TaxTMI 
TaxTMI 
2017 (3) TMI 1234
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.....T.-I failed to see that the amount of interest charged by the bank amounting to Rs. 2,39,44,064/- during the year was clearly a revenue expenditure of the year debitable to profit and loss account and was liable to be deducted from the profit shown at Rs. 92,90,383/- resulting in book loss of Rs. 1,45,53,681/- and thus there was no book profit and consequently there was no liability under section 115JB. 3. The case law relied on by C.I.T.(A) in the case of Rain Commodities Ltd. vs. CIT 41 ITD P. 449 also envisages that if it is discovered that P and L A/c in not drawn in accordance with Part II and III of Sch. VI of the Companies Act proper adjustment is possible to arrive at correct book profit. Law does not prohibit the working of cor....
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...., has not taken into account since from the commencement of the business on account of depreciation asset in the balance sheet and considered as "deferred revenue expenditure". It is pertinent to mention that the contents of schedule M of "Significant Accounting Policies" as per S. No. (g) remarks of the auditor is as hereunder:- " The company management have decided that preoperative expenses treated as 'deferred Revenue Expenditure' and amortized over a period of 5 years from next year due to unabsorbed loss during the year of the company and company have debited long term bank loan interest and medium term bank loan interest of Rs. 2,39,44,064/- which was not paid during the year, that account are not depreciated and that amount trans....
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....expenditure. (b) If this interest liability of Rs. 2,39,44,064/- is treated as revenue expenditure, whether this amount is to be reduced for working out the book profits u/s 115JB once the accounts in the case of a company have been audited and accounts as contemplated in Part II & III of Schedule VI of the Companies Act, 1956 can be said to be drawn up. 4. Considering the facts and circumstances, learned CIT(Appeals) noted that said amount cannot be held to be revenue expenditure, as it was possible that the amount can be treated as capital expenditure to be added to the cost of the asset. Further learned CIT(Appeals) held that in absence of adequate material showed that this is a revenue expenditure he was of the opinion that the Asses....
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....565. 7. Per Contra learned Departmental Representative relied upon the orders of the authorities below. 8. Upon careful consideration we find that in this case it is plea of the assessee that term loan interests were taken to balance sheet under preoperative expenditure erroneously. That the company has been in operation for several years and there is no reason why the term loan interest should not be treated as revenue expenditure attributable to profit and loss account. Learned CIT(Appeals) has not accepted this proposition on the ground that adequate materials are not on record to established that the concerned expenditure were revenue in nature. We find that there is no dispute that if the amount involved was debitable to the profit a....
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....ermits reduction of net profit to the extent of past losses or unabsorbed depreciation, whichever is less-If unabsorbed depreciation can be reduced from net profit to arrive at book profit, there is no reason why current year's depreciation which is not charged to the P&L a/c cannot be deducted from the net profit in determining boo profit." 9. We find that the ratio of the above case law can also be applied to the facts of the present case. In this case also we find that the nature of the impugned amount was duly disclosed in the notes of account attached to the balance sheet. The said note mentioned that the amount involved was long term bank interest and medium term banking on interest. If that be so there was no reason to treat th....