9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 638 - AT - Income TaxMAT computation - Computation of Book Profits u/s 115JB - Held that - AO was not competent to go into the computation of Book Profits u/s 115JB of the Act except to the limited extent of making additions and reductions as laid out in Explanation (1) to sec. 115JB of the Act. We find that the ld CIT(A) has also tested the claim of depreciation as per the provisions of Explanation (1) to sec. 115JB while coming to the view that the AO was not authorized to make the addition while re-working the extent of depreciation claimed by the assessee. The accounts of the assessee have been certified by the Statutory Auditors. The accounting policies followed by the assessee have not been found fault with by the Statutory Auditors or the authorities concerned under the Companies Act. In such cases, the AO is not permitted to make any variation by holding that the assessee has not followed the mandate of the Accounting Standards and the provisions of Companies Act while preparing its financial statements. The object of sec. 115JB is to bring to tax the book profits as shown by the company to its shareholders and keeping in view the aforesaid object behind sec. 115JB of the Act and the judicial pronouncements on the scope of the AO s powers computing the book profits, we do not find any reason to interfere with the impugned order passed by the ld CIT(A) on this issue and therefore uphold the same.
Issues Involved:
1. Computation of Book Profits under Section 115JB of the Income-tax Act, 1961. 2. Legitimacy of 100% depreciation claim on windmills. 3. Authority of the Assessing Officer (AO) to re-compute book profits without incriminating/seized material. 4. Application of judicial precedents in the context of re-computing book profits. Detailed Analysis: Issue 1: Computation of Book Profits under Section 115JB of the Income-tax Act, 1961 The core issue in this appeal was the computation of book profits under Section 115JB of the Income-tax Act. The assessee declared a book loss of ?41,68,146, which included a 100% depreciation claim on windmills. The AO, however, re-computed the book profits at ?2,37,38,520 by restricting the depreciation on windmills to 1/15th of the cost, arguing that the 100% depreciation claim was not in accordance with the Accounting Standards or Schedule VI of the Companies Act, 1956. Issue 2: Legitimacy of 100% Depreciation Claim on Windmills The assessee claimed that the Board of Directors had the discretion to adopt a higher depreciation rate, which was accepted by the statutory auditors and shareholders. The AO contended that there was no explicit provision in the Companies Act allowing such a claim and that depreciation should be claimed over the useful life of the asset as per AS-6. The CIT(A) sided with the assessee, referencing the Karnataka High Court's decision in Hariram Hotels and the Supreme Court's ruling in Apollo Tyres, which limited the AO's power to question the book profits certified by statutory auditors and accepted by shareholders. Issue 3: Authority of the AO to Re-compute Book Profits Without Incriminating/Seized Material The assessee argued that the AO was not authorized to re-compute the book profits in the absence of any incriminating material found during the search operations under Section 153A. The CIT(A) agreed, noting that the AO's power to re-compute book profits was limited to adjustments specified in the Explanation to Section 115JB and that the AO could not revisit issues already examined in the original assessment under Section 143(3). Issue 4: Application of Judicial Precedents in the Context of Re-computing Book Profits The CIT(A) relied on the Supreme Court's decision in Apollo Tyres and the Karnataka High Court's ruling in Hariram Hotels to conclude that the AO could not re-compute book profits beyond the adjustments specified in the Explanation to Section 115JB. These rulings emphasized that the AO's role was limited to verifying whether the accounts were certified by the statutory auditors and approved by the shareholders, without delving into the correctness of the accounting policies adopted. Conclusion: The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and the assessee's cross-objections. The Tribunal agreed that the AO's authority to re-compute book profits was limited and that the AO could not question the depreciation claim certified by the statutory auditors and accepted by the shareholders. The Tribunal's decision reinforced the principle that the AO's power to adjust book profits under Section 115JB is confined to the specific adjustments outlined in the Explanation to the section.
|
