TMI Blog2011 (1) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... profit under section 115JB. 3. Brief facts of the above issue are that, while doing the scrutiny assessment, it was noticed by the AO that while the computation of income under normal provision was started with the net profit of ₹ 8,70,11,000/- as per Profit and Loss account for the year ended 31. 03. 2006 but the computation of Book Profit u/s. 115JB was started with an amount of ₹ 7,39,58,000I- after excluding Exceptional Item for ₹ 1,30,53,000/- related to write back of provision for diminution in the value of investment as per Sl. No. (ix) of Schedule 20 to the accounts which is inadmissible. Thereafter, a notice under section 143(2) dated 24.09.2009 was issued to the assessee. In response to the notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act, 2009 amended Section - 115JB with retrospective effect. As per new proviso, provision for diminution in the value of investment is not to be allowed as deduction in computing Book Profit. As is corollary, any amount written back out of such provision is also not included in the Book Profit. As such there is no mistake in computation of Book Profit u/s. 115JB for the assessment year 2006-07. 3.1 The AO considered the written submission of the assessee and concluded that in the Finance Act, 2009, Section 115JB has been amended and as amended provision for diminution in the value of investment shall not be allowable to be adjusted from the Net Profit to arrive at Book Profit. This amendment is also made effective retrospectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Clause (i) of Explanation to Sec. 115JB of the Act. 6. Clause (i) of the Explanation provides that any amount withdrawn from the Provision will be reduced from the book profit if and such amount is credited to the Profit Loss A/c. The proviso to Clause (i) explains that the provision written back will be deducted from the net profit only if the provision (out of which the amount is withdrawn) pertains to any previous year commencing after 1st April 1997 and book profit of such year was increased by the provision (out of which the amount is withdrawn). In the Appellant s case the amount withdrawn and credited to the Profit Loss A/c; was out of the Provision for Diminution in Value of Investments debited to the Profit Loss A/c f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that computation of business income under normal provisions was started with the declared loss of ₹ 3,00,08,000/- and therefore, without making any addition of ₹ 7,05,73,000/- being provision in the diminution value of investment debited to the P L a/c, total income was computed at a loss of ₹ 93,17,050/-. The book profit was computed at a loss of ₹ 93,17,050/-. Hence, the fact was clear that the provision for diminution in the value of investment of ₹ 7,05,73,000/- which was debited to the P L A/c. for the year ended 31.03.2001 was neither disallowed under the normal provision nor added back under section 115JB. Therefore, the contention of the assessee, which was considered by the Ld. CIT(A) in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the profit and loss account, shall not be reduced from the book profits, unless the books profits were increased by the amount transferred to such reserves or provisions in the year of creation of such reserves (out of which the said amount was withdrawn). In this case, provision for diminution in the value of investment ₹ 7,05,73,000/- was created in the financial year 2000-01 relevant to assessment year 2001-02 but book loss of the said year was not appreciated by the said amount in the computation filed under section 115JB along with the return. As there is a loss of ₹ 30,008/- prior to providing of prior year adjustment and diminution in the value of investment, no addition has been made under section 115JB by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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