TaxTMI 
TaxTMI 
1998 (9) TMI 142
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.... year expenses 1,34,509 8,29,305 Net profit for the year 8,21,555 The assessee went in appeal before the CIT(A). The learned CIT(A) has directed the Dy. CIT for the recomputation of the profit for the purpose of s. 115J of the IT Act, 1961, by deducting the excess bonus paid at Rs. 6,94,796 during the year out of the net profit for the asst. yr. 1989-90. But the CIT(A) has confirmed the addition of the prior year expenses to the extent of Rs. 1,34,509 for the purpose of computation of profit under s. 115J of the IT Act, 1961. The assessee has come in appeal before us against the addition of the prior year expenses amounting to Rs. 1,34,509 in the net profit as worked out by assessee for....
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....it in accordance with the provisions of Part II and Part III of Sch. VI of the Companies Act, 1956. According to him as per cl. (2) of Part II to Sch. VI of the Companies Act it is the basic requirement that the P&L a/c shall be so made out as clearly to disclose the result of the working of the company during the period covered by the accounts. Since the accounts relate for a particular period and the expenses do not represent to that particular period, the expenses were not debited to the P&L a/c of the assessee of that period and the nomenclature 'prior year' has been used only to distinguish these expenses from the period to which the financial statement of the assessee belonged. The learned Departmental Representative in this regard re....
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....he P&L a/c for the relevant previous year prepared under sub-s. (1A) as increased by... Sec. 211(2) of the Companies Act, 1956 lays down that every P&L a/c of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall subject as aforesaid comply with the requirements of Part II of Sch. VI so far as they are applicable thereto. Sec. 209 of the Companies Act, 1956 deals with the books of accounts to be kept by the company. Sec. 209(3) lays down that for the purpose of sub-s. (1) and sub-s. (2) proper books of accounts shall not be deemed to be kept with respect to the matter specified therein: (a)..... (b) if such books are not kept on accrual basis and according to the double entry system ....
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....r nature and amount in a manner that their impact on current profit or loss can be perceived. The auditor is expected to qualify his report in case the prior period expenses are charged to current year's P&L a/c. The Expert Advisory Committee of the Institute of Chartered Accountants of India in its book on Compendium of Opinions Vol. I at page 1-29 has expressed its opinion on a query relating to the presentation of prior year expenses in the P&L a/c as under: "The Companies Act does not envisage a P&L Appropriation a/c although such an account is often prepared in practice. Sometimes, the P&L a/c is divided into two parts referred to customarily as 'above the line' and 'below the line' respectively. The basic requirement which must be ....