TMI Blog2017 (10) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 115JB is to bring to tax the book profits as shown by the company to its shareholders and keeping in view the aforesaid object behind sec. 115JB of the Act and the judicial pronouncements on the scope of the ‘AO’s powers computing the book profits, we do not find any reason to interfere with the impugned order passed by the ld CIT(A) on this issue and therefore uphold the same. - ITA No.375/Bang/2017 And CO No.81/Bang/2017 - - - Dated:- 13-10-2017 - SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER For The Appellant : Shri L.V Bhaskar Reddy, Addl. CIT For The Respondent : Shri V Srinivasan, C.A ORDER PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of Commissioner of Income-tax (Appeals) - 11, Bangalore dated 30/11/2016 for asst. years 2008-09. The assessee has also filed Cross Objections ( C.O ) in respect of the aforesaid order of the CIT(A). 2. Briefly stated, the facts of the case relevant for this appeal are as under:- 2.1 The assessee company is engaged in the business of manufacture and sale of animal feed supplements, manufacture and processing of packa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to accept the book profits as declared by the assessee. The ld CIT(A), however, rejected the assessee s claim that the AO was not entitled to vary the book profits in the order of assessment framed u/s 143(3) r.w.s 153A of the Act in the absence of any incriminating/seized material being found at the time of search. 3.1 Revenue, being aggrieved by the order of the CIT(A)-11, Bangalore dated 30/11/2016 for asst. year 2008-09, has filed this appeal wherein it has raised the following grounds:- The issue under appeal was computation of the Book Profit by the A.O on the issue of 100% depreciation claimed on the windmill in the books of the company to arrive at the book profit. The asessee had claimed 100% depreciation on the windmill as per Income Tax Act to arrive at the total time as per normal provisions of the Act. However, while computing the book profit as per Companies Act. also the assessee claimed 100% depreciation on the windmill and arrived at a book profit. The A.O was of the opinion that depreciation at the rate of 100% was neither in accordance to the Schedule VI of the Companies Act,1956 nor with the Accounting Standard -6 . As per the Accounting Standard- 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the assessee without being enabled by Companies Act, 1956, has charged higher depreciation and not maintained the profit and loss accounts as per Schedule VI of the Companies Act., thus it is justified to re-compute book profit by charging depreciation as per AS-6. 3.2 The ld DR for Revenue was heard in support of the grounds raised (Supra). According to the ld DR, the ld CIT(A) erred in allowing relief to the assessee by directing the AO to accept the computation of book profits u/s 115JB of the Act as declared by the assessee. It is contended that the ld CIT(A) ought to have appreciated that the assessee has not followed the Accounting Standards while claiming 100% depreciation on windmills and therefore the AO was correct in re-computing the book profits u/s 115JB of the Act by allowing the admissible depreciation. It was prayed that the finding of the ld CIT(A) on this issue be reversed. 3.3 Per contra, the ld AR for the assessee supported the finding rendered by ld CIT(A) in the impugned order, submitting that in coming to the conclusion that the AO was not authorized to recompute the declared Book Profits u/s 115JB of the Act when the same was certified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APPOLLO TYRES (supra). The relevant observations of the Hon'ble jurisdictional High Court are as follows:- 11. Section 1151B of the Act during the relevant period provides that notwithstanding anything contained in any other provisions of this Act, in the case of an assessee being a company, the income tax payable on the total income as computed under the Act is less than 7 % of the book profit, the tax payable for the relevant previous year shall be deemed to be 7 % of such book profit. Thus, the assessee has to first compute the total income in accordance with the Act and if the total income is less than 7 % of the book profit, then the assessee has to prepare profit and loss account for the previous year, then fictionally, it will be deemed that its total income chargeable to tax would be an amount equal to 7 % of such book profit. The Income Tax Officer has computed the book profit and the regular income. As tax on regular income is more than tax on book profit, tax on regular income is adopted. The Authorities have consistently relied upon Clause 3 (XII(b)) of Part-11 of Schedule VI to the Companies Act, to come to a conclusion that capital gains has to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, certified with a qualification that the profit and loss account and balance sheet referred to in the report comply substantially in all material respects with the applicable accounting standards referred to in Section 211 (3C) of the Companies Act except the land and building sold during the year, the capital gain has been transferred directly to capital reserve account instead of crediting to profit and loss account, which in the opinion of the directors is more appropriate. However, it is not disputed that this auditor's report is accepted by the General Body, the books of account and the balance sheet are filed before the Registrar of Companies. It is also noticed by us that Clause 3(XII)(b) and (c) of Part II of Schedule VI of the Companies Act provides that profit and losses in respect of transactions of a kind, not usually undertaken by the Company or undertaken by the company or undertaken in circumstances of an exceptional or non-recurring nature, if material in amount and miscellaneous income, are required to be disclosed in the profit and loss account. Considering, the capital gain income falling under these clauses, it is incumbent on the Company to disclose the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to embark upon a fresh enquiry in regard to the entries made in the books of accounts of the company. In the light of the judgment of Apollo Types (supra), we are of the opinion that the Assessing Officer has no power to recompute the book profit and has to rely upon the authentic statements of accounts of the company, the accounts being scrutinized and certified by the statutory auditors though with a qualification, approved by the company in general body meeting and thereafter filed before the Registrar of Companies, who has a statutory obligation to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act It is very clear from the above judgment of the jurisdictional High Court that the power of the A.C. with regard to the computation u/s. 115JB of the Act is very limited in scope. The AC. has to examine the accounts and see if the same has been accepted by the Statutory Auditors of the company and the shareholders in the AGM. Thereafter, he has to only take the book profit as shown in the accounts and make the adjustments as per explanation to section 115JB of the Act. Testing the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the legislature has intended to prohibit the allowance of depreciation as a deduction while computing the book profits to the extent it relates to the depreciation on revaluation of t assets. Such a situation is not obtaining in the case of the appellant. There is no revaluation of the asset and the extent of depreciation claimed is on the original cost of the windmill. Thus, even if, the provisions of Explanation 1 to sec. 115JB of the Act are applied, the amount of increase as well as reduction in the figure of depreciation remains the same and thus, the book profits returned by the appellant cannot be disturbed. 6.2.8 For the aforesaid reasons, the computation of income u/s. 115JB of the Act by making an addition of ₹ 2,79,06,066/- by the A.O. cannot be allowed to stand. The said computation of income u/s. 115JB of the Act is hereby vacated and the income as computed by the appellant of ₹ 41,68,146/- requires to be accepted. It is directed accordingly. Grounds No. 3 4 are ALLOWED. 3.4.3 On a perusal of the finding rendered by the ld CIT(A) on the issue before us (Supra), we find that the ld CIT(A) has followed the judgments of the Hon ble Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
