2006 (3) TMI 563 - AT - Income Tax

Summary

Issues:
1. Validity of reopening assessment under section 147.
2. Taxability of cash compensatory support.
3. Computation of book profit under section 115J.
4. Set off of losses under section 115J.

Analysis:
1. The first issue pertains to the validity of reopening the assessment under section 147. The appellant contended that the reopening was unlawful, but the tribunal upheld the Assessing Officer's decision, stating that the notice under section 148 was rightly issued, and the assessment was validly reopened under section 147. Thus, the tribunal dismissed the appellant's challenge against the reopening.

2. The second issue involves the taxability of cash compensatory support received by the assessee-company. The tribunal held that the retrospective amendment to section 28 of the Income-tax Act mandated the inclusion of cash compensatory support as income. The tribunal noted that the legislative amendment superseded previous Tribunal decisions, leading to the conclusion that the cash compensatory support was rightly taxed. Consequently, this ground raised by the assessee was dismissed.

3. The third issue concerns the computation of book profit under section 115J of the Income Tax Act. The appellant argued that the gratuity liability, though not reflected in the Profit & Loss Account, should be deducted from the book profit. The tribunal extensively analyzed the matter, emphasizing that the provision for gratuity liability was not made in the accounts without a valid explanation. It was determined that the Assessing Officer was not required to adjust the profit declared by the assessee for the gratuity liability, as it was not specified for adjustment under section 115J. The tribunal upheld the CIT(A)'s decision, dismissing the appellant's claim regarding the gratuity liability adjustment.

4. The final issue involves the set off of losses under section 115J. Citing a Supreme Court decision, the tribunal dismissed this ground raised by the assessee, stating that the set off of losses was not permissible in the light of the relevant legal provisions. Ultimately, the tribunal dismissed the appeal filed by the assessee, affirming the decisions made in the lower authorities.