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2018 (11) TMI 477 - AT - Income TaxRevision u/s 263 - assessee has not accounted for interest income in the books of account on advance to IAL - addition on account of interest on advance to IAL to the book profit u/s. 115JB - Held that:- Since there was significant uncertainty of ultimate collection of principal itself, so in accordance with Accounting Standard 9 on revenue recognition ('AS 9') issued by Institute of Chartered Accountants of India ('MCAI'), Assessee has not recognized any notional interest income on such advance in its audited financial statements. CIT(A) has further noted that it has been argued that since such notional interest on advance was not recognized as revenue in its audited books of accounts and also the same is not covered in any of the items listed in the Explanation to 1 section 115JB, it was not considered in the books profits for MAT purpose and was not offered to tax under provisions of section 115JB. However, out of abundant caution, such notional interest @ 8% i.e. of 1NR 12.80 Crores on the advance given to IAL was separately offered to tax under the normal provisions of the Act. Thus, we note that the assessee has clearly explained that this income was not accounted for in the books of account due to uncertainty. The accounts were duly audited. However, due to abundant caution it was offered in the computation of the normal income. The assessee has further explained that there was uncertainty so it was not accounted for in the books of account which was also accepted by the auditors. Hence, the assessee has not offered the same under MAT provision of section 115JB. From the above, it is amply clear that in the computation of income, the issue was apparent and upon that computation of income, the A.O. has passed the assessment order. Hence, on these facts, it cannot be said that the A.O. has not applied his mind. A.O. has duly applied his mind and accepted the income offered u/s.115JB which did not include this interest accrued amount as it was not provided in the books of account. Moreover the ld. CIT(A)’s opinion that the book profit needs to be reworked and the impugned amount added to book profit is not sustainable. - Decided in favour of assessee.
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