9911796707
TMI Blog2016 (1) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... d loss account of the assessee. Therefore we hold that no adjustment of prior period expenses is to be made by the assessee to arrive at the book profits for the purpose of levying tax u/s 115JB. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... he companies Act. Hence Assessing Officer has rightly brought these items to taxation u/s 115JB. 3.4.6 Thus, keeping in view of the provisions of ss. 209,210 and 211 of parts II and III of Sch. VI to the Companies Act and the Accounting Standards as discussed above, I hold that Prior period expenses can be added under s. 115JB(2) itself and the AO has correctly recomputed the P&L a/c by adding thereto the prior year expenses so as to make the profit as shown in the P&L account in accordance with the provisions of Part II of Sch. VI to the Companies Act, 1956. I, therefore, hold that no interference is called for with the order of the AO in not allowing the deduction of Rs. 46,64,504/- relating to prior year expenses out of the profit for the year for the purpose of computation of book profit under s. 115JB. 5. Before us, the Ld. AR at the outset stated that it is not pressing the addition of interest on PLA of Rs. 3,635/- and interest on TDS amounting to Rs. 6050/- to the net profit for working out the book profit of the company u/s 115JB. On the issue of addition of prior period expenses amounting to Rs. 46,64,504/- to the net profits of the assessee u/s 115JB the AR reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent. (2) Every assessee,-- (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956 (1 of 1956); or (b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company: Provided that while preparing the annual accounts including profit and loss account,-- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII, if the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, it is a rate less than the rate specified in sub-section (1); or (fc) the amount representing notional loss on transfer of a capital asset, being share or a special purpose vehicle to a business trust in exchange of units allotted by the trust referred to in clause (xvii) of section 47 or the amount representing notional loss resulting from any change in carrying amount of said units or the amount of loss on transfer of units referred to in clause (xvii) of section 47; or (g) the amount of depreciation, (h) the amount of deferred tax and the provision therefor, (i) the amount or amounts set aside as provision for diminution in the value of any asset, (j) the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, Following clause (k) shall be inserted after clause (j) in Explanation 1 below subsection (2) of section 115JB by the Finance Act, 2015, w.e.f. 1-4-2016 : (k) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account; or (iid) the amount of income accruing or arising to assessee, being a foreign company, from,-- (A) the capital gains arising on transactions in securities; or (B) the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII, if such income is credited to the profit and loss account and the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or (iie) the amount representing,-- (A) notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of section 47; or (B) notional gain resulting from any change in carrying amount of said units; or (C) gain on transfer of units referred to in clause (xvii) of section 47, if any, credited to the profit and loss account; or (iif) the amount of loss on transfer of units referred to in clause (xvii) of section 47 computed by taking into account the cost of the shares exchanged with units referred to in the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justments prescribed in the Explanation 1 to section 115JB are concerned, we find that with regard to prior period expense no adjustment has been prescribed. Therefore, what remains to be seen is whether, as per Schedule -VI part-II of the Companies Act, in conjunction with the prescribed Accounting Standards, prior period expenses have to be excluded for arriving at the net profit. A bare perusal of Schedule-VI part -II shows that profit or loss for the period is arrived at after adjusting extra ordinary items, though disclosed separately. Accounting Standard--5, which deals with Net profit or loss for the period, Prior period items and Changes in Accounting Policies, states at para 19 that prior period items are to be included for calculating current profits but they should be disclosed separately. AS-5, para 18 is reproduced herein:- Prior period items are generally infrequent in nature and can be distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that may need revision as additional information becomes known. For example, income or expense recognised on the outcome of a contingency which previously could not be estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
