Honble BALIA, J.–We have heard the learned counsel for the parties.

(2). The substantial questions of law which arise for consideration, as framed at the time of admission of the appeal, are as under:–

1. Whether the bonus, the liability of which is not provided in the accounts, and which has not been incurred as an expenditure, can be deducted for the purposes of arriving at the total income u/s. 115J of the I.T. Act ?

2. Whether the guidance note of the Institute of Chartered Accountants could override the provisions of the Income Tax Act so as to compute deduction claimed under Sec. 80 HHC ?

(3). The respondent-assessee is an Indian Company and is engaged in the business of manufacturing pesticides. It also exports its product outside India amongst other business. In respect of profits of such export business Section 80HHC applied.

(4). Prior to making assessment u/s. 143(3) for assessment year 1990-91, the Assessing Officer had issued an intimation under Sec. 143(1)(a) reducing the amount of claim under Sec. 80HHC by the assessee from 14,38,513/- to Rs. 13,50,929/-.

(5). The intimation under Sec. 143(1)(a) was set aside by the Tribunal on an application under Sec. 154 moved by the assessee which was then the remedy provided against the adjustments made by the Assessing Officer without calling upon the assessee to explain in respect of such claims to deduction or subject to concession or tax benefits under the Act.

(6). In the order that came to be made finally on the application under Sec. 154 it was held that the process adopted by the ITO for making assessments under Sec. 143(1)(a) could not have been so adopted to make additions of amounts which needed a hearing and which cannot be assumed to be erroneous on face value and could be explained or debated during regular assessment.

(7). Thereafter, the regular assessment was completed under Sec. 143(3) by the Assessing Officer on 31.3.1990.

(8). The assessee being a company is subject to provisions of Sec. 115J for the assessment year 1990-91 with which we are concerned. Section 115J inter alia provided for minimum level for taxation by taking taxable income at 30% of book profit shown by the assessee company itself in its books of accounts prepared in accordance with Part-II and Part-III of Schedule VI of the Companies Act, 1956. Such amount of taxable profit in terms of Sec. 115J according to certificate of assessees auditors was stated to be Rs. 53,59,359/-.

(9). According to Sec. 115J of the Act of 1961, in the case of a Company, whose total income as computed by the Assessing Officer in accordance with the provisions of the Act of 1961, is less than 30% of its book profits, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30% of such admitted book profit.

(10). The import of expression ``book profit was explained by the statute in the provisions of sub-sec. (1A) and Explanation appended thereto of Sec. 115J. this provision inter alia provided that every assessee being a company shall for the purpose of Section 115J prepare its Profit and Loss A/c for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956. The net profit as shown in the P & L A/c prepared under sub-sec. (1-A) is to be increased by certain amounts stated in clause (a) to (ha) of Explanation. The total sum so arrived at after the addition made in net profit as aforesaid is to be reduced by the following sums:–

(i) The amount withdrawn from reserves (other than the reserves specified in Sec. 80HHD) or provisions, if any such amount is credited to the P & L Account.

(ii) The amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the P & L Account. In this connection, it may be noticed that Chapter III of the Income Tax Act, 1961 relates to the incomes which do not form the part of the total taxable income. Thus, income which is

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