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TMI Blog2012 (6) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... penses of earlier years do not fall within the ambit of section 154 r.w.s. 143(1) of the Incometax Act, 1961. 4. The order of the learned CIT(A) is erroneous and is not tenable on facts and in law. 5. The appellant craves the leave to add, amend or alter all or any of the grounds of appeal." 2. Adverting first to ground no. 3 in the appeal, facts, in brief as per relevant orders are that return declaring loss of Rs.95,65,17,899/- and book profits of Rs.57,00,60,389/- filed on 29.09.2008 by the assessee, manufacturing printed articles of plastic, polyester film, printing machinery etc, was processed on 24.9.2009 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act). Thereafter, an order u/s 154 was passed on 15.1.2010,which is not in dispute before us. Subsequently, the Assessing Officer (A.O. in short) noticed that the assessee did not include debentures redemption reserve of 163.96 lacs and short provisions of expenses for earlier years of Rs.47.72 lacs while determining book profits u/s 115JB of the Act. In response to a show cause notice issued by the AO, the assessee raised the following contentions:- i) That the profit and loss account has been prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r P&L account and then make the specific adjustments to it. It has further been contended that nowhere the amount debited to the P&L account towards short provisions of earlier years expenses is mentioned. ii) That the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the P&L account except to the extent provided in the Explanation to section 115JB. 3.2 I have carefully considered the contentions made on behalf of the assessee. However, the same are not acceptable for the following reasons:- i) It is noticed that as per P&L account, there is net profit of Rs.7141.54 lacs. From this profit provisions for tax have been made after which amount available for appropriations is Rs.6051.05 lacs. After making appropriations, the balance profit is 2234.91 lacs. While computing book profit u/s 115JB, the assessee has taken the amount of this balance profit of Rs.2234.91 lacs and has made certain adjustments to it to arrive at the book profit of 57,00,60,389/- whereas the assessee should have started from the amount of net profit of Rs.7141.54 lacs and made the required and specified adjustments to it. The assessee's contention that nowhere the amount de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on "book profit". Sub section (2) to Section 115JB states that every assessee being a company shall for the purpose of this section prepare its P&L account for the relevant previous year in accordance with the provisions of Part II and III of the Schedule VI of Companies Act, 1956. In view of the above provisions of section 115JB, the profit declared in the profit and loss account prepared as per Part II & III of Schedule VI of the Companies Act, 1956 is the figure of profit to be considered for the purpose of determination of book profit, taxable u/s 115JB. The profit so declared in the profit and loss account prepared in accordance with provisions of Companies Act and the resultant figure carried to the balance sheet is the starting point for making adjustments for calculating "book profit" in terms of Explanation to Section 115JB(2). Now coming to the specific addition made by Assessing Officer, it is seen that the debenture redemption reserve is not a reserve in view of the judgment of Hon'ble Supreme Court in the case of National Rayon Corp. Ltd. Vs. CIT 1997 227 ITR 764 (supra). In this judgment, the Hon'ble Supreme Court has clearly held that debenture redemption reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er which such expenses can be added back to the book profit therefore such prior period expenses cannot be added back for determining book profit. In this connection it may added that since the provisions of Section 115JB are special provision for payment of tax by certain companies, therefore, as held in various court decisions the same are to be strictly construed. Now coming to the provisions of section 143(1) it is seen that Section 143(1) mandates only two type of adjustments to be made in the total income of the assessee i.e. any arithmetical error and any incorrect claim if such incorrect claim is apparent from return. As held above the "debenture redemption reserve" and the "prior period expenditure" are neither arithmetical error nor an apparent incorrect claim. Moreover in terms of the decision of Gujarat High Court in case of Gujarat Petro Synthese Ltd. Vs. P.I. Roongta 316 ITR 282; Khatau Junkar Ltd. (1992) 196 ITR 55 as well as of Kolkata High Court in the case of CIT Vs. Malabar Building Products Ltd. (2001) 248 ITR 72, the words "prima facie inadmissible" means without much debate or on the face of the document itself it can be stated that the mistake had been commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) while referring to the decisions in IOL Ltd. Vs. DCIT (2003) 81 TTJ 525(Kol.); Hindalco Industries Ltd. Vs. ACIT and National Rayon Corporation (supra) concluded that debenture redemption reserve is deductible while computing book profits u/s 115JB of the Act. The ld. DR now pointed out before us that the Bombay Bench of the ITAT in JSW Steels Ltd. vs.ACIt, 133 TTJ 742(Bom.) held that debenture redemption reserve is not deductible while determining book profits u/s 115JB of the Act.. As regards prior period expenses, the ld. CIT(A) concluded that these could not be added under Explanation 1 to Sub Section (2) of Section 115JB of the Act, therebeing no such clause, under which such expenses can be added back to the book profits. A plain reading of the said provision of sec. 115JB of the Act reveals that every assessee, being a company, shall, for the purposes of section 115JB, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The provisions of sub-section (1) of section 211 of the Companies Act, 1956 relates to balance sheets and it requires that the company shall draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raphs 5 to 7 of AS-5 read as under :- "5. All items of income and expense which are recognised in a period should be included in the determination of net profit or loss for the period unless an Accounting Standard requires or permits otherwise. 6. Normally, all items of income and expense which are recognised in a period are included in the determination of the net profit or loss for the period. This includes extraordinary items and the effects of changes in accounting estimates. 7. The net profit or loss for the period comprises the following components, each of which should be disclosed on the face of the statement of profit and loss : (a)profit or loss from ordinary activities; and (b)extraordinary items." Under the head "Prior Period Items", paragraphs 15 and 19 of the said Accounting Standard read as under :- "15. The nature and amount of prior period items should be separately disclosed in the statement of profit and loss in a manner that their impact on the current profit or loss can be perceived. 19. Prior period items are normally included in the determination of net profit or loss for the current period. An alternative approach is to show such items in the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that error may be rectified. Section 154 of the Act provides for rectification of mistakes, which are apparent from the record. The phraseology "mistake apparent from the record" has been considered by several judicial opinions and all those judicial opinions uniformly held that an error, which is not self-evident, and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of the record. The Hon'ble Apex Court have consistently held that where in relation to interpretation of a provision there are conceivably two opinions, rectification cannot be resorted to. In this connection, Hon'ble Supreme Court held in the case of T.S.Balaram, ITO Vs. Volkart Brothers& Others,82 ITR 50(SC) that ".......It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Incometax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which, can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined, that the original asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the true scope of the relevant provisions of the Act in proceedings under section 154 of the Act. It is clear from the facts of the case that there were debatable questions relating to debenture redemption reserve and prior period expenses while determining books profits u/s 115JB of the Act.
6. In view of the foregoing, especially when the Revenue have not placed before us any material in order to controvert the aforesaid findings of the ld. CIT(A) nor even pointed out any contrary decision while the issues are debatable, we are not inclined to interfere with the conclusion of the ld. CIT(A) and accordingly, reject ground no. 3 raised by the Revenue. As a corollary, ground nos. 1 & 2 raised in this appeal do not survive for our adjudication and are, therefore, treated as infructuous .
7. Ground no. 4 in the appeal, being general in nature, does not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground no.5 in the appeal, accordingly, these grounds are dismissed.
8. No other plea or argument was made before us.
9. In the result, appeal is dismissed.
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