TMI Blog2016 (9) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... is no provision in the Companies Act to directly absorb any profit or loss in the balance sheet directly other than routing it through the profit and loss account of the assessee. Therefore, it is apparent that the assessee company had directly absorbed the profit derived from the sale of its capital asset in the balance sheet thereby avoided to disclose the same in its profit and loss account in order to escape from the clutches of the provisions of section 115JB of the Income Tax Act. This is against the provisions of the Companies Act as well as against the Income Tax Act. The decisions cited by the learned Authorized Representative has not considered the mandatory provision of Companies Act, 1956 with respect to Schedule VI Part II & III. Therefore, we are of the considered view that the learned Assessing Officer has correctly computed the “book profit” as per the provisions of the Act, which is rightly upheld by the learned Commissioner of Income Tax (Appeals). - I .T.A.No.497/Mds/2016 - - - Dated:- 1-8-2016 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Mr. B.Ramakrishnan, C.A. For The Respondent : Mr. B.K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which will be the book profit of the assessee for the purpose of determining the tax liability under section 115JB of the Income Tax Act, subject to the other provisions of the Income Tax Act. Since the assessee had not complied with the provisions of the Companies Act, the learned Assessing Officer added the profit derived from the sale of capital asset to the profit loss account of the assessee for computing the book profit. While arriving at such decision, the learned Assessing Officer observed as under:- 14. After considering the reply of the assessee and the following factual and legal position, the assessment of the assessee is completed. 14.1 The two assets sold by the assessee are fixed assets as defined in Accounting Standard (AS)10 prescribed by lCAl. 14.2 Losses arising from the retirement or gains or losses arising from disposal of fixed assets which is carried at cost should be recognised in the profit and loss Statement. 14.3 As per notification by the council of lCAl, Accounting Standard (AS)10 is one of the standard made mandatory. 14.4 The Companies Act,1956, as well as many statutes require that the financial statements of an ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. The sale of the fixed assets of the company is non-recurring. These are not in the regular course of its business and are exceptional in nature. The credit receipts from these sales should have been reported in the profit and loss account of the assessee. 14.12 The qualification by the Auditor was evidence to conclude that the books profit of the assessee was not stated correctly. In such a case, a duty is cast upon the A.O. to restate the book profit. 14.13 In the process of restating the book profit it was noticed that the assessee had made an addition to fixed assets by way of construction just prior to the sale and that too after getting substantial amount as advance. The materials bought were only iron steel and cement. No other material seems to have been bought. All the materials have been claimed to have been bought and brought from Mumbai. Any lorry which comes from Mumbai to Chennai should take the Bangalore-Chennai Highway to reach Chennai. It is very unusual that none of the lorries took the usual route. The supplier of material and the labour contractor were not produced by the assessee even after being told to do so. Mere deduction of TDS from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ` 9,50,000 Less: Selling Expenses Brokerage ` 2,67,69,474 Less: Cost including improvement ` 1,22,80,526 6,36,609 Less: Consideration towards Furniture Fittings ` 1,16,43,917 ` 34,11,86,517 Total profit on sale of properties (I + II) Book Profit before tax as per the P L Account audited by the Statutory Auditor (-) ` 1,01,69,416 Add: Profit on sale of properties ` 34,11,86,517 Reworked book profit ` 33,10,17,101 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r non-recurring nature, if material in amount . (c) Miscellaneous income. 7. From the above, it is apparent that whatever be the nature of profit or loss is incurred by the assessee it has to be disclosed in the profit and loss account mandatorily as per the provisions of the Companies Act, 1956. Only the assets liabilities and the profit/loss carry forwarded from the profit and loss account are disclosed in the balance sheet. The format of balance sheet as provided under Schedule VI of the Companies Act itself indicate the fact that only the assets liabilities including reserves and carry forward of profit/loss from the profit loss account are to be disclosed in the balance sheet. Thus the profit determined in the profit loss account of the assessee complying with the Companies Act shall be the book profit of the assessee company for the purpose of Section 115JB of the Act, subject to the other provisions of the Income-Tax Act. To make it clear, there is no provision in the Companies Act to directly absorb any profit or loss in the balance sheet directly other than routing it through the profit and loss account of the assessee. Therefore, it is apparent th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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