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TMI Blog2023 (1) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... es under the Companies Act, 1956, as having been properly maintained in accordance with the Companies Act, 1956. Assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said Section. Putting it differently, Supreme Court held that an assessing officer does not have the jurisdiction to go beyond the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J of the Act. If that be the position, assessing officer could not have taken another figure as the net profit instead of the net profit of Rs.33,222.00 shown as per the profit and loss account prepared in terms of Parts II and III of Schedule VI to the Companies Act, 1956. That being the position, the substantial questions of law as extracted above are answered in favour of the appellant and against the respondent. - I.T.T.A.No.232 of 2006 - - - Dated:- 21-12-2022 - HON BLE THE CHIEF JUSTICE UJJAL BHUYAN AND HON BLE SRI JUSTICE C.V.BHASKAR REDDY Petitioner Advocate ; C.P. Ramaswami Respondent Advocate : J.V. Prasad SC For Income Tax JUDGMENT: (PER THE HON BLE THE CHIEF JUSTICE UJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment of Rs.3,09,504.00. 7. In appeal before the Commissioner of Income Tax (Appeals) IV, Hyderabad (briefly, the CIT(A) ), the first appellate authority took the view that action of the assessing officer was supported by a decision in CIT v. Krishna Oil Extraction Limited (1998) 150 CTR (MP) 131 which had given a clear finding that prior period adjustments are to be excluded for working out book profit for the purpose of Section 115J of the Act. 8. On further appeal before the Tribunal it was held as follows: 3. We have heard both the parties and perused the record. As has been noted at page-2 of the CIT(A) s order, the appellant in its annual account has worked out net profit at a figure of Rs.3,42,726. From this, it has claimed a prior period adjustment of Rs.3,09,504. This being the treatment given by the assessee as per Part II and III of Schedule VI of the Companies Act, we are of the considered opinion that the assessee s case is squarely covered by the Supreme Court s decision in the case of Apollo Tyres Ltd. v. CIT 255 ITR 273 (SC). We, therefore, find no merit in the submission of the assessee and uphold the order of the ld. CIT (A). 9. Thus, Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; or (g) the amount withdrawn from the reserve account under Section 80HHD, where it has been utilised for any purpose other than those referred to in Sub-section (4) of that section; or (h) the amount credited to the reserve account under Section 80HHD, to the extent that amount has not been utilised within the period specified in sub-section (4) of that section; (ha) the amount deemed to be the profits under subsection (3) of Section 33AC; If any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by -- (i) the amount withdrawn from reserves (other than the reserves specified in Section 80HHD) or provisions, if any such amount is credited to the [profit and loss account : Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the aforesaid previous years should be in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. Explanation below sub-section (1A) defines book profit to mean, the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A) and as increased by the provisions mentioned in clauses (a) to (i) thereunder. 12. From the above it is seen that the statute does not provide that prior period adjustments are to be excluded to work out the book profit as per sub-section (1A). 13. In Apollo Tyres Limited (supra) Supreme Court was considering amongst others the question as to whether an assessing officer while assessing a company under Section 115J of the Act can question the correctness of the profit and loss account prepared by the assessee in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. 14. In the above context, Supreme Court referred to the object behind insertion of Section 115J in the Act and thereafter observed that income tax authorities were unable to bring certain companies within the net of income tax because these companies were adjusting their a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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