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4. The ld. A.R. submits that it is a legal ground based on the decision of the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 5191 and since no fresh clarification on facts is needed, therefore, the same may be admitted.

5. The ld. D.R. submits that he has no objection on the admission of this Additional Ground of Appeal.

6. After hearing the rival parties and perusing the records, we find that this issue was decided by the CIT(A) against the assessee but the assessee did not consider to agitate this issue further and now in view of the decision in the case of Kwality Biscuits Ltd. (supra), the assessee wants to raise the issue before us. Since no new evidence or investigation is required and the facts are already on record, we, therefore, entertain this Additional Ground of Appeal, as raised by the assessee, as Ground No. 3.

27. The last ground, which is an Additional Ground, is with regard to the charging of interest under Sections 234B and 234C of the Income-tax Act.

28. The ld. A/R submits that since the entire exercise of computing the income or that of book profit could be made only at the end of the financial year, the advance tax provision cannot be made applicable unless and until accounts are audited and the Balance Sheet is prepared because till then the assessee may not know whether the provisions of Section 115J would be applicable or not. The liability would be after the book profits are determined in accordance with the Companies Act. Hence, there was no default on the part of the assessee so far as the provisions of advaxnce tax are concerned, and, therefore, interest cannot be charged under Sections 234B and 234C. In support of his argument, the ld. A/R strongly relied upon the judgment of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra).

29. On the other hand, the ld. D/R supported the orders of the authorities below as charging of interest is consequential and as per the scheme of the Act.

30. We have carefully considered the rival submissions of the parties and we find that the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra), has held as under (page 527):

Since the entire exercise of computing the income or that of book profit could be only at the end of the financial year, the provisions of Sections 207, 208, 210 or 210 cannot be made applicable, until and unless the accounts are audited and the balance-sheet is prepared even the assessee may not know whether the provision of Section 115J would be applicable or not. The liability would be after the book profits arc determined in accordance with the Companies Act. The words 'for the purposes of this section' in the Explanation to Section 115J(1A) are relevant and cannot be construed to extend beyond the computation of liability of tax. Accordingly, we arc of the view that the Income-tax Appellate Tribunal was not justified in directing to charge interest under Sections 234B and 234C of the Income-tax Act.

31. We, therefore, respectfully following the decision of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (supra), are of the opinion that the interest under Sections 234B and 234C are not chargeable.

32. In the result, the appeal filed by the assessee is partly allowed.

B.R. Jain, Accountant Member

1. After much persuasion, I have not been able to agree with the view taken by my brother ld. Judicial Member in respect of grounds 2(a) and 2(b) of the assessee's appeal which are dealt within paras 15 to 24 of his order. Briefly the facts are that the assessee prepared its profit and loss account for the relevant previous year in accordance with the provisions of parts II and III of Schedule VI of the Companies Act, 1956. After providing depreciation of Rs. 72,23,897 for the current year which was equal to the rates as prescribed under the I.T. Rules, it determined the net loss of Rs. 1,11,559. The Assessing Officer while completing the assessment determined the total income first at a loss of Rs. 95,754 and thereafter recasted its profit and loss account so as to work out the book profit under Section 115 J of the Income-tax Act, 1961 by restricting the claim of depreciation of Rs. 72,28,897 to Rs. 27,68,990. He concluded that the assessee has charged excess depreciation in the profit and loss account in contravention of Sch. XIV of the Companies Act, 1956 by Rs. 44,59,907. This was done by calculating depreciation at the rates provided under Sch. XIV of the Companies Act. Thus the book profit for the purpose of Section 115 J of the Income-tax Act has been worked out at Rs. 43,48,348, 30% of the book profits so arrived at has been treated as income liable to tax for the year under appeal. The assessee challenged this action of the Assessing Officer before CIT(A) and pleaded before him that the only requirement of the Companies Act is for providing of depreciation but there is no requirement about the rate at which the depreciation for the current year has to be provided for preparing its profit and loss account as per parts II and III of the Companies Act. His contention that the Assessing Officer has erred in recasting the profit and loss account by providing depreciation as per Schedule XIV was not allowed by the CIT(A). It has however been observed by him that under the provisions of the Companies Act, higher rate of depreciation can be claimed by making bona fide technical evaluation, but as the claim of depreciation at higher rate is not supported by any bona fide technical evaluation, as such, the reference made by the appellant to the Circular issued by the Company Law Board as also guidelines of the Institute of Chartered Accountants of India were not held to be applicable in the assessee's case. The action of the Assessing Officer was confirmed by him. Before us also the assessee's counsel has pleaded that no bar has been placed in the provisions of Parts II and III of Sch. VI of the Companies Act with regard to charge of higher depreciation nor that depreciation has to be charged as per provisions of Section 205(1)(b) of the Companies Act for preparing profit and loss account for the current year. The assessee has worked on tripple shift basis, but it charged depreciation equal to the rates at which it is permissible under the Income-tax Act, 1961. It has also been pleaded that such a rate stands duly approved by the Board of Directors of the Company by way of approval of annual accounts, who are not less than experts in respect of the matters and affairs of their company. The claim of the assessee is that the provisions of Section 205(1 )(&) of the Companies Act, 1956 read with Section 350 of that Act which refers to the rates given in the Sch. XIV of the Companies Act are not applicable in preparation of profit and loss account for the relevant previous year. The provisions of Section 205(1)(b) of the Companies Act are relevant only in respect of Clause (iv) under the Explanation to Section 115J of Income-tax Act for arriving at the book profits after making adjustments and only when the loss/losses of earlier years are to be set off against the profits of the relevant previous year, whereas my ld. brother in para 24 of his order confirms the order passed by the CIT(A) by following the judgment of the Apex Court in the ease of Surana Steels P. Ltd. (supra) and of the Hon'ble Gauhati High Court in the case of Mech. Technik India (P.) Ltd. (supra). However, I am unable to agree with him.