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TMI Blog2018 (8) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1) of the Income-tax Act. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in sustaining the Order of the Assessing Officer on an erroneous premise by holding that the appellant had not prepared its Profit and Loss Account as per Part II and Part TIT of the Schedule VI of the Companies Act, 1956 and therefore, income from capital gains should be included for the purpose of computing book profits under section 115J of the Income-tax Act. Your appellant craves leave to add, amend, alter one or more Grounds of Appeal at the time of hearing of the appeal petition. 2. The brief facts of the case are that the assessee company is engaged in the business of manufacture of vacuum pumps, filed its return of income for AY 2011-12 on 28-09-2012 declaring total income of Rs. 2,16,64,470. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and filed details, as called for. The assessment has been completed u/s 143(3) on 16-03-2015 determining total income at Rs. 3,37,14,470 under normal provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite of the fact that the assessee has furnished various documents including Memorandum of Understanding between the parties to agree for payment of compensation and vacating the premises, declaration-cum-indemnity bond given by two tenants to hand over vacant possession of the property to the assessee and also order of the Civil Judge, Thane in Civil Suit No.224 of 2004 where both the parties agreed and filed a compromise petition before the Court to settle the dispute. The Ld.AR for the assessee further referring to the copy of agreement for sale entered into between the assessee and the payments submitted that as per the agreement for sale, the fact that there is a dispute in the property by way of Civil Suit before the Court is recorded. The assessee also filed various evidences before the AO including payment of compensation by account payee cheques and other details. The AO has disallowed compensation paid for tenants for vacating the premises only on the ground that the said compensation has been paid for premature termination of tenancy agreement but not for vacating illegal occupation of premises. The Ld.AR further referring to various case laws including the decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies alongwith order of the Civil Court, Thane in a compromise petition filed by the assessee alongwith one of the tenants, Shri Balkrishna T Poojari. Insofar as the another tenant, M/s Instavac Engg. Pvt Ltd, the assessee has filed affidavit cum indeminity bond. On perusal of all documents filed by the assessee, we find that there is no dispute with regard to the fact that the said parties are occupying the premises on leave and licence basis. It is also an admitted fact that the assessee has terminated leave and licence agreement before completion of the term of agreement for which it has paid compensation. It is also an admitted fact that there is a dispute between the tenants and the assessee and such dispute has been pending before the Civil Court of Thane. All these evidences go to prove an undisputed fact that the two tenants have occupied the premises for which the assessee has paid compensation to get vacant possession of the property to be handed over to the purchasers. Whether said compensation has been paid for getting vacant possession from illegal occupants from the tenants, who occupy the building does not matter as long as the assessee has paid compensation for getti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edited to reserves and surplus account in the balance sheet without routing it through P&L Account. According to the AO, the assessee has not prepared its financial statements in accordance with Parts II & III of Schedule VI of Companies' Act, 1956 and hence, the same can be recomputed to arrive at correct book profit u/s 115JB of the Act. The AO has taken support from the decision of Hon'ble Bombay High Court in the case of CIT vs Veekaylal Investments Co Pvt Ltd (2001) 249 ITR 597 (Bom). It is the contention of the assessee that once books of account are prepared in accordance with Parts II & III of Schedule VI to the Companies' Act, 1956 and certified by the Auditors and approved by the Board of Directors, then there is no scope for the AO to make adjustments to book profit except as provided under Explanation 1 to section 115JB. In support of its arguments, assessee has relied upon the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd vs CIT 255 ITR 273 (SC). The assessee also relied upon the decision of jurisdictional High Court in the case of CIT vs Akshay Textile Trading & Agencies Pvt Ltd 304 ITR 401 (Bom). 9. We have heard both the parties and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of Companies, who has a statutory obligation to examine and be satisfied with the accounts of the company are maintained in accordance with the requirements of the Companies' Act. The aforesaid observations of the Apex Court concludes the issue by holding that the AO does not have a power to embark upon the fresh enquiry with regard to the entries made in the books of account of the company, when the accounts of the assessee company is prepared in terms of Parts II and III of Schedules VI to the Companies' Act, 1956. A similar view has been taken by the Hon'ble Bombay High Court in the case of CIT vs Bhagwan Industries Ltd 255 ITR 273 (Bom) where the issue involved is profit derived from transfer of land credited to capital reserve account in the balance-sheet rather than routing it through P & L account in the manner provided as per Parts II and III of Schedules VI to the Companies' Act, 1956. The Hon'ble Bombay High Court, after considering the decision rendered by the Hon'ble Apex Court in the case of Apollo Tyres vs CIT (supra) and the judgment in the case of CIT vs Akshay Textile Trading & Agencies Pvt Ltd (supra) held that there is no scope for the AO to recast ..... X X X X Extracts X X X X X X X X Extracts X X X X
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