of this Act were deemed for this purpose of find modify to extent necessary book effect to terms of agreement and argued that by fiction enacted under section 42 of Act. other provisions of Act were deemed for this purpose to have been modified to extent necessary to give effect to terms of agreement. assessee also has referred to provisions of section 115JA and claimed that by overriding provisions as enacted under section 115JA of Act in case of company where total income of such assessee chargeable to tax for relevant previous year by fiction was deemed to be amount equal 30 per cent of book profit. It was claim of assessee that section 115JA did not deal with provisions of section 42 of Act. For this purpose, now we have to come to provisions of section 115JA by virtue of which deemed income relating to certain companies is assessed. relevant provision of section 115JA was inserted in Act by Finance (No. 2) Act, 1996 with effect from 1-4-1997. This provision is deeming provision and deemed income has to be computed in view of sub-sections (1) and (2) as under: 115JA. (1) Notwithstanding anything contained in any other provisions of 115JA. (1) Notwithstanding anything contained in any other provisions of this Act, where in case of assessee, being company, total income, as computed under this Act in respect of any previous year relevant to assessment year commencing on or after 1st day of April, 1997 [but before 1st day of April, 2001] (hereafter in this section referred to as relevant previous year) is less than thirty per cent of its book profit, total income of such assessee chargeable to tax for relevant previous year shall be deemed to be amount equal to thirty per cent of such book profit. (2) Every assessee, being company, shall, for purposes of this section prepare its profit and loss account for relevant previous year in accordance with provisions of Parts II and III of Schedule VI to Companies Act, 1956 (1 of 1956): Provided that while preparing profit and loss account, depreciation shall be calculated on same method and rates which have been adopted for calculating depreciation for purpose of preparing profit and loss account laid before company at its annual general meeting in accordance with provisions of section 210 of Companies Act, 1956 (1 of 1956): Provided further that where company has adopted or adopts financial year under Companies Act, 1956 (1 of 1956), which is different from previous year under Act, method and rates for calculation of depreciation shall correspond to method and rates which have been adopted for calculating depreciation for such financial year or part of such financial year falling within relevant previous year. Explanation. For purposes of this section, book profit means net profit as shown in profit and loss account for relevant previous year prepared under sub-section (2), as increased by (a)the amount of income-tax paid or payable, and provision therefor; or (b)the amounts carried to any reserves by whatever name called; or (c)the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d)the amount by way of provision for losses of subsidiary companies; or (e)the amount or amounts of dividends paid or proposed; or (f)the amount or amounts of expenditure relatable to any income to which any of provisions of Chapter III applies; if any amount referred to in clauses (a) to (f) is debited to profit and loss account, and as reduced by, (i)the amount withdrawn from any reserves or provisions if any such amount is credited to profit and loss account: Provided that, where this section is applicable to assessee in any previous year (including relevant 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 [but ending before 1st day of April, 2001] 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 (ii)the amount of income to which any of provisions of Chapter III applies, if any such amount is credited to profit and loss account; or (iii)the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation. For purposes of this clause, (a)the loss shall not include depreciation; (b)the provisions of this clause shall not apply if amount of loss brought forward or unabsorbed depreciation is nil; or] (iv)the amount of profits derived by industrial undertaking from business of generation or generation and distribution of power; or (v)the amount of profits derived by industrial undertaking located in (v)the amount of profits derived by industrial undertaking located in industrially backward State or district as referred to in [sub-section (4) and sub- section (5) of section 80-IB], for assessment years such industrial undertaking is eligible to claim deduction of hundred per cent of [profits and gains under sub-section (4) or sub-section (5) of section 80-IB]; or (vi)the amount of profits derived by industrial undertaking from business of developing, maintaining and operating any infrastructure facility [as defined in Explanation to sub-section (4) of section 80-IA and subject to fulfilling conditions laid down in that sub-section]; or (vii)the amount of profits of sick industrial company for assessment year commencing from assessment year relevant to previous year in which said company has become sick industrial company under sub- section (1) of section 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. Explanation. For purposes of this clause, net worth shall have meaning assigned to it in clause (ga) of sub-section (1) of section 3 of Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); [or] [(viii)the amount of profits eligible for deduction under section 80HHC, computed under clause (a), (b) or (c ) of sub-section (3) or sub-section (3A), as case may be, of that section, and subject to conditions specified in sub- sections (4) and (4A) of that section; (ix)the amount of profits eligible for deduction under section 80HHE, computed under sub-section (3) of that section.] (3) Nothing contained in sub-section (1) shall affect determination of amounts in relation to relevant previous year to be carried forward to subsequent year or years under provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being company, mentioned in this section.] 8. In view of above provisions, whether or not accounts, which are prepared in conformity with Schedule II and III of Chapter VI of Companies Act, 1956 could differ from accounts placed before Annual General Meeting of company. proviso to section 115JA provides that separate set of accounts could be prepared where company has adopted financial year under Companies Act, 1956, which was different from previous year under this Act and, method and rates which had been adopted for including depreciation for such financial years or part of financial year falling within relevant year. By lower authorities, assessee was confronted with decision in case of Niko Resources Ltd., In re [1998] 234 ITR 828(AAR), wherein it is held that applicant could not claim any specific benefit under section 42 in calculation of his profit by referring to provision of section 115JA of Act. According to above decision of AAR, provisions of section 42 could not override provisions of section 115JA of Act and as such, deduction claimed under section 42 of Act was not admissible. book profit has to be calculated under provision of section 115JA has been provided in Explanation and relevant Explanation from section 115JA is reproduced for sake of clarity: For purposes of this section, book profit means net profit as shown in profit and loss account for relevant previous year [prepared under sub-section (1A)], as increased by (a)the amount of income-tax paid or payable, and provision therefor; or (b)the amounts carried to any reserves [other than reserves specified in section 80HHD [or sub-section (1) of section 33AC]] by whatever name called; or (c)the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d)the amount by way of provision for losses of subsidiary companies; or (e)the amount or amounts of dividends paid or proposed; or (e)the amount or amounts of dividends paid or proposed; or (f)the amount or amounts of expenditure relatable to any income which any of provisions of Chapter III; [(g)the amount withdrawn from reserve account under section 80HHD, where it has been utilised for any purpose other than those referred to in sub- section (4) of that section; or (h)the amount credited to reserve account under section 80HHD, to extent that amount has not been utilised within period specified in sub- section (4) of that section;] [(ha)the amount deemed to be profits under sub-section (3) of section 33AC;] 9. Assessing Officer rejected claim of assessee regarding deduction under section 42 of Act by taking book profit as disclosed in annual accounts placed before AGM of company. assessee in his profit and loss account has appended note in Schedule H in IV which states as under: In view of deduction available under section 42 of Income-tax Act, 1961 in respect of expenditure on exploration and exploitation of oil and gas, company did not expect any income-tax liability and, hence, no provision has been made in respect thereof. Before Assessing Officer it was claimed that provision for liability had been made by way of foot note in balance sheet and this was in accordance with accountancy principles and it was also argued before us that existing business entries in books of account were not decisive or conclusive, whether deduction is allowable or not which is otherwise permissible. From bare facts, it is clear that assessee has maintained 2 sets of profit and loss account, one which laid before company at its Annual General Meeting in accordance with Parts II and III to Schedule VI of Companies Act, 1956. assessee in its return of income filed for assessment years under appeal had furnished statement of total income wherein it has computed book profit under section 115JA after reducing book profit by amount which statutory deduction available under section 42 of Act. Notes appended to accounts above for claiming deduction under section 42 is also given along with return of income. assessee computed book profit as per revised profit and loss account prepared by assessee for purpose of computation of book profit under section 115JA of Act. On enquiry from Bench, ld. counsel of assessee fairly stated that second set of accounts prepared were never placed before Annual General Meeting but he argued that this is examined and found by auditor as correct and this is also certified by Managing Director of company. As per scheme of Act, deemed levy of income-tax of total income of assessee for any assessment year is prescribed under section 115JA with effect from 1-4-1997 as per prescribed rates. This provision mandates that every assessee-company shall for purpose of this section prepares its profit and loss account for relevant previous year in accordance with Parts II and III of Schedule VI of Companies Act, 1956. Under each head of income, deductions and allowances have been provided, and by way of explanation book profit has been defined. purpose of bringing this new section 115JA of Act by Finance Act (No. 2) o f 1996 is to levy minimum tax on companies which are having book profits and paying dividends but are called as zero tax companies, i.e., not paying any taxes. scheme envisages payment of minimum tax by deeming 30 per cent of book profits as computed under Companies Act and as taxable income and in case total income is computed under provision of income-tax has less than 30 per cent of book profit. Where total income as computed under normal provisions of Act is more than 30 per cent of book profit then tax shall be charged on normal income. Authority for Advance Ruling in case of Niko Resources Ltd. (supra) has called that foreign company engaged in business of exploration and development of oil and gas fields is covered by provisions of section 115JA. authority for advance ruling has held that section 42 cannot override section 115JA of Act. As per authority, section 42 of Act which enacts sub-provisions for deductions in case of business for prospecting, etc., for mineral oil cannot override under section 115JA which introduces legal fiction by which 30 per cent of book profit of assessee-company, by virtue of this company is deemed to have its total income. Section 42 is applicable only when business income is computed under section 6D and not under section 115JA of Act. Accordingly, it is held that assessee-company cannot claim any special benefit under section 42 in calculation of its book profit by resorting to section 115JA of Act. AAR in Niko Resources Ltd. s case (supra) has finally elaborated issue as under: scheme of income-tax is to levy tax on total income of assessee for any assessment year at prescribed rate. Income has been classified in Chapter IV under various heads. Under each head of income, deductions and allowances have been provided for purpose of computation of income under that head. In order to compute total income of assessee for any particular assessment year, it is necessary to classify and assess income under each appropriate head. If assessee is engaged in business of prospecting for or extraction or production of mineral oil, his income will be assessed under business head. If he fulfils conditions laid down in that section, he will get benefit of section 42 in computation of his business income. But this is only step in computation of total income. In process of computation of total income, if any relief has been given to assessee under any other section that too will have to be allowed. Section 42, however, cannot override section 115JA which introduces legal fiction by which thirty per cent of book profit of assessee is deemed to be his total income. Section 115JA does not seek to levy tax on business income of assessee, but on his total income. Section 42 which starts with words For purpose of computing profits or gains of any business consisting of prospecting for or extraction or production of mineral oils. . . . Section 42 will be applicable only when computation of profit and loss of business of prospecting for or extraction or production of mineral oil is taken up. Section 293A also does not advance case of assessee in any way. section is as under: 293A. Power to make exemption, etc., in relation to participation in business of prospecting for, extraction, etc., of mineral oils. (1) If Central Government is satisfied that it is necessary or expedient so to do in public interest, it may, by notification in Official Gazette, make exemption, reduction in rate or other modification in respect of income-tax in favour of any class of persons specified in sub-section (2) or in regard to whole or any part of income of such class of persons or in regard to status in which such class of persons or members thereof are to be assessed on their income from business referred to in clause (a) of sub-section (2): Provided that notification for modification in respect of status may be given effect from assessment year beginning on or after 1st day of April, 1993. (2) persons referred to in sub-section (1) are following, namely: (a)persons with whom Central Government has entered into agreements for association or participation of that Government or any person authorised by that Government in any business consisting of prospecting for or extraction or production of mineral oils; (b)persons providing any services or facilities or supplying any ship, aircraft, machinery or plant (whether by way of sale or hire) in connection with any business consisting of prospecting for or extraction or production of mineral oils carried on by that Government or any person specified by that Government in this behalf by notification in Official Gazette; and (c)employees of persons referred to in clause (a) or clause (b). (3) Every notification issued under this section shall be laid before each House of Parliament. Explanation. for purposes of this section, (a) mineral oil includes petroleum and natural gas; (b) status means category under which assessee is assessed as individual , Hindu undivided family and so on. Section 293A has nothing to do with computation of total income. It lays d o w n that Central Government may by notification grant exemption or reduction in rate of tax or other modifications in respect of income-tax in favour of certain classes of assessees. We were referred to two Notifications issued under section 293A dated 31-3-1983, and 6-7-1987. Both Notifications pertain to rates of tax payable by foreign companies under certain circumstances. We fail to see relevance of these two notifications for purpose of present case. Neither section 293A nor two notifications issued thereunder can cut down scope or effect of section 115JA which stands on different footing altogether. It does not contain machinery for computation of business income or total income of assessee. It provides rough and ready formula. minimum amount of tax will have to be paid by assessee on basis of its book profits if its total income is less than thirty per cent of its book profit. In such situation assessee s total income shall be deemed to be thirty per cent of its book profit. This is legal fiction. It will come into play only when total income as computed under this Act is less than thirty per cent of book profit of assessee. Total income has to be computed in manner laid down in Act. If assessee has business income, it will have to be computed in manner laid down in sections 30 to 43D. All deductions and allowances permissible under any other provision will also have to be given to assessee for purpose of computation of his total income in regular course of assessment of income. If total income, thus calculated, falls short of thirty per cent of book profit, special provisions of section 115JA come into operation. There is no scope for any deduction or allowance under any other provision of Act at this stage. section is to apply notwithstanding anything contained in any other provisions of this Act . Book profit has been defined and explained in section 115JA. This provision became necessary because large number of companies were not paying any tax in spite of making huge profits by taking advantage of various provisions f o r deduction and allowances contained in Act. total income, thus, computed was way below taxable limit. To circumvent this, section 115JA was introduced in statute. Thirty per cent of book profit of company will have to be treated as its total income in case where total income as computed in accordance with other provisions of Act was found to be less than thirty per cent of book profit of company. What is book profit h s been defined and explained in that section. Section 115JA is self- contained code and will apply notwithstanding any other provisions of Act. There is no scope for any allowances or deduction under any other section from what is deemed to be total income of assessee. questions raised by applicant which we have set out earlier are not happily framed. We answer all questions by saying that applicant cannot claim any special benefit under section 42 in calculation of its book profit by resorting to section 115JA. Deduction of expenditure under section 42 is allowable only when business income is computed under Chapter IV-D of Income-tax Act. Section 42 of Income-tax Act cannot override provisions of section 115JA. provisions of section 115JA will clearly apply in case of applicant- company. book profit is defined in section 115JA(2) and expression book profit for purpose of section 115JA(2) so as to: net profit as shown in profit and loss account for relevant previous year prepared under section 115JA(2) as increased by amount(s) mentioned in clauses (a) to (f) and as reduced by amount(s) covered by clauses (l) to (ix) of said Explanation. 10. From above it is clear that what is book profit has been defined and explained in above Explanation. profit and loss account for purpose of book profit has to be prepared in accordance with provisions of Companies Act. Section 115JA(2) enjoins upon every assessee company to prepare for purposes of under section 115JA its profit and loss account for relevant previous year in accordance with provisions of Parts II and III of Schedule VI to Companies Act and only adjustments to this is to be made by which net profit has to be increased or reduced as per Explanation to section 115JA(2) of Act. 11. scheme of Income-tax Act was to levy tax on total income of assessee for any assessment year at prescribed rate. above income had been classified in Chapter IV under various heads. Under each head of income, deductions and allowances had been provided for purpose of computation of income under that head. In order to compute total income of assessee, it was necessary to classify and assess income under each appropriate head, where assessee was engaged in 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 head Income from business . Therefore, where conditions laid down in section 42 were fulfilled appellant was to get benefit under that section in computation of his business income. But this deduction was available insofar as computation of total income from head Business was concerned. In process of computation of total income, if any relief had been given to assessee under any other section that too was to be allowed. But section 42 could not override section 115JA which has introduced legal fiction by which 30 per cent of book profit of assessee were deemed to be his total income. This was so because section 115JA did not levy tax on business income of assessee but on his total income. Section 42 could be applicable only when computation of profit and loss of business income was to be considered. No doubt legal fiction has been created in section 42 but that fiction was relevant only so far as computation of income under head Business income was concerned. If legal fiction created in section 42 was to be extended and telescoped into provisions of section 115J then entire purpose of introducing minimum alternate tax under section 115JA would have been defeated. two legal fictions had to exist hormonally and are not meant to destroy each other as being claimed by appellant. It is evident from facts mentioned in assessment order and Annual Report of company, copy of which has been made available during course of appellate proceedings that book profit of appellant for year as computed in accordance with provisions of Companies Act, 1956 stood at Rs. 3,25,85,894. claim of appellant that book profit should be reduced by deduction available to appellant under section 42 of Income-tax Act for purpose of computing book profit under section 115JA is misconceived in view of language of sub-section (1) of section 115JA which reads as under: Notwithstanding anything contained in any other provisions of this Act, where in case of assessee, being company, total income, as computed under this Act in respect of any previous year relevant to assessment year commencing on or after 1st day of April, 1997 is less than thirty per cent of its book profit, total income of such assessee chargeable to tax for relevant previous year shall be deemed to be amount equal to thirty per cent of such book profit. above sub-section clearly states that provisions of this section are in total exclusion of this thing contained any other provision of this Act. above sub-section clearly states that first total income of appellant being Company is to be computed under provisions of this Act allowing appellant all deductions, rebates and concessions to which he is entitled as per provisions of Income-tax Act. Assessing Officer is, therefore, required to consider total income so computed with reference to book profit of appellant. In case, income computed by Assessing Officer is less than book profit, then total income will be replaced by 30 per cent of such book profit. Explanation to section 115JA defines book profit which leaves no scope for further interpretation with view to introduce from back door such deduction or concession which are otherwise not available to total income of appellant under head Income from business or profession as required to be computed in accordance with provisions of sections 28 to 43 contained in Part D of Chapter IV. Obviously, section 42 which forms part of above computation of business income has to exist in frame work of computation of business income and cannot travel beyond its scope. In other words, deduction claimed by appellant under section 42 cannot be considered for purpose of computing income under section 115JA. 12. In present case assessee has prepared 2 sets of accounts, in t h e first set of accounts as approved by AGM and prepared according to provisions of Parts II and III of Schedule VI to Companies Act, by which book profit is determined, which includes profits as claimed as deduction under section 42 of Act by assessee-company in respect of exploration and exploitation of oil and gas. authorities below rejected claim of assessee and taken profit and loss account placed before AGM as final in and taken profit and loss account placed before AGM as final in which no adjustment was permissible. Where assessee is entitled to claim deduction under section 42 of Aet from book profit as per accounts is not placed before AGM and not prepared as per provisions of Parts II and III of Schedule VI to Companies Act, 1956. This query has already been answered by Hon ble Apex Court in case of Appollo Tyres Ltd. v. CIT [2002] 255 ITR 273 before Hon ble Apex Court first question was as under: (i)Can Assessing Officer while assessing company for income-tax under section 115J of Income-tax Act question correctness of profit n d loss account prepared by assessee-company and certified by statutory auditors of company as having been prepared in accordance with requirements of Parts II and III of Schedule VI to Companies Act? This was answered by authority for advance ruling as under: brief facts necessary for disposal of first of above questions are as follows: assessee-company while determining its net profit for relevant accounting year has provided for arrears of depreciation in its profit and loss account which according to revenue is not in accordance with Parts II and III of Schedule VI to Companies Act, 1956 (the Companies Act ). Hence, Assessing Officer while considering case of assessee-company under section 115J of Income-tax Act recomputed said profit and loss account of company so as to exclude provision made for arrears of depreciation. said action of Assessing Officer in questioning correctness of accounts maintained by company was challenged by company before Income-tax Appellate Tribunal ( Tribunal ) which among other things held that Assessing Officer has no authority to reopen accounts of company which is certified by auditors of company as having been maintained in accordance with provisions of Companies Act and which account has been accepted in general meeting of company as well as by Registrar of Companies. This view of Tribunal was not accepted by High Court which held that Assessing Officer has authority to examine whether t h e accounts of company have been maintained in accordance with requirement of sub-section (1A) of section 115J and in that process if he finds that accounts of company are not in accordance with provisions of Companies Act, he could make necessary changes before proceeding to assess company for tax under Explanation to section 115J of Income-tax Act. For deciding this issue, it is necessary for us to examine object of introducing section 115J in Income-tax Act which can be easily deduced from Budget Speech of then Finance Minister of India made in Parliament while introducing said section which is as follows: It is only fair and proper that prosperous should pay at least some tax. phenomenon of so-called zero-tax highly profitable companies deserves attention. In 1983, new section 80VVA was inserted in Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce provision whereby every company will to have to pay minimum corporate tax on profits declared by it in its own accounts. Under this new provision, company will pay tax on at least 30 per cent of its book profit. In other words, domestic widely held company will pay tax of at least 15 per cent of its book profit. This measure will yield revenue gain of approximately Rs. 75 crores. above speech shows that income-tax authorities were unable to bring certain companies within net of income-tax because these companies were adjusting their accounts in such manner as to attract no tax or very little tax. It is with view to bring such of these companies within tax net that section 115J was introduced in Income-tax Act with deeming provision which makes company liable to pay tax on at least 30 per cent of its book profits as shown in its own account. For said purpose, section 115J makes income reflected in company s books of account deemed income for purpose of assessing tax. If we examine said provision in above background, we notice that use of words in accordance with provisions of Parts II and III of Schedule VI to Companies Act was made for limited purpose of empowering assessing authority to rely upon authentic statement of accounts of company. While so looking into accounts of company, Assessing Officer under Income-tax Act has to accept authenticity of accounts with reference to provisions of Companies Act which obligates company to maintain its account in manner provided by Companies Act and same to be scrutinised and certified by statutory auditors and will have to be approved by company in its general meeting and thereafter to be filed before Registrar of Companies who has statutory obligation also to examine and satisfy that accounts of company are maintained in accordance with requirements of Companies Act. In spite of all these procedures contemplated under provisions of Companies Act, we find it difficult to accept argument of revenue that it is still open to Assessing Officer to rescrutinise this account and satisfy himself that these accounts have been maintained in accordance with provisions of Companies Act. In our opinion, reliance placed by revenue on sub- section (1A) of section 115J of Income-tax Act in support of above contention is misplaced. Sub-section (1A) of section 115J does not empower Assessing Officer to embark upon fresh inquiry in regard to entries made in books of account of company. said sub-section, as matter of fact, mandates company to maintain its account in accordance with requirements of Companies Act which mandate, according to us, is bodily lifted from Companies Act into Income-tax Act for limited purpose of making said account so maintained as basis for computing company s income for levy of income-tax. Beyond that, we do not think that said sub- section empowers authority under Income-tax Act to probe into accounts accepted by authorities under Companies Act. If statute mandates that income prepared in accordance with Companies Act shall be deemed income for purpose of section 115J of Act, then it should be that income which is acceptable to authorities under Companies Act. There cannot be two incomes one for purpose of Companies Act and another for purpose of income-tax both maintained under same Act. If Legislature intended Assessing Officer to reassess company s income, then it would have stated in section 115J that income of company as accepted by Assessing Officer . In absence of same and on language of section 115J, it will have to held that view taken by Tribunal is correct and High Court has erred in reversing said view of Tribunal. Therefore, we are of opinion, Assessing Officer while computing income under section 115J has only power of examining whether books o f account are certified by authorities under Companies Act as having been properly maintained in accordance with Companies Act. Assessing Officer thereafter has limited power of making increases and reductions as provided for in Explanation to said section. To put it differently, Assessing Officer does not have jurisdiction to go behind net profit shown in profit and loss account except to extent provided in Explanation to section 115J. 13. As Hon ble Apex Court has already answered that Assessing Officer, while determining book profit under section 115JA could not recompute profits in profit and loss account by excluding provisions made for arrears of depreciation and sub-section (1A) of section 115JA does not empower Assessing Officer to embark upon fresh enquiry in regard to entries made in books of account of company. Finally Hon ble Apex Court held that Assessing Officer has to accept authenticity of accounts with reference to provision of Companies Act, 1956 which company has to maintain its accounts in manner provided by Act and same to be scrutinised and certified by statutory auditors and approved by company in its annual general meeting n d thereafter to be filed before Registrar of Companies and as statutory authority RoC is under obligation to examine and to be satisfied with accounts of company which are maintained in accordance with requirement of Companies Act. Similar is situation in present case, where assessee also again placed before Assessing Officer accounts which are not laid before AGM of company and not approved by auditors and Registrar of Companies. Assessing Officer was very well within his rights to accept only accounts which are approved by AGM and placed before auditor of company as well Registrar of Companies. ld. counsel of assessee relied on case law of Hon ble Gujarat High Court in case of Nagri Mills Co. Ltd. v. CIT [1981] 131 ITR 257 but after going through this case law it is seen that issue before Hon ble Gujarat High Court is entirely different from present case. Before High Court issue was as regards to claim for deduction is not dependent upon whether relevant entries have been made in books of account or not. What determines claim for deduction is right accruing to assessee under law in regard to such deduction, i.e., deduction under section 36(i)(v) as regards to payment of gratuity towards approved gratuity fund claim same as expenditure. Whereas in present case before us issue is, whether assessee can claim deduction under section 42 of Act even though income is computed under section 115JA of Act, particularly when assessee in its accounts it has not claimed deduction and declared book profit. ld. counsel of assessee has further relied on case law of Modern Woollens Ltd. v. Dy. CIT [1993] 47 ITD 154 (Bom.), Asstt. CIT v. Bell Ceramics Ltd. [1999] 69 ITD 156 (Ahd.), in case of ITO v. Patkai Mining & Engg Co. (P.) Ltd. [2002] 82 ITD 109 (Guwahati) (TM). But it is seen that after all these case laws and in view of facts of present case, issue is already covered by decision of Hon ble Apex Court in case of Appollo Tyres Ltd. (supra). As facts in present case are clear that assessee-company has computed book profit under section 115JA after reducing book profit by amount which was statutory deduction available under section 42 of Act. assessee has prepared revised profit and loss account for purpose of computation of book profit under section 115JA, which has introduced legal fiction by which 30 per cent of book profit of assessee were made to be his total income and this was so because section 115JA did not depend on business income of assessee but his total income. Section 42 could be applicable only when computation of income of business was to be considered no doubt legal fiction has been created in section 42 that fiction is relevant only for purpose of computation of income under head Business . For that legal fiction created in section 42 was to be extended into provisions of section 115JA then entire purpose of introducing minimum alternate tax under section 115JA will be defeated. two legal fictions had to exist harmoniously and are not meant to destroy each other as claimed by assessee-company. It is evident from facts mentioned in assessment order as well as first appellate order and annual report of company as well as second set of accounts prepared by assessee-company which is not placed before AGM and not filed with Registrar of Companies, that assessee for relevant assessment year has computed book profit, should be reduced deduction claimed under section 42 of Act. After going through above provision and case law of Hon ble Apex Court in case of Appollo Tyres Ltd. (supra) as well as Niko Resources Ltd. s case (supra), claim of assessee that from book profit deduction claimed under section 42 should be reduced, for purpose of computing book profit under section 115JA is misconceived and cannot be allowed. Accordingly, we feel that deduction claimed by assessee under section 42 cannot be considered for purpose of computing deemed income under section 115JA of Act. Accordingly, this issue of assessee s appeal is decided against assessee and in favour of revenue. 14. next issue in ITA No. 2359/Ahd./2000 of assessee s appeal is s regards to addition made in respect of gas contract of Rs. 1,81,78,084 and additional revenue from Gujarat Gas Company of Rs. 2,93,326. main ground was that CIT(A) has grossly erred in law and on facts in bringing to tax this sum on ground that assessee has not accounted for income in respect of gas contract with Gujarat Gas Company Ltd. inasmuch as assessee was following mercantile system of accounting and said amount was liable to be taxed on accrual basis. ld. counsel of assessee as well as ld. Departmental Representative fairly agreed that this assessment was made under section 115JA of Act and these two incomes are subject-matter of regular assessments and cannot be assessed under section 115JA of Act. ld. counsel of assessee only requested for direction from Bench that if assessee is assessed on mercantile system of accounting then deduction be allowed as and when same is received. In view this request, we observe that as and when this amount is received assessee is free to make claim if law permits and Assessing Officer will examine claim as per provisions of Act. Accordingly, this issue of appeal of assessee is dismissed. 15. next issue in these appeals of assessee is as regards to levy of interest under sections 234B and 234C of Act. ld. counsel of assessee as well as ld. Departmental Representative fairly stated that this charging of interest under sections 234B and 234 C of Act is consequential and, hence, same is treated as consequential in nature and dismissed. 16. only issue in revenue s appeal, i.e., ITA No. 2592/Ahd./2000 raised by revenue vide ground No. 1 reads as under: ld. CIT(A) erred in law and on facts of case in directing to delete income of Rs. 1,84,71,410 for purpose of computation of book profit as per section 115JA of Act, disregarding facts that addition of very same amount of Rs. 1,84,71,410 as in case of assessee for year under consideration has been confirmed by ld. CIT(A). 17. On facts and circumstances addition of Rs. 1,84,71,410 made i n book profit, as per P&L account is ordered to be deleted in view of Explanation to section 115JA which defines book profit for purpose of this section to mean net profit as shown in P&L account for relevant year prepared in accordance with provisions of Part II and Part III of Schedule VI of Companies Act, 1956. We feel that in view of above, CIT(A) has rightly directed Assessing Officer to re-compute income under section 115JA with reference to book profit as per profit and loss account for year ending as on 31-3-1997 at Rs. 9,38,47,148. Accordingly, we uphold order of CIT(A) and this issue of revenue s appeal is dismissed. 18. In result, both appeals of assessee and revenue s appeal are dismissed. *** GUJARAT STATE PETROLEUM CORPORATION LTD. v. JOINT COMMISSIONER OF INCOME TAX