TMI Blog2022 (6) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... lifications relates to claim of loss on revaluation of assets in question. The qualification of Auditor has the effect of stating that book profits declared by the Assessee do not bear the trappings of true and fair expression of 'statement of profit and loss'. This being so, it cannot be said that book profits disclosed in the financial statement is sacrosanct and assessee acquires indefeasible right in the matter of its declaration of book profits. Secondly, we also find merit in the plea of the Revenue that notwithstanding the fact that 'loss on account of revaluation of fixed asset' does not arise by way of provision for diminution in the value of asset but an actual loss, such capital loss is not a deductible loss in nature nevertheless. The expression 'income defined under Section 2(24) of the Act does not include such capital losses. The capital loss claimed on account of impairment of assets, in our view, is liable to be adjusted for the purposes of determination of book profit similar to the adjustment available in respect of capital receipts not taxable under the normal provisions of the Act. This view is supported by the decision of the Coordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer with certain directions. The fact and issue being the same, direction of the Assessee Officer should apply mutatis mutandis in the instant case. 3. Ld. DR did not object to such proposition in the light of the decision rendered by the Co-ordinate Bench in its own case in other assessment year. The relevant operative paragraph of the order of the Co-ordinate Bench of ITAT is reproduced hereunder for ready reference: (3.4.2) With this background, we now consider the facts of this case and relevant provisions of law. Provisions under paragraphs 11 and 13 of Accounting Standard-6 (AS-6) have been noted by Ld. CIT(A) and relevant portions of the order of Ld. CIT(A) have already been reproduced earlier in this order. Vide paragraph 11 of AS-6, Management of the company is vested with power to exercise judgment in the light of technical, commercial, accounting and legal requirements and it permits Management to periodically review the original estimate of useful life of an asset. Further, under paragraph 13 of AS-6, it is permitted for the company to apply the higher rate of depreciation where the management estimates of the useful life of an asset is shorter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of the assessee are maintained in accordance with the requirements of the Companies Act. However, on the perusal of records before us, which includes the Assessment Order, the order of the Ld. CTT(A), the Paper book filed by the Assessee, Form 35, Form 36 etc; we find that the both the lower authorities, AO as well as Ld. CIT(A), have not considered whether, after examination by Registrar of Companies, whether Registrar of Cor cares was satisfied that the accounts of the assessee are maintained in accordance with the requirements of the Companies Act. Further, on perusal of records, we find that the relevant information, whether, after examination by Registrar of Companies, whether Registrar of Companies was satisfied that the accounts of the assessee are maintained in accordance with the requirements of the Companies Act; is not available on our records. Neither of the two sides, in the course of appellate proceedings in ITAT has provided details regarding constitution of the committee which recommended lower useful life of the assets and higher rate of depreciation. Furthermore, the information regarding technical qualifications, knowledge and expertise of the commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that the loss incurred by the assessee was on account of settlement and is not in the nature of revaluation loss as incorrectly captioned in the financial statement. It was further pointed out that the assessee has not claimed any corresponding revaluation reserve in relation to such loss on account of any provision for diminution in the value of asset. It was thus contended that the Assessing Officer is not entitled to disturb the books results and the assessee is not liable to pay any alternative tax on account of adjustment in the book profit under Section 115JB on this score. 7. The Ld. DR for the Revenue, on the other hand, assailed the action of the CIT(A) and submitted that the impugned fact of actual write off of loss on account of impairment of fixed asset is neither borne out from records nor would by itself allow the assessee to reduce the book profit for the purposes of Section 115JB of the Act. Seen it differently, the impugned loss is capital loss in nature which are not allowable as revenue expenditure even under normal provisions and therefore liable to be adjusted for the purposes of determination of book profit which is only alternate scheme of taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss is not a deductible loss in nature nevertheless. The expression 'income defined under Section 2(24) of the Act does not include such capital losses. The capital loss claimed on account of impairment of assets, in our view, is liable to be adjusted for the purposes of determination of book profit similar to the adjustment available in respect of capital receipts not taxable under the normal provisions of the Act. This view is supported by the decision of the Coordinate Bench of ITAT in ITO vs. Ganesh Sagar Infrastructure (P.) Ltd., (2022) 135 taxmann.com 313 (Ahmedabad). 10. We are thus of the considered view that the assessee is not entitled to reduce the book profit by the capital loss debited to the P L account which is subject matter of qualification by Auditors. Such capital loss is neither eligible for deduction under the normal provisions nor under the alternate provisions of taxation. We thus set aside the action of the CIT(A) on this score and restore the position taken by the Assessing Officer. 11. In the result, the Ground No. 2 of the Revenue's Appeal is allowed. 12. In the combined result, the appeal of the Revenue is allowed. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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