TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 815
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....nciples ('GAAP'), and thus, holding that the Hon'ble Supreme Court's decision in the case of Apollo Tyres Ltd. vs. CIT [2002] 255ITR 273 (SC) is not applicable in the present case. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that CSR expenditure is a below the line item and an application of income, thereby adding back the CSR expenditure to profits considered for computation of book profits u/s 115JB of the Act, without appreciating the fact that Appellant has actually incurred such amount during the year. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that Explanation 1 to section 115JB of the Act, does not prescribe any adjustment in respect of CSR expenditure actually incurred and thus, the said addition is without any legal basis. 5. That on the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 3. Brief facts of the case are that the assessee company is engaged in the business of manufacturing of turbines and generators for thermal and the projects. The Assessing Officer noted....
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..... That as per accepted norms of accountancy, the appropriation does not take the character of expenditure. The Assessing Officer proceeded to disallow the same and increase the book profit to that extent. He held that as per provisions of section 115JB, item no. b to explanation 1, the amount carried to any reserves, by whatever name called, other than a reserve specified under section 33AC is to be added back to the book profits. That the creation of reserves for CSR is clearly not covered by section 33AC of the Act. Hence, the Assessing Officer added back to the book profit the CSR provision expenditure. 5. Against the above order, the assessee appealed before the Ld. CIT(A). 6. The Ld. CIT(A) elaborately noted the submission of the assessee. He noted that in response to the addition made by the Assessing Officer while computing the book profit under section 115JB of the Act, the assessee submitted that all the CSR expense of Rs.48,00,000/- was incurred during the year and no reserve was created. Thus, the addition made by the Assessing Officer on the basis of explanation to section 115JB of the Act that the reserves were created is not correct. Furthermore, the assessee stated....
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....e society. 6.6 In this backdrop, it is noted that since the CSR amount of Rs. 48,00,000/- is shown as deduction of expense in the profit and loss account of the assessee, the same has reduced the profit amount to be considered for Book Profit purposes under Section 115JB of the Act. Since the said amount of CSR is below the line item, the amount of Rs. 48,00,000/- which is claimed as deduction should be added back to the profit considered for the purpose of book profit, which the AO has rightly done so. 6.7 The reference of the appellant on the decision of the Hon'bie Supreme Court in the case of Appollo Tyres ltd. would have been correct, if the audited profit and loss account is prepared in accordance with the generally accepted accounting principles and standards. Since CSR amount is shown as expenditure {an above the line item), the audited profit and loss account is not as per the GAAP and hence the same can be considered by the AO to compute the book profit as per the GAAP and clear provisions of Companies Act. The assessee cannot escape by drawing a wrong profit and loss account on one hand and then taking the benefit of Hon'ble Supreme Court's decision. To....
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.... account under reserve and surplus in balance sheet. The Ld. Counsel for the assessee further referred to the following case laws:- "In the case of M/s. HTC Global Services (India) P Ltd vs. ACIT (I.T.A. Nos. 58 & 1280/Mds/2014, I.T.A. Nos. 362 & 2021/Mds/2014) the Ld. AO had disallowed the amount paid towards donation under section 115JB of the Act by observing that the same was a below the line item and should not be considered as expenditure. The Ld. CIT(A) granted the relief to the Assessee holding that even though such amount may not be an allowable deduction under the Act, it nevertheless forms a part of miscellaneous expenditure while computing book profits under the Act. Thus, cannot be disallowed while computing book profits under section 115JB of the Act. The Hon'ble Chennai bench confirmed the order of the Ld. CIT(A) and held that donation paid is an allowable expenditure while computing the book profit for the purpose of section 115JB of the Act. (Refer para 6.2 at page 39 of CLC) Similar observation was made by the Hon'ble ITAT, Kolkata Bench in the case of I.T.O Ward 4(1), Kolkata vs. M/s. R.B Properties Pvt. Ltd (I.T.A No. 1723/Kol/2011)" 9. Per contra, the Ld. D....
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....which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including statement of profit and loss; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including statement of profit and loss for such financial year or part of such financial year falling within the relevant previous year. Explanation 1.-For the purposes of this section, "book profit" means the profit as shown in the statement of profit and loss for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e....
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.... in clause (j) is not credited to the statement of profit and loss, and as reduced by,- (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the statement of profit and loss), if any such amount is credited to the statement of profit and loss: Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or (ii) the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the statement of profit and loss; or (iia) the amount of depreciation debited to the statement of profit and loss (ex....
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....ed the Board of Directors of such company and has appointed new directors who are nominated by the Central Government under section 242 of the said Act; (B) company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016). Explanation.-For the purposes of this clause,- (i) "Adjudicating Authority" shall have the meaning assigned to it in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016); (ii) "Tribunal" shall have the meaning assigned to it in clause (90) of section 2 of the Companies Act, 2013 (18 of 2013); (iii) a company shall be a subsidiary of another company, if such other company holds more than half in the nominal value of equity share capital of the company; (iv) "loss" shall not include depreciation; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account in case of a company other than the company referred to in clause (iih). Explanation.-For the purposes of this clause,- (a) the loss shall not in....