TaxTMI 
TaxTMI 
2019 (5) TMI 1258
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....n the business of producing of coal tar pitch and others and had filed its return of income for the Assessment Year 2011-12 on 30.09.2011 declaring total income of Rs. 59,68,73,155/-. The assessment was completed u/s 143(3) of the Act on 27.03.2015 determining total income of Rs. 61,66,77,310/- under normal provisions of the Act. In the said assessment, disallowance u/s 14A of the Act was made to the tune of Rs. 99,658/- and adjustment to arm's length price as proposed by the ld. Transfer Pricing Officer ('TPO') was made to the tune of Rs. 1,72,04,492/-. The ld. A.O also computed the book profit of the assessee u/s 115JB at Rs. 1,38,79,44,213/-. The ld. CIT sought to revise this assessment u/s 263 of the Act on the ground that the ld. A.O erred in not making addition of Rs. 1,72,04,492/- being the adjustment made to arm's length price while computing book profit u/s 115JB of the Act. The ld. CIT observed that ld. A.O did not make any enquiry on this aspect as to whether the transfer pricing addition made by ld. TPO would have to be added back while computing book profits u/s 115JB of the Act. The ld. CIT also observed that ld. A.O had not verified the compliance of provisions of se....
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....closed in Pages 1 to 12 of the paper book); copy of notices issued by the ld. A.O and replies filed by the assessee thereon (Pages 13 to 25 of Paper Book); and copy of decisions relied upon by the assessee before the ld. CIT in 263 proceedings. The only grievance of the ld. CIT for treating the order of the ld. A.O as erroneous and prejudicial to the interest of the Revenue warranting invoking of revisional jurisdictional u/s 263 of the Act was that the addition made by the ld. TPO in the sum of Rs. 1,72,04,492/-, though added under normal provisions of the Act was not added by the ld. A.O in the computation of book profits u/s 115JB of the Act. In this regard, it would be pertinent to note that Explanation 1 to section 115JB(2) of the Act clearly specifies the list of items that could be added to net profit as per profit & loss a/c to arrive at the book profits. For the sake of convenience the relevant provisions are reproduced hereinbelow: Explanation 1.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of inco....
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....e said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through profit or loss account, as the case may be; if any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account..." 6. We find that the transfer pricing adjustment made u/s 92CA(3) of the Act is not an item falling under the aforesaid list provided in Explanation 1 to section 115JB(2) of the Act. The Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT reported in [2002] 255 ITR 273 (SC) held as under: "The Assessing Officer, while computing the book profits of a company under section115J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to section 115J. The Assessing Officer does not have the jurisdictional t....
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....ii)(d) of the Order are not applicable. b) The Company has not taken any loan during the year from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year and the year and the year and balance in respect of such loan taken from a Company in earlier year was Rs. 900 lacs & Rs. 750 lacs respectively. The Company has also issued Deep Discount Debentures of face value of Rs. 123 crores in the earlier years to a Company covered in the register maintained under section 301 of the Act and the balance as on 31st March, 2011 net of discount, to be written off over the period of Debentures was Rs. 3679.84 lacs. c) In our opinion, the rate of interest and other terms and conditions of the aforesaid loans taken by the Company are prima facie not prejudicial to the interest of the Company. d) In respect of the aforesaid loan, the Company was regular in repaying the principal amount and was also regular in payment of interest as stipulated. v) a). To the best of our knowledge and belief and according to the information and explanations given to us, we are of ....
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.... HImadri e-Carbon Ltd. SCHEDULES FORMING PART OF THE ACCOUNTS Transactions carried out with related parties referred to in above, in ordinary course of business are as under: 9. It is very clear from the perusal of the annual report that accounting standards 21to 23 are not applicable to the assessee company and hence there is no discussion regarding the same in the annual accounts of the assessee company. 10. The above observation would clearly prove that the accounts have been prepared in proper compliance with applicable accounting standards. There is no evidence brought on record by the ld. CIT that the accounts of the assessee have not been approved by the shareholders in the General Body Meeting or they have been subject to any enquiry by the Registrar of Companies for non-compliance to any accounting standards. Hence, the entire observations of the ld. CIT with regard to verification of compliance of provisions of section 297 of the Companies Act, compliance to accounting standards i.e. AS-18, AS-21 and AS-23 are totally irrelevant and not germane to the issue under consideration in the facts and circumstances of the assessee's case. 11. We find th....
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....the appeal raised by the assessee is allowed and the AO is directed to exclude the transfer pricing adjustment, if such adjustment survives, from the book profits computed under Section 115JB of the Act." 12. We find that this decision of the Delhi Tribunal was duly brought to the attention of the ld. CIT while giving reply to show cause notice issued u/s 263 of the Act and the ld. CIT conveniently ignored the same and does not whisper about the same in his final finding while proceeding to treat the order of the ld. A.O as erroneous and prejudicial to the interest of the revenue. Even otherwise, the ld. CIT had only mentioned in Para 5 of his order that the transactions with related parties and associated enterprises require elaborate examination by ld. A.O by conducting detailed enquires and verifications in the light of provisions of Companies Act, relevant accounting standards and income tax Acts. We find that the ld. CIT had not specifically pointed out any exact error committed by the ld. A.O while framing the assessment. Instead, the ld. CIT only directed the ld. A.O to make detailed and roving enquires through the route of invoking revisional jurisdiction u/s 263 of the ....