TaxTMI 
TaxTMI 
2006 (9) TMI 226
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....manufacture of detonators, industrial explosives and its accessories. It returned total loss of Rs. 34,27,39,176 for the year under consideration. Since the provisions of section 115JB were attracted, the assessee worked out the book profits at Rs. 9,89,95,042. While computing this book profits, it started with the figure of net profit of Rs. 9,78,55,461, which was the profit before taxation, as shown in the Profit & Loss Account. This profit was arrived at after crediting Rs. 3.06 lakhs as write offs/provision and after charging Rs. 109.96 lakhs as additional advisory fee for sale of investments. These two items were classified as extraordinary items in the Profit & Loss Account. The profit before extraordinary items amounted to Rs. 1,085.....
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.... the book profits should be Rs. 660.81 lakhs which is the final balance in the Profit & Loss Account. This profit has then to be increased by the items mentioned in clauses (a) to (f) under Explanation to section 115JB(2), if they are debited to the Profit & Loss Account. Referring to the clauses (a) to (f), the learned counsel pointed out that they were all items which were to be appropriated from the profits and hence, any item which was not an appropriation could not be adjusted. Besides relying on the judgment in the case of Apollo Tyres Ltd., the learned counsel relied on the decision of the Nagpur Bench of the Tribunal in the case of Bastar Wood Products Ltd. v. Dy. CIT [1995] 78 Taxman 126. Reliance was also placed on the decision of....
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....uld be Rs. 1,085.45 lakhs, which was the profit before extraordinary items and taxation. 8. We have duly considered the rival submissions and material on record. Sub-section (2) of section 115JB provides that every assessee company shall prepare its Profit & Loss Account in accordance with the provisions of Part-II and Part-III of Schedule-VI to the Companies Act, 1956. The said Schedule-VI does not make any distinction between Profit & Loss Account and Profit & Loss Appropriation Account. In fact, the Schedule does not speak of the Appropriation Account at all. It is only as a matter of presentation that most of the companies segregate to reflect as to what has been appropriated where out of the profits earned by them. Otherwise, sub-clau....
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....) to (vii) given in the Explanation. No other adjustment is permitted by law and also as laid down by the Supreme Court in the case of Apollo Tyres Ltd. None of the clauses given in the Explanation provide for the increase or decrease of the book profits by extraordinary items. The reference to AS-5 by the learned Departmental Representative does not in any manner advance the case of the revenue. It merely says that prior period and extraordinary items should be separately disclosed along with their nature so that their impact on the operating results can be perceived. It does not say that they are not part of the Profit & Loss Account. Similarly, the Guidance Note issued by the ICAI also does not help the revenue as it merely says that som....