9911796707
TMI Blog2000 (9) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: Previous years interest decapitalised Rs. 9,994,101.58 Add: Previous years excess depreciation written back Rs. 2,974,414.99 ------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id was capitalised and not charged to P&L A/c and the entire amount was debited in the previous year relevant to the asst. year in question. He added that it was not understandable how this could be considered as prior period expenses. He further added that in principle the purpose of adjustment on account of prior period expenses was to claim expenses of earlier year which could not be claimed on account of the fact that the assessee became aware of the liability after the close of the accounting period though it related to earlier years but the adjustment made by the present assessee was on account of decision to reverse the earlier year accounting practice which could not be said to be a liability of earlier year which arose during the year under consideration. He further added that the narration was clear that it was reversal of previous year interest decapitalised and therefore it was not prima facie allowable. He held that the Assessing Officer was correct in adopting the first figure which was the book profit for the year under consideration. 6. Aggrieved the assessee has come up in second appeal before this Tribunal. 7. The learned AR of the assessee submitted that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting policy of theInstituteofChartered Accountants. He, therefore, contended that the ld. CIT(A)'s observation that the amount in question could not be treated as prior period expenses was unwarranted and uncalled for. 10. The ld. AR further submitted that the book profit for the purpose of section 115JA had to be calculated strictly in accordance with the provisions of section 115JA of the Act and the Assessing Officer was not competent to calculate the book profit otherwise according to his sweet will. In this connection he referred to the explanation below to sub-section (1) of section 115JA, sub-section (2), clauses (a) to (f) and (i) to (ix) of the Explanation of the I.T. Act. He also referred section 211, sub-section(1) and sub-section (2) of the Companies Act, Part 11 of Schedule 6 of the Companies Act and contended that the book profit shown by the assessee was in conformity with these provisions and therefore the Assessing Officer was not justified in ignoring the same and substituting his own book profit after making prima facie adjustment on account of the above. He relied on the following decisions : 1. Atul Ltd. v. Asstt. CIT [1999] 69 ITD 187 (Ahd.) 2. Sipani Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1)(a) says as under : 'Provided that in computing the tax or interest payable by or refundable to the assessee the following adjustments shall be made in the income or loss declared in the return namely - (iii) and loss carried forward, deduction allowance of relief claimed in the return, which on the basis of the information available in such return, accounts or documents, is prima facie inadmissible shall be disallowed ............ 15. He contended that the adjustment made by the assessee in the book profit for prior period adjustments were not admissible in terms of the aforesaid provisions to section 143(1)(a) of the Act. He added that since depreciation as well as interest pertained to earlier previous years and not to the previous year relevant to the asst. year in question the Assessing Officer was justified in making prima facie adjustment under section 143 (1)(a) of the Act. 16. He further submitted that section 115JA speaks of preparation of P&L Account for the purpose of this section for their relevant previous year in accordance with the provision of Part II & III of Schedule 6 of Companies Act, Schedule 6 Part II, sub-part 2 reads as under : 'The Profit & Loss Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee after making aforesaid adjustment for previous year interest decapitalised and previous year excess depreciation written back was not the real and correct book profit in terms of the provision of section 115JA of the Act, or even in terms of Parts II & III of scheduled 6 of the Companies Act, and the accounting practise. Admittedly the aforesaid adjustment on account of interest and depreciation did not pertain to the period relevant to the assessment year 1997-98 covered under the present appeal. The book profit for the period relevant to the assessment year under consideration was to be determined with reference to the income and expenditure of the relevant period. Expenditure of earlier year could be debited in the account for the period under consideration only if the liability of such expenditure was known during the period relevant to the assessment year in question and not earlier. In the present case, there was no such situation. Admittedly it was not the assessee's case that it was not aware of the interest and depreciation in question earlier and that it became aware of the same only during the period relevant to the asst. year in question. The assessee was fully a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. Mills Co. Ltd. and referred to the Tribunal's observation in para 30 quoted above. He is also correct in referring to the provision of Schedule 6 Part 11 and sub-part 2 of the Companies Act which reads as under : "The Profit & Loss Account shall be made out as clearly to disclose the result of the working of the company during the period covered by this account.' 22. It will be seen from the above that Schedule 6, Part I sub-part 2 of the Companies Act require that the P&L A/c should clearly disclose the result. of the working to the company during the period covered by the account. Admittedly, the book profit prior to the aforesaid adjustment was the real profit and the book profit worked out by the assessee after the aforesaid adjustment did not truly disclose the result of the working of the company during the relevant period. 23. The ld. DR also rightly referred to the decision in the case of Sipani Automobiles Ltd. wherein in para 10 it was held that if the book profit was wrongly stated then the Assessing Officer can make adjustment under section 143(1)(a) of the Act. Clearly the aforesaid interest and depreciation adjusted by the assessee against the real and correct b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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