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2016 (5) TMI 1032 - AT - Income TaxAllowability of loss on demerger in the computation of book profit u/s 115JB - MAT - Held that:- The claimed loss was disclosed by the assessee in the profit & loss account as an extraordinary item and such loss was arrived at by reducing the same from the book value of the asset transferred and further the treatment as given by the assessee to the loss, arose on demerger is in accordance with part II & III to schedule VI of the Companies Act and such demerger was approved by the Hon’ble High Court vide order dated 19/09/2008. Even otherwise, as mentioned earlier, the statutory auditors have accepted the book treatment in respect of loss arose on account of demerger, thus, we are not in agreement with the observation of the Ld. Assessing Officer that such loss could not be debited to the profit and loss account and ought to have been adjusted against the reserve of the assessee company. The starting point for computation of book profit u/s 115JB of the Act is the net profit as shown in the profit & loss account for the relevant previous year In the present case, such amount is the loss of ₹ 66,86,13,773/-. There is no concept like multiple profit in the profit & loss account. It is well settled proposition of law that, as per explanation-1 below section 115JB(2) of the Act, only adjustment as permitted to the book profit are those as provided in the said explanation. The purpose of section 115JB of the Act is to provide an alternative method of computation of tax by accepting the book profits as shown by the assessee, albeit with certain adjustment as specified in Explanation-1 to section 115JB(2) and levying tax thereon as alternative to the tax computed under the other provisions of the Act. Assessing Officer wrongly disputed the correctness of the accounts of the assessee. - Decided in favour of assessee.
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