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TMI Blog2025 (4) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenses amounting to Rs.29,16,167/- cannot be reduced from the book profits computed under Section 115 JA of the Income Tax Act even if such expenses have been debited to the Profit and Loss Account in the books and have been allowed in the assessment order for computing the income under the normal provisions of the Income Tax Act 1961 for the assessment year in appeal? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that Profit and Loss appropriation account does not form part of the Profit and Loss account and as such any amounts displayed under the Profit and Loss appropriate accounts has to be excluded while computing Book Profits for the purpose of Section 115 JA of the Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, not incurred in the prior period but were incurred only in the previous year in question. There were two components of the expenses. The first was of a sum of Rs.26,59,755/-, representing bonus which became payable on the basis of a settlement agreement entered into in financial year (FY) 1997-98. Hence, it was the appellant's case that the liability had crystallised during the present assessment year only. 6. The second component related to internal audit fees and power charges. In both instances, there had been an upward revision of the amount/additional demand made by the electricity department during the relevant financial year though relating to earlier years. Hence, though categorised as prior period expenses, the expenditure had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Companies (ROC), the ratio of the judgment in Apollo Tyres Foot Note Supra (1) should apply to the assessee also. 11. Hence, the assessee could not approbate and reprobate, meaning that the books of accounts could not be accepted for the purpose of Companies Act and rejected for the purpose of Income Tax Act. Hence, the Tribunal concluded stating that the adjustment in book profit providing for prior year expenses was not permitted under the provisions of Section 115JA of the Act and that the judgment of the Supreme Court in Apollo Tyres (supra) stood in the way of the appellant's claim. 12. Learned counsel for the appellant would reiterate the position that the expenditures, though under the nomenclature 'prior period expenses', had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary for us to see the presentation of the profit and loss account by the assessee which is as follows : 17. The account reveals that the appellant has computed net profit at a sum of Rs.114,88,29,121/- for the year ended 31.03.1998. This, according to the Department, must be the net profit for the purposes of income tax. Any adjustment made to this figure, according to them, would be an adjustment below the line, impermissible both in terms of the Explanation to Section 115JA as well as the ratio of the judgment in Apollo Tyres (supra). 18. What the appellant has done, is to reduce Rs.34,250/- (being donations and charity) plus Rs.2,56,412/- (being internal audit fees and power charges) plus Rs.32,67,502/- (bonus paid in the current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icture should not be lost by virtue of a quirk of presentation of the financials. 22. The order of the Tribunal confirming the proposal is also, in our view, hyper technical. The Tribunal has proceeded on the assumption that there is a profit and loss appropriation account which is erroneous as there is no such account in the financials produced before us. Substantial question No.2 hence is returned as unanswered in the present facts and circumstances of the case. 23. The Appellant has relied upon the decisions in the case of Commissioner of Income Tax v Khaitan Chemicals & Fertilizers Ltd [307 ITR 0150] and Tamil Nadu Cements Corporation Ltd v Joint Commissioner of Income-Tax, Special Range II, Chennai [2012 (23) Taxmann.com 145(Mad]. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue, the decision of this Court in Tamil Nadu Cements Corporation Ltd. (supra) has not been taken note of.
29. Substantial question of law No.3 is incomplete both in the Tax Case (Appeal) and in the order of admission dated 20.06.2012. We are of the view that the substantial issue arising for decision in this case has been encompassed in substantial question of law No.1 and that the same would suffice to provide a proper resolution of that issue.
30. In light of the above discussion, we are of the view that the proposal for revision does not hold any merit and substantial question of law No.1 is answered in favour of the Assessee. This Tax Case (Appeal) is allowed as indicated above. X X X X Extracts X X X X X X X X Extracts X X X X
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