9911796707
TMI Blog1994 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, making an addition of the entire refund of countervailing duty in a sum of Rs. 1,88,01,243, additional depreciation of Rs. 75,46,881 and sales-tax refund of Rs. 5,681. Aggrieved by this intimation, the assessee sought rectification under s. 154 of the IT Act, but its request was denied by the Assessing Officer. As a consequence the assessee filed an appeal before the CIT(A). In his order in IT Appeal No. 43/DC.II/C/CIT-II/90-91 dt. 28th Feb., 1991, the learned CIT(A) arrived at the book profit as follows: . . Rs. Net profit as per published accounts . 57,27,649 Add : CVD refund of the current year . 1,00,62,986 . . 1,57,90,635 Add : Provision for taxation 20,00,000 . Investment allowance 10,23,800 . Unascertained gratuity 2,00,000 . Sales-tax refund 5,681 32,29,481 . . 1,90,20,116 Less : Depreciation under s. 202 of the Companies Act. . 10,89,729 . . 1,89,30,387 30% thereof.... . 56,79,116 Both the assessee and the Revenue came on appeal. The assessee's appeal was disposed of by the Tribunal in ITA No. 400 (Coch)/1991 by its order dt. 31st March, 1993. At that point of time, neither the assessee nor the Revenue brought to the notice of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's own computation was higher than the income computed in accordance with the other provisions of the Act and, therefore, the assessee had invited the Assessing Officer to the provisions of s. 115J as its return was on that basis. Hence, the Assessing Officer did not have any option under s. 143(1) except to invoke the provisions of s. 115J. Of course, the adjustments envisaged in the proviso to s. 143(1) are in the realms of deductions, allowances and reliefs and not in the income filed. However, at the invitation of the assessee, the Assessing Officer was obliged to have a look at the book profit in terms of s. 115J. The profit and loss account furnished by the assessee had shown the figure of Rs. 57,27,649 "above the line" and a profit of Rs. 87,95,707 "below the line". The difference is due to the addition of Rs. 30,68,058 by way of adjustment for prior year items. Thus, the Assessing Officer took the latter figure as the starting point of computation, as according to him, the correct profit was not taken by the assessee in its first statement which accompanied the return. He was obliged to take the higher figure by the assessee's own conduct in furnishing anther statement st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t persuaded by the submission of Sri Nair. In our opinion, such items are to be included in the profits of the year under review in terms of cl. 2(b) of Part II of Schedule VI to the Companies Act which set out the requirements as to P&L a/c and cl. (2b) as follows:- "(2) the profit and loss account— (a)........... (b) shall disclose every material feature, including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of an exceptional nature." Accounting Standard (A.S. 5) defines prior period items "as material charges or credits which arise in the current year as a result of errors or omissions in the preparation of financial statements of one or more periods." Therefore, the sum of Rs. 30,68,058 is to be considered as forming part of the book profit of the company. Hence, the book profit of the company has to be taken at Rs. 87,95,707 (Rs. 57,27,649 plus Rs. 30,68,058). The Assessing Officer is right in starting his computation with the figure of Rs. 87,95,707 and the assessee is also right in starting with such a computation in its second statement without filing revised return. To this book profit certain additions have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for the simple reason that the assessee had made such an adjustment. No other reason is assigned for making such an adjustment by the Assessing Officer and, therefore, it is deleted. 8. Turning to the third adjustment namely, the sales-tax refund of Rs. 5,681 we hold that the P&L a/c does not contain the figure of Rs. 5,681 but the information is available in the statement computing the income of the assessee in accordance with the provision other than the provisions under s. 115J of the IT Act, as item No. 11 of such statement under the caption "Sales-tax etc. refunded not credited in P&L Rs. 5,681". From this information, the Assessing Officer had made the adjustment in his intimation. Having regard to the fact that the Assessing Officer is only concerned with ascertainment of the book profit under s. 115J of the Act, which has specified certain adjustments to be made, we hold that an item of refund (not of reserve) which was not at all credited to the P&L a/c cannot be taken into account for purpose of quantifying the book profit. So the book profit of the assessee for purpose of s. 115J cannot take in its sweep the three adjustments that were made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower charges 10,73,276 . S.T. Refund 5,681 43,02,757 Total : . 1,00,30,406 Add : C.V.D. Refund : . . . 1,00,62,986 . . 55,28,862 . Asst. yr. 1988-89 32,09,395 1,88,01,243 Total : . 2,88,31,649 Less : Depreciation under s. 205 . 75,068 Balance : . 2,87,56,581 The assessee carried the matter in appeal. The learned CIT(A) upheld the inclusion in the book profit of the assessee the sum of Rs. 1,00,62,986 being the refund of countervailing duty received in the previous year relevant to the asst. yr. 1989-90. He deleted the inclusion in the book profit of the assessee the refund of countervailing duty in a sum of Rs. 87,38,257 relating to the asst. yr. 1987-88 and 1988-89. The assessee is in appeal against the inclusion of Rs. 1,00,62,986. The Revenue is in appeal against the exclusion of Rs. 87,38,257. 5. The assessee's initial grounds of appeal is as follows: "The CIT(A) ought to have held that Rs. 1,88,01,243 being the refund countervailing duty is not part of the profit of the year and hence not taxable." The additional ground of appeal, since admitted, is as follows: "The additional depreciation amounting to Rs. 75,46,881 pursuant to the change ..... X X X X Extracts X X X X X X X X Extracts X X X X
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