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TMI Blog2017 (1) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the orders of the lower authorities in this regard. In fact, reference to clause (i) of the Explanation to section 115JA finds place for the first time at the level of the Tribunal. Submissions have been advanced before us on behalf of the assessee on the satisfaction of the condition set out in the Proviso to sub-clause (i) of the Explanation to s.15JA. This is however, an exercise in fact finding, that has to be gone into by the assessing officer. We thus have no choice but to remit the matter to the file of the assessing officer to redo the computation of book profits in terms of Section 115 JA as it stood at the relevant time, including the applicability of sub-clause (i) of the Explanation to section 115JA and render a finding on the applicability of the proviso thereto. X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation (AY 1999-2000). The Assessing officer was of the view that the amounts were liable to be added to enhance book profits u/s 115 JA of the Act and the assessment was thus completed effecting the above adjustments to the book profits returned by the assessee. Unfortunately, the orders of assessment, both dated 12.2.2004, are rather cryptic and give no indication as to under which specific clause of the Explanation to section 115 JB the adjustments have been made. 4. Appeals were filed before the Commissioner of Income Tax (Appeals) who allowed the same on the ground that the adjustments were not contemplated under sub-clauses (a) to (f) under the Explanation to section 115JA. Surprisingly, the latter part of the Explanation relating to the reduction from book profits has neither been noticed nor adverted to. The Revenue approached the Income Tax Appellate Tribunal, which by order dated 27.7.2007, reversed the order of the Commissioner of Income Tax (Appeals) restoring the computation of the assessing officer. 5. The Tribunal was of the view that the adjustment was in consonance with sub-clause (i) in the Explanation to Section 115 JA and the proviso thereunder that reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced the aforesaid two amounts from book profits in accordance with sub-clause (i) of the Explanation. The satisfaction of the mandatory condition set out in the proviso thereto is, however, moot. 9. The provisions of Section 115JA were inserted primarily to ensure that companies with substantial book profits and dividend payout would also be invested with appropriate tax liability. Sub clause (i) in the Explanation and the proviso thereunder were specifically inserted for the following reasons as explained by the Central Board of Direct Taxes in Circular No.550 bearing F.No.133/513/89 TPL dated 1.1.1999; 24.4 Further, under the existing provisions certain adjustments are made to the net profit as shown in the Profit and Loss account. One such adjustment stipulates that the net profit is to be reduced by the amount withdrawn from reserves or provisions, if any such amount is credit to the P&L account. Some companies have taken the advantage of this provision by reducing their net profit by the amount withdrawn from the reserve created or provision made in the same year itself, though the reserve when created had not gone to increase the book profit. Such adjustments lead to unint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso thereto i.e. whether the book profit of the earlier year when the reserve/provision was created, was increased by the amounts credited to the profit and loss account in the financial year relevant to the assessment year in question. There is no finding in the orders of the lower authorities in this regard. In fact, reference to clause (i) of the Explanation to section 115JA finds place for the first time at the level of the Tribunal. Submissions have been advanced before us on behalf of the assessee on the satisfaction of the condition set out in the Proviso to sub-clause (i) of the Explanation to s.15JA. This is however, an exercise in fact finding, that has to be gone into by the assessing officer. We thus have no choice but to remit the matter to the file of the assessing officer to redo the computation of book profits in terms of Section 115 JA as it stood at the relevant time, including the applicability of sub-clause (i) of the Explanation to section 115JA and render a finding on the applicability of the proviso thereto. Both parties have cited case law relying upon the decisions of the Supreme Court reported in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd ((20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be similar in relation to provision for land development as well, we consider it appropriate to remit this issue to the file of the assessing officer to be adjudicated upon denovo after affording proper opportunity to the assessee. 15. In summary we direct the assessing officer to re-do the assessments (AY 1998-99 and 1999-2000) with respect to excess depreciation reversed and provision for land development withdrawn at the stage of appropriation of profits in P & L Account in the light of the provisions of s. 115 JA of the Act and relevant case-law after affording due opportunity to the assessee in this regard. The proceedings are directed to be completed within a period of three months from the date of receipt of a copy of this order by the assessing officer. TC(A) 1418 and 1419 to this extent, are allowed by way of remand. 16. TC(A) No.1419 of 2007 relating to assessment year 1999-00 raises the additional issue in substantial question no:1, relating to an adjustment made of a provision for taxation in the computation of MAT. The upward adjustments to be effected to book profits are set out in the Explanation to Section 115JA and sub-clause (a) specifies an increase by the a ..... 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