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TMI Blog2021 (10) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... items' comes below the line in profit loss account. If you consider provision for gratuity relating to earlier years as item comes below the line of profit loss account, then for the purpose of computation of book profit, net profit as per books of accounts should be considered before allowing deduction for provision for gratuity relating to earlier years. There is no error in reasons given by the AO to compute book profit u/s. 115JB of the Act by taking net profit as per profit loss account before considering deduction claimed for prior period item being provision for gratuity relating to earlier years. - ITA No. 1394/CHNY/2018 - - - Dated:- 27-9-2021 - Duvvuru R.L. Reddy, Member (J) And G. Manjunatha, Member (A) Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit as ₹ 40,78,793/- 5 For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer has erred in ignoring the fact that provision for gratuity for earlier years was disclosed separately in the Profit and Loss Account for the purpose of prior period items only. 3. The brief facts of the case are that the assessee is engaged in the business of manufacture of customer's brand biscuits, filed its return of income for the assessment year 2006-07 on 29.11.2006 admitting 'nil' total income under normal provisions as well as the provisions of section 115JB of the Income Tax Act, 1961 (hereinafter the 'Act'). The assessment has been completed u/s. 143(3) of the Act on 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the line in the profit loss account, which means the same item needs to be considered in light of Explanation -1 to section 115JB of the Act. If you consider Explanation - 1 to section 115JB of the Act, then deduction claimed by the assessee is neither covered under positive or negative adjustments. Hence, there is no error in the reason given by the AO to take net profit as per profit loss account before allowing deduction towards gratuity liability. 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The provisions to section 115JB of the Act, deals with computation of book profit. Explanation (1) to section 115JB of the Act provides for positive and nega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered before allowing deduction for provision for gratuity relating to earlier years. In this case, profit for the year before allowing deduction for provision for gratuity was at ₹ 40,78,793/- and if you consider said figure, then adjustment made by the assessee to book profit computed u/s. 115JB of the Act towards provision for gratuity relating to earlier years is not covered under Explanation (1) to Section 115JB of the Act. Further, it is a well settled principle of law that the AO does not have power to make any adjustment to book profit except as provided under Explanation (1) to Section 115JB of the Act. This is amply clear from the decision of Hon'ble Supreme Court in the case of M/s. Apollo Tyres Ltd., vs. CIT, supra. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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