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TMI Blog2015 (12) TMI 1847X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2) The CIT(A) erred in holding that the assessee is eligible to adjust the prior period expenses while computing the book profit u/s 115JB by relying oil decision in the case of Tamil Nadu Cement Corporation Ltd. vs JCIT (Special Range)(2012)349 ITR 58 (Madras) and CIT vs Khaitan Chemicals and fertilizers Ltd [2008] 307 ITR 150 (Delhi) without appreciating the fact that not only the prior period expenses is not an item which is specified in Clause (i) to (viii) of Explanation 1 t o Section I15JB(I) but al so that the amount of prior period expenses of Rs. 14,37,10,403 had not been debited to the P&L account and the SC in the case of Apollo Tyres vs CIT 255 ITR 253 had held that once the account has been certified by the auditors to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short]. While completing assessment u/s 143(3), the AO, apart from making disallowances and additions in normal computation of income, also computed book profit under section 115JB by adding back an amount of Rs. 14,37,10,403/- being prior period expenses adjusted in the opening reserve. 3. The assessee challenged the action of the AO before the CIT(A) and submitted that the assessee has computed book profit as per Explanation 1 and 2 to second proviso to section 115JB by reducing the aforesaid sum of Rs. 14,37,10,403/- as shown in the notes to accounts forming part of the financial statements. The assessee contended that net profit has not been defined under the provisions of the Act and the provisions of section 115JB of the Act refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon the decision of the Hon'ble Delhi High Court in case of CIT vs. Khaitan Chemicals & Fertilisers Ltd. (307 ITR 150) as well as in case of CIT vs. Sain Processing & Weaving Mills P. Ltd. (325 ITR 565). 4. The CIT(A) accepted the contention of the assessee and following the judgments as relied upon by assessee in the case of Khaitan Chemicals & Fertilisers Ltd.(supra) and Sain Processing & Weaving Mills P. Ltd. (supra) and the judgment of the Hon'ble Madras High Court in case of Tamilnadu Cement Corporation Ltd., vs. JCIT (349 ITR 58) held that the assessee is eligible to deduct prior period expenditure to compute the book profit u/s 115JB of the Act irrespective of whether such prior period expenditure are shown separately in the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of prior period expenditure has not been debited to Profit & Loss Account even by virtue of notes to accounts. He has relied upon the judgment of the Hon'ble Supreme Court in the case of Apollo Tyres vs. CIT (255 ITR 273) and submitted that once accounts of the assessee are certified by the Auditor, as has been prepared in accordance with provisions of Schedule VI of Companies Act then there is no jurisdiction of the AO to go behind net profit shown in Profit & Loss Account except to the extent provided in Explanation to sec. 115JB. The decisions relied on by the assessee and followed by the CIT(A) are not applicable in the case of the assessee. Hence, learned Departmental Representative has supported the order of the AO. 7. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. The dispute before us is regarding deduction of Rs. 14,37,10,403/- on account of prior period expenditure from net profit shown in Profit & Loss Account for the purpose of computing book profit u/s 115JB. There is no dispute that the assessee has not debited this amount to the Profit & Loss Account. However, the said amount has been disclosed by the assessee in the notes to accounts. Learned AR of the assessee has placed reliance on various judgments as referred above. It is pertinent to note that the ratio of judgments relied upon by learned AR of the assessee is that if an item of income or expenditure is required as per Part II of Schedule VI of the Companies Act to be part of Profit & Loss Account but the same was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notes to accounts, then such item of income or expenditure will be treated as part of Profit & Loss Account for the purposes of computing profit u/s 115JB. Assessee has not brought on record anything to show as to how this amount was required to be part of Profit & Loss Account prepared in accordance with part II of Schedule VI of the Companies Act. We further note that the CIT(A) has allowed the claim of the assessee on the premise that once assessee has disclosed this amount in notes to accounts, then the same will be treated as disclosed in Profit & Loss Account and consequently has to be adjusted for computation of book profit u/s 115JB. The CIT(A) has not gone into this aspect of the issue whether this prior period expenditure was re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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