TMI Blog2015 (12) TMI 1847X X X X Extracts X X X X X X X X Extracts X X X X ..... his prior period expenditure was required to be part of Profit Loss Account as per Schedule VI of Companies Act or not. Therefore, if this amount was not required to be part of Profit Loss Account prepared as per Schedule VI of the Companies Act, then undisputedly this amount not being part of any of the clauses of Explanation to sec. 115JB cannot be excluded from net profit for the purposes of computing book profit u/s 115JB. Since neither the revenue nor the assessee has furnished any record in support of their respective claims, whether this amount of prior period expenditure was required to be part of Profit Loss Account prepared as per provisions of Schedule VI of the Companies Act, therefore, we set aside this issue to the record of the CIT(A) to re-examine the issue in light of the relevant provisions of Schedule VI of the Companies Act as well as the relevant accounting standard applicable on this item of expenditure and then give a finding whether this amount of prior period expenditure is required to be part of profit and loss account or not - Appeal of the revenue allowed for statistical purposes. - ITA No. 1708/Bang/2013 - - - Dated:- 29-12-2015 - Shri Abra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company and engaged in the business of real estate project for the year under consideration. The assessee has filed its return of income on 14/10/2010 declaring loss of ₹ 4,21,81,982/-. Subsequently, assessee has filed a revised return on 02/02/2011 declaring income after claiming deduction u/s 80-IA of the Income-tax Act,1961 [hereinafter referred to as the Act for short]. While completing assessment u/s 143(3), the AO, apart from making disallowances and additions in normal computation of income, also computed book profit under section 115JB by adding back an amount of ₹ 14,37,10,403/- being prior period expenses adjusted in the opening reserve. 3. The assessee challenged the action of the AO before the CIT(A) and submitted that the assessee has computed book profit as per Explanation 1 and 2 to second proviso to section 115JB by reducing the aforesaid sum of ₹ 14,37,10,403/- as shown in the notes to accounts forming part of the financial statements. The assessee contended that net profit has not been defined under the provisions of the Act and the provisions of section 115JB of the Act refer to computation of book profit from Profit Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the assessee has not debited this amount of ₹ 14,37,10,403/- to the Profit Loss Account. Therefore, the said amount cannot be further adjusted from profit shown in the Profit Loss Account while computing book profit u/s 115JB. Learned Departmental Representative has further contended that this amount of prior period expenditure also does not fall in any of the clauses of Explanation to section 115JB for making such adjustment. He has referred to notes on accounts and submitted that even in notes on accounts, the auditor of the assessee has explained that this amount has been adjusted against opening reserve and surplus and in other words, it has been reduced from earlier year s profit. Thus, learned Departmental Representative has submitted that disclosure in the notes to accounts does not lead to any inference that this amount of prior period expenditure will be forming part of the Profit Loss Account and consequently it can be adjusted while computing book profit u/s 115JB. Learned Departmental Representative has pointed out that the CIT(A) has committed an error in allowing the claim without appreciating fact that not only prior period expenditure is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regarding deduction of ₹ 14,37,10,403/- on account of prior period expenditure from net profit shown in Profit Loss Account for the purpose of computing book profit u/s 115JB. There is no dispute that the assessee has not debited this amount to the Profit Loss Account. However, the said amount has been disclosed by the assessee in the notes to accounts. Learned AR of the assessee has placed reliance on various judgments as referred above. It is pertinent to note that the ratio of judgments relied upon by learned AR of the assessee is that if an item of income or expenditure is required as per Part II of Schedule VI of the Companies Act to be part of Profit Loss Account but the same was not disclosed in the Profit Loss Account and has been disclosed in the notes forming part of financial accounts, then said disclosure in the notes to accounts would be treated as disclosure of that particular item of income or expenditure as case may be in Profit Loss Account for the purpose of computation of book profit u/s 115JB. In case in hand, assessee has claimed to have prepared financial statement and Profit Loss Account as per Schedule VI of the Companies Act. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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