Book profit computation under section 115JB permits only statutory adjustments, including unabsorbed depreciation and 10B-related expenditure.

In computing book profit under section 115JB, the accepted adjustments included the correctly worked out set-off of brought forward unabsorbed depreciation on the facts, and only expenditure relatable to income eligible under section 10B could be adjusted under Explanation 1. The assessee's computation on the second issue was accepted, the Revenue's objections did not survive, and the relief granted by the first appellate authority was sustained.

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Issues: Whether unabsorbed depreciation was rightly set off while computing book profit under section 115JB of the Income-tax Act, 1961, and whether expenses relatable to income eligible under section 10B could be adjusted in the computation of book profit.

Analysis: The adjustment of brought forward depreciation in the computation of book profit under section 115JB was accepted as having been correctly worked out on the facts. On the second issue, the computation under Explanation 1 to section 115JB was held to permit only expenditure relatable to income to which section 10B applies, and the working furnished by the assessee was accepted. The Revenue's objections did not survive against the order under appeal.

Conclusion: Both issues were decided against the Revenue and in favour of the assessee.

Final Conclusion: The Revenue's appeal failed and the assessment relief granted by the first appellate authority was sustained.

Ratio Decidendi: In computing book profit under section 115JB, only the specific statutory adjustments permitted by Explanation 1 can be made, including the correct treatment of unabsorbed depreciation and expenditure relatable to income eligible under section 10B.

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