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While computing book profits the AO added Provision for Doubtful debts of Rs.3,53,35,020/- debited to the profit and loss account to the profits arrived at in the profit and loss account prepared in accordance with the provisions of Sec.115JA(2) of the Act. The question whether provision for doubtful debts and provision for doubtful advances have to be added while computing book profits u/s.115JA of the Act has to be answered in favour of the revenue and against the assessee because of the retrospective amendment introduced in Section 115JA of the said Act.
The Assessing Officer is not competent to make addition to the book profit for amount of interest, as the net profit had already been computed as per provisions of the Companies Act. The said amount does not fall under section 115JB(2) and Explanation 1 thereunder. Therefore, the appeal of the revenue on the said issue was liable to be dismissed.
Assessee contended that it is entitled to the benefit of exemption under section 54EC of the Act even while computing book profit chargeable to tax under section 115JB of the Act. The Bench, while passing the order, followed the decision of the Hon’ble Kerala High Court to hold that the assessee is not entitled to deduction under section 54EC of the Act while computing the book profit under section 115JB of the Act.
ACIT Vs. Parablic Drugs Ltd. (ITAT Delhi) – It has to be held that all of these expenditure were incurred by the assessee in the course of its business and none of the expenditure can be classified as expenditure in the nature of capital. The case law relied upon by the ld. AR supports the case of the assessee. Therefore, we found no infirmity in the order of CIT(A) vide which the assessee has been held eligible for deduction of these expenditure under both the sections either u/s 35(1)(i) or u/s 37(1) of the Act.
Century Textiles & Industries Ltd Vs DCIT, Mumbai -In the instant case, the original order was passed on 22.3.2004 u/s 143(3) of the I T Act and since the reassessment notice was issued for the purpose of adding the arrears of depreciation debited to P&L account and the revaluation reserves credited to P&L account to be reduced while computing book profits and since the order of the CIT relates to non-disallowance of expenditure in respect of exempt income under clause (f) to Explanation(1) of sec 115JB; therefore, in view of the decisions cited above, the period of limitation provided for in 263(2) would commence from the date of original assessment which, in the instant case is 22.3.2004. Since the order of the CIT u/s 263 is dated 30.3.2009, therefore, the same is barred by limitation.
Recently ITAT Mumbai in the case of Ruchi Strips & Alloys Ltd vs. DCIT held that the concealment of income had its repercussions only when the assessment was done under the normal procedure. If the assessment as per the normal procedure was not acted upon and it was the deemed income assessed u/s 115JB which became the basis of assessment, the concealment had no role to play and was totally irrelevant. The concealment did not lead to tax evasion at all.
Assessment dispute: ITAT Chennai ruling on book profit computation, bad debts provision, and disputed tax liabilities under Section 115JB.
The above ruling lays down that the amount withdrawn from revaluation reserve and credited to the Profit & Loss account cannot be reduced from book profit if such amount had not increased the book profit at the time of creation of reserve.
Supreme Court upholding the order of the Delhi High Court, denied reduction from book profit, for the purpose of Section 115JB (Section) of the Indian Tax Law, of the amount withdrawn from revaluation reserve. This is for the reason that such reserve was not added back to the net profit in the year of creation of revaluation reserve (year of creation), in terms of the requirement of the Section.
It was held that clause (iii) of Explanation 1 to section 115JB of the Income-tax Act, 1961 (“the Act”) cannot be said to be discriminatory and hence unconstitutional. This clause relates to set-off of unabsorbed business loss or unabsorbed depreciation, whichever is lower. The HC also held that the approach of reading down a provision by modifying the language of a statute to achieve the intention of the legislature, cannot apply to such a provision.
