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2008 (12) TMI 440 - AT - Income TaxComputation of book profits u/s 115JB - Minimum alternate tax - gain on sale of units of mutual fund - not credited to the profit and loss account - directly taken to the Reserves Accounts in the balance sheet - claim of the assessee is that the said profit arising on redemption of units of mutual fund is arising on sale of the assets shown under investment and have no link with the business carried on by the assessee and as such these were not routed through the profit and loss account. HELD THAT:- In view of the ratio laid down by the Hon’ble Supreme Court in Apollo Tyres Ltd.’s case [2002 (5) TMI 5 - SUPREME COURT] and by the jurisdictional High Court in Akshay Textiles Trading & Agencies (P.) Ltd.’s case [2007 (10) TMI 251 - BOMBAY HIGH COURT], we hold that where the accounts of a Company are maintained as per the Provisions of Companies Act and are Certified by the Auditors to the effect that the same are maintained as per the requirements of the Companies Act and the same are approved by the shareholders of the company in its annual general meeting and filed before the Registrar of Companies, the authenticity of such accounts has to be accepted by AO, while computing the book profits u/s 115J/115JA/115JB. AO is however empowered to make such adjustments as provided for in the Explanation to the respective section. Once an asset is held as an investment by a company and is reflected as an investment in the balance sheet of the company from year to year, then any gain on sale of such investments is not linked to the profits and gains of the business carried on by the respective companies. The said gain of sale of units on mutual funds was offered to tax in the respective hands of the companies for the year under appeal. Where the accounts are prepared and certified by the auditors, which in-turn are approved/adopted by the shareholders of the company and are filed before the Registrar of the Companies, AO has no powers of disturbing the profits of business as held by the Hon’ble Supreme Court in Apollo Tyres Ltd.’s case (supra). Only power of the AO is to make suitable adjustments to the profits of business under the Explanation to section 115JB. The said adjustments are relatable to the profits and gains of business carried on by the assessee. Any gain arising on sale of investments, though taxable, may necessarily be not routed through Profit and Loss Account. We uphold the order of CIT(A) that no adjustments on account of gain on sale of units of mutual fund is to be made while working out the book profits u/s 115JB. The grounds of appeal raised by the Revenue are dismissed. In the result, all the seven appeals filed by the revenue in the case of seven different assessees mentioned above are dismissed.
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