2017 (8) TMI 32 - HC - Income Tax

Reworking of the book profits by AO as per the provisions of Section 115JB - MAT - Assessee had directly credited the profit arising from sale of land to Capital Reserve Account in the balance sheet rather than routing it through Profit and Loss Account in the manner provided as per PartII and PartIII of Schedule VI to the Companies Act, 1956 - Held that - Tribunal referring to the Judgment of the Apex Court in a case of Apollo Tyres Ltd. v. C.I.T. 2002 (5) TMI 5 - SUPREME Court and Akshay Textiles Trading and Agencies Pvt.Ltd. 2007 (10) TMI 251 - BOMBAY HIGH COURT as observed no infirmity in the order of ld. CIT(A) for deleting the addition under Section 115JB. Thus Tribunal has not committed any error. Appeal dismissed.

Summary

Issues:
1. Interpretation of provisions of Section 115JB of the Income Tax Act for reworking book profits.
2. Treatment of profit arising from the sale of land in the balance sheet.
3. Applicability of judicial precedents in determining book profits under Section 115JB.

Analysis:
1. The Appeal concerned the Assessment year 2004-05 and focused on the reworking of book profits by the Assessing Officer under Section 115JB of the Income Tax Act. The Appellant contended that the Tribunal erred in not accepting the reworking and argued that the profit from the sale of land should have been routed through the Profit and Loss Account as per the Companies Act, 1956.

2. The key contention revolved around the treatment of the profit of ?2,84,84,000 arising from the sale of land. The Assessee had directly credited this amount to the Capital Reserve Account in the balance sheet, bypassing the Profit and Loss Account. This raised questions about the proper accounting treatment and compliance with the provisions of Schedule VI to the Companies Act, 1956.

3. The Tribunal's decision was influenced by judicial precedents, citing the Judgment of the Apex Court in Apollo Tyres Ltd. v. C.I.T. and the Judgment of the Bombay High Court in the case of Akshay Textiles Trading and Agencies Pvt. Ltd. The Tribunal found no error in the Commissioner of Income Tax (Appeals) deleting the addition under Section 115JB based on these precedents, specifically mentioning the decision in the case of Abdhut Trading Co. Pvt. Ltd.

4. Ultimately, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the Appeal, stating that no error was committed in deleting the addition under Section 115JB. The judgment highlighted the importance of judicial precedents in interpreting and applying tax laws, providing clarity on the treatment of book profits in such cases.