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The Commissioner Of Income Tax, LTU, Versus M/s. Sansera Engg. Pvt. Ltd.,

2016 (6) TMI 642 - KARNATAKA HIGH COURT

Rectification of mistake - Whether the Tribunal was correct in holding that prohibition mentioned in section 40(a)(ic) of the act does not apply to the computation of the book profit for the purpose of section 115JB and according to that the FBT is an allowable deduction ? Held that:- So far as Fringe Benefit Tax (F.B.T.) is concerned, the Tribunal has not interfered with the view taken by the CIT(A), which was based on the Board circular dated 29-08-2005. - When the Board has issued the cir .....

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ported exercise of power under Sec. 154, such could not be upset. - After hearing him at length, we do not find that such would fall in the arena of mistake on the face of record within the scope and ambit of Sec. 154 of the Act, which is limited to rectification of the mistake or error. When the initial order of rectification is found to be beyond the scope of Sec. 154, as has been rightly held by the Tribunal, everything would fall to ground.The Tribunal has rightly held that such type of .....

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ions of law: 1. Whether the Tribunal was correct in holding that prohibition mentioned in section 40(a)(ic) of the act does not apply to the computation of the book profit for the purpose of section 115JB and according to that the FBT is an allowable deduction ? 2. Whether the tribunal was correct in deleting the addition made by the assessing officer holding that the rectification is neither permissible u/s.154 nor u/s.115JB (explanation-1) in respect of exclusion of prior period expenditure? 3 .....

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t. According to the CIT (A), the Board has issued a circular No.8/2005 dated 29.08.2005 wherein it was explained that for the purpose of computing the income under the head profits and gains of profession , the FBT would not be claimed as deduction because it is an expenditure laid out extending wholly and exclusively for the purpose of business or profession of the employer. Section 40(a)(ic) specifically prohibit the claim of its deduction for the purpose of computing the income under the regu .....

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nt of FBT paid, for the purpose of computing the income under the profits and gains of business or profession . This prohibition does not apply to the computation of the book profit for the purpose of section 115JB. Accordingly, the FBT is an allowable deduction in the computation of book profit for the purpose of section 115JB. Accordingly, the FBT is an allowable deduction in the computation of book profit u/s 115JB of the income tax Act . 5. On due consideration of the above, we are of the vi .....

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TD 51 which is based on the judgment of the Hon ble Supreme Court in the case of Apollo Tyres Ltd, 254 ITR 273. For the purpose of section 115JB, the book profit is the profit disclosed as per P&L a/c prepared in accordance with the provisions of Part-II and Part-III of Schedule VI of the Company s Act, 1956, laid before the company in its AGM. The adjustment to that profit can only be made qua, the items provided in Explanation-1 to section 115JB i.e. a to f. On perusal of clause a to f, un .....

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. 154; nor u/s 115JB (Exp-1), therefore, the CIT (A) has rightly deleted this addition format he book profit. Similar is the position with regard to third aspect, the learned CIT (A) has observed as under: 5. In respect of Security Transaction Tax(STT), the appellant pointed out that it is not included in any of the 9 items listed in Explanation 1 to section 115JB(2) and, hence, could not be used to enhance the book profit. This is an argument based on a correct understanding of the prevailing l .....

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