TaxTMI 
TaxTMI 
2001 (2) TMI 56
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....holding that the provisions made for doubtful debts, bonus, gratuity, wealth-tax liability and foreign exchange rate difference could not be added to the net profit shown in the profit and loss account within the meaning of the Explanation to section 115J(1A) while working out the book profit under section 115J of the Income-tax Act, 1961. Facts : The assessee-company filed its return on December 31, 1990, for the assessment year 1990-91 declaring total loss of Rs. 32-34 lakhs. The business of the assessee is to manufacture steel forgings. The Assessing Officer disallowed the deductions claimed by the assessee on account of payment of wealth-tax. He also disallowed the provisions made by the assessee for doubtful debts, for gratuity, ....
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....in disallowing the claims for deduction in respect of the five items and ordering addition thereof to the net profit for the purposes of section 115J of the Act. The addition of the five items to the net profit is accordingly discussed hereinbelow : I. Addition of wealth-tax paid by the assessee to the net profit : Mr. Desai, learned senior counsel for the Department, fairly concedes that the net profit, as shown in the profit and loss account, will not be increased by the amount of wealth-tax paid because under clause (a) of the Explanation, to section 115J(1A), what is contemplated is the amount of income-tax paid. Under the said clause, payment of wealth-tax is not contemplated, Therefore, the net profit shall not be increased b....
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.... of an unascertained liability. Therefore, we have decided this point only on the facts of this case. In the case of Deputy CIT v. Beardsell Ltd. [2000] 244 ITR 256 (Mad), the claim of the assessee was disallowed on the ground that the provision was not for ascertained liabilities and, accordingly, an amount of Rs. 33.49 lakhs came to be added to the net profit, In that matter the adjustment was made under section 143(l)(a) of the Act. Hence, the said judgement has no application to the facts of the present case. In the present case, the Department has invoked section 143(3) of the Act. Therefore, the Department was required to record a proper finding of fact before adding Rs. 1,67,411. III. Whether the net profit was required to be incr....
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....bunal found that the assessee had taken a foreign exchange loan from the ICICI and though, normally, under the provisions of Income-tax Act such increase in the liability due to fluctuations in the foreign exchange rates is normally taken as on capital account, the same is debited to the profit and loss account under the Companies Act. We agree with the view expressed by the Tribunal. While applying section 115J, the Assessing Officer has to go by the computation of the book profit as permitted under the Companies Act. By virtue of section 115J, in the case of a company whose total income as computed under the Income-tax Act is less than 30 per cent. of the book profit, the total income chargeable to tax will be 30 per cent. of the book pro....