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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 ..... tax case appeal is filed by the Revenue against the common order of the Income-tax Appellate Tribunal, Chennai "C" Bench, dated June 26, 2001, in I. T. A. No. 786 of 1993 relat- ing to the assessment year 1989-90, raising the following substantial ques- tion of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that earlier year's bonus is to be deducted from the book profit under section 115J ?" 2. The assessee is a company, whose assessments were taken up for consideration under section 115J of the Income-tax Act (hereinafter referred to as "the Act"). While completing the assessment under section 115J of the Act, the Assessing Officer disallowed the bonus paid to the extent of Rs. 9,59,501, holding that it did not relate to the assessment year under consideration and hence could not be deducted, while arriving at the book 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d strictly to the net profit arrived at in terms of the provisions of Schedule VI and in the profit and loss account. Except for making addition and deduction in terms of the Explanation to section 115J of the Act, the claim of the assessee for further deduction of the amount paid by way of bonus to arrive at the net profit is contrary to section 115J of the Act. So long as the net profit shown by the assessee in the profit and loss account stood at Rs. 24,85,760 and a report filed by the company before the statutory authorities also disclosed the net profit at Rs.24,85,760, it stands to reason that the Assessing Officer could only compute on the basis of the what was disclosed therein and he could not go for further deduction. 6. Per contra, learned counsel for the assessee supported the order of the Tribunal. He submitted that the agreement for bonus payment 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, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Registrar of Companies. Thus, the apex court held that the Assessing Officer has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The power available under section 115J of the Act is limited to the extent of making increase and reduction as provided for in the Explanation to section 115J of the Act. The apex court pointed out that on filing, the Registrar of Companies has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Once that is done, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account, except to the extent provided in the Explanation 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where in com- puting the net profit as per the statement of profit and loss account in accordance with Part II of Schedule VI to the Companies Act, the assessee had shown prior period expenses, extraordinary items, separately after the determination of current net profit. It did not mean that the net profit was to be arrived at, de hors these items. The Delhi High Court held that two approaches are indicated in paragraph 19 of the Accounting Standard (AS-5). The normal approach is to include prior period item in the deter- mination of net profit and loss for the current period. The alternative approach is to show such items in the statement of the profit and loss account after the determination of current net profit or loss. In either case, the objective is to indicate the effect of such items on the current profit or loss. Thus, the High 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 pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the debit made towards prior period expenses was not in the profit and loss account prepared under the Companies Act and the deduction was shown in the profit and loss appropriation account, which is not relevant for the purpose of assessment under section 115JA of the Act. In considering the claim of the Revenue, the Kerala High Court pointed out to the decision of the apex court in the case of Apollo Tyres Ltd. v. CIT reported in [2002] 255 ITR 273 and held that the claim of the assessee therein could not be accepted since the assessment to be completed has to be in accordance with the statutory pro- vision under section 115J of the Act. The Kerala High Court pointed out that unless the assessee had made a deduction in the computation of the net profit in the profit and loss account, the claim of the assessee could not be allowed for the purpose of computing the net profit. 14. We are in entire agreement with the reasoning of the Kerala High Court. Thus, going by the facts as narrated in the preceding paragraphs and applying the decision of the apex court in the case of Apollo Tyres Ltd. v. CIT reported in [2002] 255 ITR 273, to the facts of the case, we have no hesitat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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