Case Law Details
Brief of the Case
ITAT Bangalore held In the case of M/s B & B Infotech Ltd. vs. ITO that once P&L A/c is admittedly prepared as per Schedule VI of the Companies Act, then neither the AO has any power to tinker with it nor the assessee is permitted to claim exclusion or inclusion of any item of income or expenditure as the case may be, for the purpose of computing book profits u/s 115JB except the permissible adjustment provided under the Explanation to sec.115JB itself. In the given case, it is not disputed that this amount does not fall in the ambit of any of the clauses of Explanation to 115JB.
Facts of the Case
The assessee filed its return of income on 25/3/2006 declaring ‘nil’ income. A notice u/s 148 was issued on 8/11/2006 whereby the AO sought to tax under MAT an amount of Rs.43 lakhs being remission of liability of ING Vysya Bank Ltd. The assessee submitted before the AO that this remission of the liability was on account of principal amount of loan and therefore, the same is not in the nature of income which can be considered as part of the book profits u/s 115JB. The AO rejected the objections of the assessee and added the said amount of Rs.43 lakhs while computing book profits u/s 115JB.
Contention of the Assessee
The ld counsel of the assessee submitted that remission being capital receipt, cannot be considered as income of the assessee even for the purpose of book profits u/s 115JB of the Act. In support of his contention, he has relied upon the decision of the Mumbai Bench of the Tribunal in the case of M/s.Shivalik Venture Pvt. Ltd. vs. DCIT in ITA No.2008/Mum/2012 dated 19/8/2015 as well as the decision of the Jaipur Bench of the Tribunal in the case of ACIT vs. Shree Cement Ltd. in ITA Nos.614, 615 & 635/JP/2010 dated 9/9/2011.
The learned AR of the assessee has also relied on the judgment of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. Nagarjuna Fertilizers & Chemicals Ltd. in ITTA No.100 of 2003 dated 23/9/2014 and submitted that when the assessee has the disclosed the fact of capital receipt in the notes to accounts, then said amount shall be excluded from the profit and loss account for the purpose of book profits u/s 115JB.
The learned AR of the assessee has submitted that even if the said amount is shown by the assessee in the P&L A/c when the assessee has disclosed the nature of receipt in the notes to the accounts, then the effect of said disclosure in the notes to the accounts will be that the said amount should not be considered as part of P&L A/c of the assessee as per the provisions of Schedule VI of the Companies Act.
Contention of the Revenue
The ld counsel of the revenue submitted that this amount has been credited by the assessee in the P&L A/c. The assessee has not disputed that the accounts of the assessee are prepared as per the provisions of Schedule VI of the Companies Act. Therefore, the AO has no power to tinker with the P&L A/c prepared by the assessee as per Schedule VI of the Companies Act except the adjustment as permitted under the Explanation to sec. 115JB. He has relied upon the orders of the authorities below.
Held by CIT (A)
Before the CIT (A), assessee reiterated the contention that the remission of the principal loan amount in one time settlement cannot be considered as income for the purpose of book profits u/s 115JB. The CIT (A) did not accept the contention of the assessee and had held that book profits arrived at as per the provisos of Schedule VI of the Companies Act cannot be tinkered with in view of the judgment of the Hon’ble Supreme Court in the case of Apollo Tyres (255 ITR 274).
Held by ITAT
In the case in hand, the assessee got remission of liability of Rs.43 lakhs under one time settlement by the ING Vysya Bank which has been disclosed by the assessee in the P&L A/c. This disclosure, in the P&L A/c is strictly as per the requirement of Schedule VI of the Companies Act and further in conformity with the mandatory accounting standard AS 5. Therefore, the treatment of the amount in the books of account and particularly in the P&L A/c, is as per the provisions of Schedule VI of the Companies Act as well as accounting standard AS 5. Hence, any disclosure in the notes to accounts would not require any change in the P&L A/c already prepared as per Schedule VI of the Companies Act.
The decisions relied upon by the assessee are applicable on the facts and circumstances where if an item of income or expenditure which is required to be disclosed in the P&L A/c prepared as per provisions of Schedule VI of the Companies Act but instead of disclosing the said item in the P&L A/c, it was disclosed in the Notes to the accounts, then such item of income or expenditure will be treated as part of the P&L A/c for the purpose of computing book profits u/s 115JB. Once P&L A/c is admittedly prepared as per Schedule VI of the Companies Act, then neither the AO has any power to tinker with it nor the assessee is permitted to claim exclusion or inclusion of any item of income or expenditure as the case may be, for the purpose of computing book profits u/s 115JB except the permissible adjustment provided under the Explanation to sec.115JB itself.
It is not disputed that this amount does not fall in the ambit of any of the clauses of Explanation to 115JB. Therefore, once this amount has been disclosed in the P&L A/c prepared strictly as per provisions of Schedule VI of the Companies Act, the same cannot be excluded for the purpose of computing book profits u/s 115JB.
Accordingly, appeal of the assessee dismissed.
