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TMI Blog2023 (2) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to delete additions made towards income admitted to claim TDS Credits while computing book profit u/s.115JB of the Act. Prior period expenses excluded while computing book profit - As we find that as per Part-II III of Schedule-VI of Companies Act, 1956, the assessee is mandatorily shown separate items of prior period expenses and income to disclose the effects in the profits or loss for the current year. In this case, no doubt the assessee has shown prior period expenses in accordance with Part-II III of Schedule-VI of Companies Act, 1956 - while computing book profit u/s.115JB of the Act, the assessee has shown prior period expenses along with other items of expenses of the current financial year contrary to provisions of Part-II III of Schedule-VI of Companies Act, 1956. Assessee has taken profit before tax after deducting prior period expenses while computing book profit. However, for the purpose of computing profits gains of business and profession added back prior period expenses to arrive at income chargeable under the head profits gains of business . I Assessee has not prepared its accounts in accordance with Part-II III of Schedule- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2008-09. The appellant submits that the Learned CIT(Appeal) ought to have appreciated the fact that the above adjustments were to compute the income liable for assessment for the Asst. year 2008-09 under the normal provisions of the IT Act 1961, which are permissible under the said provisions of IT Act 1961. 4. The appellant submits that the Learned commissioner of Income tax (Appeal), Chennai ought to have appreciated the fact that the adjustments to book loss referred to, as above, in Ground No.3 cannot be made for the purposes of computing income liable for assessment under the provisions of section 115JB of IT Act 1961. 5. The appellant submits that the accounts of a company, as in the case of the appellant should be maintained as required under the provisions of companies Act 2003 and as per the requirements of the Accounting Standards of ICAI which are mandatorily binding on a company like that of the appellant. 6. The appellant submits that the Income offered for Asst. to claim TDS credits - Rs.65,61,610/- cannot be considered as income of the Asst. year under consideration for the purpose of book profits under the provisions of section 115 JB of IT Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under book profit at Rs.55,06,502/- by making additions towards income admitted to claim TDS Credits and disallowance of prior period expenses. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeeded. The Ld.CIT(A) for the reasons stated in their appellate order dated 06.11.2019, rejected the arguments of the assessee and sustained the additions made by the AO. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 4. The Ld.Counsel for the assessee referring to provisions of Sec.115JB of the Act, more particularly, Explanation (1) to Sec.115JB of the Act, submitted that except as provided under Explanation(1), no further adjustment can be made by the AO while computing book profit u/s.115JB of the Act. He further referring to various judicial precedents, including the decision of the Hon ble Karnataka High Court in the case of CIT (LTU) v. Sansera Engineering (P) Ltd. reported in [2017] 80 taxmann.com 248 (Karnataka) argued that the AO can make adjustment to the profit qua items provided in Explanation (1) to Sec.115JB of the Act. Since, adjustment made by the AO towards income offered for claiming TDS Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome component is accrued to the assessee in the subsequent financial years and therefore, the assessee has rightly treated advances from customers as current liabilities in the financial statement and which is in accordance with provisions of Companies Act, 1956. 7. Having heard both sides, we are of the considered view that if advances received by the assessee from customers on which TDS Credits has been claimed, has been offered as income of subsequent financial years, then the same needs to be recognized as income as and when such income accrues to the assessee. Therefore, we are of the considered view that when the assessee has treated advances from customers as liability in the books of accounts pending recognition of income in subsequent financial years, it cannot be said that the assessee has not followed the provisions of Companies Act, 1956, more particularly, Part-II III of Schedule-VI of Companies Act, 1956 while preparing its accounts. Therefore, we are of the considered view that on this issue, the AO cannot make any adjustments to re-compute book profit u/s.115JB of the Act, because said item does not come under any of the items of adjustments specified in Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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