TaxTMI 
TaxTMI 
2009 (9) TMI 44
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....hat for the purpose of computing "book profit" under Section 115 JB of the Act, the amount withdrawn from the revaluation reserve and credited to the profit and loss account is not to be reduced from the net profit as per the profit and loss account unless the book profit had been increased by the amount of the reserve in the year of the creation of such reserve. 2. The appellant company is engaged in the business of manufacture of, inter alia, yarn and polyester. For the assessment year 2001-2002, the appellant company computed "book profit" under Section 115 JB of the Act, after reducing the net profit by the amount withdrawn from the revaluation reserve created on revaluation of the fixed assets. The Assessing Officer did not allow the....
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.... for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act; 1956 (1 of 1956): 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- ..... .... .... .... if any amount referred to in clauses (a) to (h) is debited to the profit and loss account, and as reduced by- (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account Provided that....
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.... provision/reserve and credited to P&L Account, even if in the year in which the provision/reserve had been created but the amount of such reserve had not been added back while computing book profit for that year, not withstanding that the reserve had been debited to the P&L Account. From the comparison of the provisions of section 115JB it is clear that prior to insertion of the proviso to clause (i) of the explanation of section 115 JB the assessee was entitled to reduce the sum from revaluation reserve while computing book profit under section 115JB of the Act even if in the year in which the provision/reserve had been created but the amount of such reserve has not been added back while computing book profit for that year not withstandin....
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....bed by ICAI on the treatment of reserve created on revaluation of fixed assets and that revaluation reserve is essentially in the nature of an adjustment entry to balance both sides of the balance sheet and there is no question of taking the same to the profit and loss account and, therefore, the issue of adjusting the book profit on account of creation of the revaluation reserve does not arise. 6. We are of the opinion that since there is no dispute that the provision of clause (i) of Explanation-1 to Section 115 JB is applicable to the issue in question and the language of the same being plain and clear, we agree with the view of the Tribunal on the interpretation of this provision as stated by it in para 61 and as reproduced by us abov....