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2019 (12) TMI 968 - AT - Income TaxRectification petition u/s 154 - rectify the computation of adjusted book profits and allow the deduction being lower of brought forward loss and unabsorbed depreciation - HELD THAT:- The assessee had actually carried forward the amount of ₹ 18,69,57,957/- to the next years and not the net amount after adjustment of debit balance in the Profit and Loss account. If the debit balance of profit and loss account would have been adjusted against General Reserve in the FY 2007-08 (AY 2008-09), then the opening balance as on 01-04-2008 would not have been ₹ 18,69,57,957/-. As such, it is clear that the assessee had not adjusted the brought forward losses of earlier years with the General Reserves. Hence, the observation of the learned CIT(A) that the entire brought forward losses has been adjusted against General Reserve in books of accounts is not correct. Whether waiver of a loan is capital receipt or revenue receipt? - We note that this issue is no longer res integra. Waiver of a loan certainly cannot be reckoned as transaction of a kind usually taken but it is an item of exceptional and non-recurring nature. A capital surplus on account of waiver of loan in no way can be recorded as operational profit or profit which is to be included in the profit & loss account. See M/S. JSW STEEL LIMITED [2017 (4) TMI 47 - ITAT MUMBAI] as held that waiver of a loan is a capital receipt therefore, it cannot be adjusted with brought forward business losses. Based on the facts narrated above, we note that section 115-JB is a stand-alone provision which does not contain any provision about carry forward of B/F losses, while computing the Book Profit u/s 115-JB of the Act. Audited accounts of the company clearly suggests that the assessee had never adjusted the brought forward losses/debit balance of Profit and Loss account with the General Reserve. Sum of ₹ 18,69,57,957/- credited in the General Reserve account was a Capital Receipt hence, it should not to be considered in computation of book profit u/s 115JB of the Act.The Ld. A.O. failed to take into account that the restriction, contained in Sec.72 of the I.T. Act on carrying forward the unabsorbed business losses for more than 8 years, does not apply in computing the Adjusted Book Profit u/s 115JB of the Act.Therefore, we direct the AO to allow the claim of the assessee for adjusting the unabsorbed losses of ₹ 2,95,24,689/- with the book profits under section 115-JB of the Act, for the year. Payment of Referral fees to the Doctors by the Appellant - allowable deduction u/s 37 - HELD THAT:- The action as had been suggested on the violation of the code of conduct is only for the medical practitioners and not for the pharmaceutical companies or allied health sector industries. Thus, it is viewed that the regulations issued by MCI are qua the doctors/medical practitioners registered with MCI, and the same shall in no way impinge upon the conduct of the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of Explanation to section 37(1), then the same would debar the doctors or the registered medical practitioners and not the pharmaceutical companies and the allied healthcare sector for claiming the same as an expenditure. In view of the above judicial precedents, the expenditure incurred on account of Referral Fees paid to Doctors is allowable as deduction u/s 37(1) of the Act. Hence, we direct the Assessing Officer to delete the addition paid to the Doctors as referral fees.
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