TMI Blog2023 (8) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... ok profit are those as provided in the explanation thereto. We have to observe that the treatment given by respondent in its accounts have been approved by the Company Court while approving the scheme of demerger. Moreover, the statutory auditors have accepted the book treatment in respect of loss that arise on account of demerger. It is well settled that as per Explanation 1 below section 115JB(2) of the act, only adjustment as permitted to the book profit are those as provided in the said explanation. The purpose of section 115JB of the Act is to provide an alternative method of computation of tax by accepting the book profits as shown by Respondent, after certain adjustments as specified in Explanation 1 of section 115JB(2) and lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh Kumar For the Liquidator : Mr. Tanmay Varadkar of Varun Corporation Limited For the Liquidator : Mr. Prakash K. Pandya Liquidator present P.C. 1. Mr.Tanmay Varadkar undertakes to file Vakalatnama for respondent during the course of this week. Undertaking accepted. 2. Respondent was called Khatau International Limited till 04.01.2009. Respondent was carrying on business activities through three divisions, viz., (1) Resort Division, (2) Travel Division, and (3) Investment Division. 3. Under the Resort Division, respondent was running a resort namely Infinity Resort at Corbett, Ramnagar, w.e.f., 15th July 2008. Respondent demerged its resort division to a company called Khatau Resorts Pvt.Ltd. in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the liabilities transferred was Rs. 1,70,00,000/-. The treatment given by respondent to the loss arising on demerger, it appears from the annual accounts, was in accordance with the provisions of the Companies Act and as well as accounting standards 5 dealing with net profit or loss for the period prior period items and changes in the accounting policies issued by the Institute of Chartered Accountants of India (ICAI). 6. On 05th October 2010, respondent declared nil income for Assessment Year 2009-2010, in regular computation of income and loss of Rs. 64,21,12,555/- was computed under section 115JB of the Act. This computation of income was based on the annual accounts prepared for the year ending 31st March 2009, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is that as per explanation to section 115JB(2) of the Act, only adjustment as permitted to the book profit are those as provided in the explanation thereto. 9. It is respondent s case that there is no adjustment prescribed in the said explanation with respect to increasing the book profit by loss arising on transfer of assets and liabilities upon demerger. But the Assessing Officer as also Commissioner of Income Tax (Appeals) took the starting point for the purpose of section 115JB of the Act as the net profit as disclosed before provision for fringe benefit tax, prior period adjustment and extraordinary adjustment which is not provided in Explanation 1. 10. Having heard the counsel and having considered the impugned orders and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Apollo Tyres (Supra) also held that while so looking into the accounts of the company, an assessing officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its accounts in a manner provided by that Act, the same to be scrutinised and certified by statutory auditors and approved by the company in its General Meeting and, thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. It does not empower the Assessing Officer to mark upon a fresh enquiry in regard to the entries made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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