TMI Blog2006 (9) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the Supreme Court in the case of Apollo Tyres Ltd.[ 2002 (5) TMI 5 - SUPREME COURT] . None of the clauses given in the Explanation provide for the increase or decrease of the book profits by extraordinary items. The reference to AS-5 by the ld DR does not in any manner advance the case of the revenue. It merely says that prior period and extraordinary items should be separately disclosed along with their nature so that their impact on the operating results can be perceived. It does not say that they are not part of the Profit Loss Account. Similarly, the Guidance Note issued by the ICAI also does not help the revenue as it merely says that sometimes, Appropriation Account is included as a separate section of the Profit Loss Account. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary items in the Profit Loss Account. The profit before extraordinary items amounted to Rs. 1,085.45 lakhs. The Assessing Officer was of the view that the assessee should have taken Rs. 1,085.45 lakhs as the base figure for computation of book profits, i.e. according to him the extraordinary items should have been ignored. The explanation of the assessee was that the amount of Rs. 109.96 lakhs was an expenditure for the company and hence, the book profits had to be determined after reducing all the expenditure. However, the Assessing Officer did not agree with the contention of the assessee and after referring to the provisions of section 115JB, held that the assessee was not entitled to reduce the amount of Rs. 109.96 lakhs paid towards a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts Ltd. v. Dy. CIT [1995] 78 Taxman 126. Reliance was also placed on the decision of the Hyderabad Bench of the Tribunal in the case of NCS Estates (P.) Ltd. v. Dy. CIT[2002] 125 Taxman 220. 5. The learned Departmental Representative emphatically stated that just as the Assessing Officer does not have the power to tinker with the profit shown in the Profit Loss Account, the assessee also cannot do so. He referred to the Accounting Standard-5 (AS-5), issued by the Institute of Chartered Accountants of India (ICAI) on 'Prior Period and Extraordinary Items'. Our specific attention was drawn to para-9 of the Standard, which is reproduced below- Prior Period Items should be separately disclosed in the current statement of profit los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated where out of the profits earned by them. Otherwise, sub-clauses (a) and (b) of clause (viii) of Note-II in para-3 of Part-II of Schedule-VI specifically provide that the aggregate amounts set aside or proposed to be set aside to reserves should be distinctly shown in the Profit Loss Account. 9. Similarly, sub-clause (b) and sub-clauses (a) and (b) of clauses (xii) and (xiii) respectively in Note-II of Part-II of Schedule-VI provide that profits or losses in respect of transactions not usually undertaken or undertaken in exceptional circumstances or which are of non-recurring nature should be shown in the Profit Loss Account. The aggregate amount of dividends paid and proposed are also to be shown in the Profit Loss Account. The point w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not help the revenue as it merely says that sometimes, Appropriation Account is included as a separate section of the Profit Loss Account. But, as we have seen earlier, Parts-II and III of Schedule-VI to the Companies Act do not speak of Appropriation Account at all. In the light of this discussion, we are convinced that it was in accordance with law for the assessee to have taken Rs. 978.55 lakhs as the base figure to compute the book profits for the purposes of section 115JE. 10. In the next ground, the assessee is aggrieved against the following three additions/disallowances: (a) Addition of Rs. 3,62,005 on account of delayed payment of Provident Fund; (b) Not allowing depreciation at 60 per cent on software; (c) Disallowance of Rs. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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