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TMI Blog2012 (6) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... profit. Aggrieved by the said order of assessment, the assessee went on appeal before the Commissioner of Income-tax (Appeals). 3. The assessee took the contention that the Assessing Officer should have deducted the bonus paid, viz., Rs. 9,59,501 as well as the donation amount- ing to Rs. 11,151 from the net profit arrived at Rs. 24,85,760, since the donation and the bonus were actual cash outgoings from the current year's profit, 30 per cent. should have been deducted from the net profit. The Commissioner of Income-tax (Appeals) pointed out that the net profit for the purpose of section 115J of the Act was to be computed in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. Item F1 of sub-clause (x), clause (3) of Part II of Schedule VI to the Com- panies Act shows that apart from wages and salaries, bonus have to be set out in the profit and loss account. So too, the information regarding mis- cellaneous expenses also need to be disclosed therein. Thus, the Commis- sioner of Income-tax (Appeals) held that the donation and the bonus have to be deducted in arriving at the profit under section 115J of the Act. Aggrieved by the same, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relating to the previous year was entered into only during the relevant previous year. Thus, when the liability itself had accrued only during the relevant previous year, the same could not be termed as payment relating to the earlier year. He submitted that working at the normal computation under the Income- tax Act, this had been treated as expenditure. That being the case, for com- puting the book profit, the same could not be treated differently. The bonus payment and donations were paid from out of the profits of the pre- vious year and not as appropriation and, hence, the same should have been deducted from the net profit. Keeping in with the accounting principles, the officer should have excluded the sum relating to the donations and bonus from out of Rs. 24,85,760 for the purpose of arriving at the book profit at 30 per cent. for the purpose of section 115J of the Act. He further pointed out that the rejection of the assessee's claim to exclude the pay- ment made on the above items, viz., donation and bonus for the prior years, thus, gives a distorted picture of profit and loss account prepared by the assessee. In the circumstances, rightly the Tribunal considered the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 115J of the Act. 10. In the light of the categorical pronouncement of the apex court, as far as the present case is concerned, we do agree with the contention of the learned standing counsel appearing for the Revenue, that the net profit, as disclosed in the profit and loss account, has to be accepted a such. As far as this is concerned, even learned counsel appearing for the assessee is not having any dispute. However, the dispute remains only to the extent of the officer ignoring the deduction that ought to have been made to the extent of Rs. 9,59,501 towards bonus paid and a sum of Rs. 11,151 towards dona- tions. Learned counsel for the assessee pointed out that as in the case of investment allowance taken to the appropriation account, the said sum also goes to the appropriation account ; accordingly, a sum of Rs. 24,85,760 is a summation of all these amounts put together, and hence, not the net profit of the company. Thus, excluding the amounts paid towards dona- tions and bonus, viz., a sum of Rs. 11,151 and Rs. 9,59,501, the balance alone out of Rs. 24,85,760 ought to have been taken as book profit in terms of the Explanation to section 115J of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court accepted the plea of the assessee that the net profit for the purpose of section 115JA of the Act was to be computed only after deducting the prior period expenses/extraordinary items. The facts of the present case are distinguishable from the above reported decision. The assessee-company claimed deduction of three items of bonus payment, i.e., Rs. 9,59,501 relating to the earlier period, Rs. 10,60,012 paid on October 18, 1989, and Rs. 7,89,413 paid on October 31, 1989. The Assessing Officer allowed Rs. 9,59,501. He held that the said amount was allowable, since the same was further bonus paid on the agreement reached in respect of the earlier year's dispute. As far as the other two items were concerned, the Assessing Officer held that the assessee created a provision for Rs. 10,50,000 and it appeared as an item in the balance-sheet, hence, to that extent, it was admissible. The payment in excess of the said provision was, however, held not admissible, since the liability over and above arose only after the end of the previous year ending March 31, 1989, which could be considered in the assessment year 1990-91. Thus, the sum of Rs.7,99,425 was disallowed. Learned counsel p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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