TaxTMI 
TaxTMI 
2016 (9) TMI 496
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....uting it through the profit & loss account)in the book profit while determining the tax liability under section 115JB of the Act. ii) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer for disallowing the cost of improvement of ` 3,10,00,000/- under the normal computation and under the provisions of section 115JB of the Act. 3. Brief facts of the case are that the assessee is a company engaged in the business of leasing and renting of amenities and buildings filed its return of income for the assessment year 2010-11 on 06.10.2010 declaring loss of `4,88,52.174/-. During the relevant assessment year, the assessee company has sold its fixed assets and derived capital profit of ` 32,11,24,002/- as detailed herein below:- Property Amount of profit on sale of properties ` 100 ft. Road, Saligramam, Vadapalani 30,18,74,253 KRM Centre, No.2, Harrington Road, Chetpet 1,92,49,749 Total Profit 32,11,24,002 The assessee had directly absorbed the same in its balance sheet without routing it through the profit and loss account. Thus, the book profit of the company was under stated by the p....
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....year by Rs. 26.82 Crores. 14.7 The Director's reply to this qualification of the auditor merely states that a policy, the company credits capital profits to Reserves and Surplus instead to Profit and Loss Account, so that the profit and loss account correctly shows the result of operational performance. But the Accounting Standard-l0 mandated by lCAl has been clearly violated by the company. 14.8 The Apex Court in J.K.Industries Ltd., Vs UOI (29 ITR 176) (SC) has upheld the mandatory nature of Accounting Standards issued by ICAI. 14.9 Only when the accounts of a company are prepared in accordance with Part II & III of Schedule VI of the Companies Act, 1956, the Assessing Officer will not have the power to restate the profit of a company. 14.10 In the case of the company the qualification by the statutory Auditor clearly establishes the fact that the profit and loss account of the company has not been prepared as required by Part II and Part III of Schedule VI of the Companies Act. 14.11 Part B of Part II of Schedule VI lays down that the profit and loss account shall be so made and as to disclose the results of the working of the company during the period covered....
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....k profit on sale of fixed assets as per Schedule B of the balance sheet under the head "Reserves and Surplus" by Rs. 32,ll,24,002/-. 14.16 The decision rendered in the case of Apollo Tyres is applicable only when the profit and loss account of the assess company is prepared in accordance with the provisions of Part II and III of Schedule VI of the Companies Act,1956. The assessee's lengthy objections are answered as above and the assessment is completed by reworking the book profits u/s.115JB and reworking the capital loss under normal computation under Income-tax Act. I. Consideration received for Vadapalani property ` 140,00,00,000 Cost excluding unproved additional construction - 100,62,26,490 ` 39,37,73,510 Less: Consideration towards Furniture & Fittings, Electrical fitting and Plant & Machinery ` 6,42,30,910 Profit on sale of Vadapalani property ` 32,95,42,600 II. Consideration received for Harrington Rd Property ` 4,00,00,000 - ` 9,50,000 Less: Selling Expenses - Brokerage ` 2,67,69,474 Less: Cost including....
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....enses. (xi)a)The amount of income from investments, distinguishing between trade investments and other investments. ....... ...... (xii) a) Profits or losses on investments showing distinctly the extent of the profits or losses earned or incurred on account of membership of a partnership firm (to the extent not adjusted from any previous provision or reserve. (b) Profits or losses in respect of transactions of a kind not usually undertaken by the company or undertaken in circumstances of an exceptional or non-recurring nature, if material in amount . (c) Miscellaneous income." 7. From the above, it is apparent that whatever be the nature of profit or loss is incurred by the assessee it has to be disclosed in the profit and loss account mandatorily as per the provisions of the Companies Act, 1956. Only the assets & liabilities and the profit/loss carry forwarded from the profit and loss account are disclosed in the balance sheet. The format of balance sheet as provided under Schedule VI of the Companies Act itself indicate the fact that only the assets & liabilities including reserves and carry forward of profit/loss from the profit & loss account are to be disc....