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2011 (1) TMI 289 - AT - Income TaxBook profit - The issue is regarding whether in the course of settlement under OTS with a bank, the reduction of liability to Bank credited to the P&L account should be taken into account in computing Book Profits, particularly when part of the same represents waiver of principal portion of loan - the issue regarding computation of Book profits consists of two part (a) whether u/s 115JB, the starting point in computing the Book Profits should be the Profits as computed ‘above the line’ before extraordinary items and appropriations or ‘below the line’ after the extraordinary items and appropriations – the language of section 115JB is very clear to indicate that starting point of the profit and loss should be the figure after the appropriation as well as any extraordinary item made or prior year expenses which the company may for the purpose presentation show ‘below the line - This view is supported by the decision of the Hyderabad Tribunal in the case of Gulf Oil Corporation Ltd. v. ACIT (2006 -TMI - 66815 - ITAT HYDERABAD-B) - starting point for computing the book profit is the figure of Rs. 54,168,537 appearing after appropriation and extra ordinary item and not Rs. 1,08,98,948 being the profit figure arrived at ‘above line’ Cessation of liability - In the present case, the assessee did not claim nor was allowed any deduction or benefit of allowance by way of allowable expenditure and trading liability, and the same being credited to the profit and loss account had been subjected to tax as part of book profit under section 115JB of the Act - The Special bench of the Hyderbad Tribunal in the case of Rain Commodities Ltd. v. DCIT (2010 -TMI - 203366 - ITAT HYDERABAD) has held that profit on sale of capital assets credited to the profit and loss account is includible in computing Book profits, notwithstanding the fact that the same is exempted under the normal provisions of the Income tax Act on account of the investment of capital gains in an approved mode – Appeal is dismissed
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