TaxTMI 
TaxTMI 
2026 (3) TMI 1285
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....ble receipt? ii. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in holding that the Corporate Tax is not debited in the P&L a/c. and therefore the amount did not enter the stream of income for the purpose of determining net profit at all and therefore clause (b) of Explanation-1 is not applicable failing to appreciate that the assessee has credited the fees received from Saudi Arabia net off corporate taxes and therefore in effect is claimed in the P&L a/c. and therefore ought to have been added to the computation of book profit u/s 115JB? iii. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) deleting the addition of expenditure on Jukehi Road at Kymore failing to appreciate that the same is a capital expenditure as the assets is of enduring nature and the decision relied upon by the ITAT is distinguishable on facts from that of the assessee? iv. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) deleting the disa....
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.... subsidy received towards purchase of assets and state capital investment received from W.B.I.D.C. for computation of Book profit u/s 115JB of the Act, failing to appreciate that the same are incentives in the nature of revenue and are not capital in nature? xi. Whether, on the facts and in the circumstances of the case and in law the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) deleting the addition of provision for Wealth Tax in computing Book Profits failing to appreciate that the same falls within the ambit of Section 115JB of the Act? xii. Whether, on the facts and in the circumstances of the case and in law the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) deleting the addition of provision for additional gratuity in computing book profits u/s.115JB failing to appreciate that unascertained liabilities has to be added to the book profits as per Explanation-1 to Section 115JB? xiii. Whether, on the facts and in the circumstances of the case and in law the Hon'ble ITAT was right in upholding the decision of the Ld. CIT(A) allowing the claim of exclusion of write back of excess provisions made in ea....
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....e said amount expended as receipt in computing the book profits under Section 115JB. The Commissioner of Income-tax (Appeals) confirmed the addition to the book profits made by the Assessing Officer. The Tribunal noted that the Commissioner of Income-tax (Appeals) had however deleted the addition made in computing the total income of the Respondent under the normal provisions of the Act. The Tribunal, following the decision of the Apex Court in Apollo Tyres Ltd v CIT (2002) 255 ITR 273 (SC) and National Hydroelectric Power Corporation Ltd v CIT (2010) 187 Taxman 193 (SC) deleted the adjustment made to the book profits by observing that under the provisions of Section 115JB of the Act, the Assessing Officer, while computing the income under the said Section, only has the power of the examining whether the books of account are certified by the authority under the Companies Act and have been properly maintained in accordance with the provisions of the Companies Act. The Assessing Officer thereafter has a limited power of making additions or reductions as provided for in the Explanation to the said section. The Assessing Officer does not have the jurisdiction to go behind the net profi....
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....g policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation.- 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 (1A), 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 whether 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) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which section 10 or section 10A or section 10B or section 11 or section 12 apply, if any amount referred to in clauses (a) to (f) is....
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....(Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or year under the provisions of sub-section (2) od section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of inc....
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....d that the Commissioner of Income-tax (Appeals) and the Tribunal by concurrent orders deleted the addition that the Appellant was not the owner of the asset and that the expenditure had been incurred to facilitate smooth conduct of the business. Also, the Apex Court in the Appellant's own case (Associated Cement Companies Ltd. (supra)) for the Assessment Year 1959-60 in respect of a similar expenditure at Shahabad had allowed the same as revenue expenditure. The relevant paragraphs of the said judgment giving the facts and reasons are as under:- "4. The assessee, the Associated Cement Companies Ltd. had a chain of factories manufacturing cement all over the country. The assessment year in question is the year 1959-60 and the corresponding previous year was ended on 31-7-1958. One of the factories of the assessee was situated at Shahabad, which is now in the State of Karnataka, but was at the relevant time forming part of the then State of Hyderabad. In September 1956, the Government of Hyderabad had decided to include the area on which the said factory at Shahabad was situated within the municipal limits of the Shahabad Town Municipality. A tripartite agreement between the....
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...., that it would not have to pay municipal taxes for a period of 15 years. On an appeal by the company, the AAC allowed the deduction holding that the amount was the payment of a composite sum of the revenue outgoing for the following 15 years. The revenue preferred an appeal to the Tribunal passed an order directing the ITO to scrutinize the expenditure and allowed the deduction of the expenditure to the extent that it did not result in the company becoming the owner of any asset. 6. Before the High Court it was contended on behalf of the company that the entire amount of Rs. 2,09,459 pertained to expenditure on pipelines installations and other accessories which under the agreement came to ownership of the Shahabad Town Municipality and did not pertain to any increase of the assets of the company. The Division Bench which decided the reference has pointed out that it had not been disputed by the revenue before the Tribunal that the entire expenditure concerned was laid out for the purpose of business and the only question was whether it was capital expenditure or revenue expenditure. The only ground on which the claim of the assessee for deduction of the said expenditure ....
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....ng nature acquired by an assessee that brings the case within the principles laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. In that case the appellant, a company carrying on the business of manufacture of jute, was a member of the Indian Jute Mills Association, which was formed with the objects, inter alia, of protecting the trade of its members, including imposing restrictive conditions on the conduct of the trade and adjusting the production of the mills of its members. A working time agreement was entered into between the members restricting the number of working hours per week for which the mills were entitled to work their looms. Cla....
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.... 136,749,257 3. Chanda, Maharashtra 173,119,321 4. New Wadi, Karnataka 352,788,814 5. Kymore, Madhya Pradesh 15,318,631 6. Gaga, Himachal Pradesh 76,876,446 Total 925,044,848 9. The Commissioner of Income-tax (Appeals) allowed the relief by placing reliance on the decisions in DCIT v. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum.) (SB) (under the normal provisions of the Act) and in ITO v Frigsales (India) Ltd (2005) 4 SOT 376 (Mum) (in computing book profits) and first appellate orders passed for Assessment Years 2001-02 and 2002-03. The Tribunal refused to interfere in the matter in view of the findings of the Commissioner of Income-tax (Appeals) and the orders passed in the Appellant's own case and in Shree Balaji Alloys v CIT (2011) 333 ITR 335 (J&K) and CIT v Shree Balaji Alloys (Civil Appeal No. 10061 of 2011). Before us, both the parties agree that the question as to the inclusion of the sales tax subsidy in computing the book profits have been admitted in the Appellant's own case for the Assessment Year 2002-03 by this Court in Income Tax Appeal No.1658 of 2016 vide order dated 4th March, 2019. However, the inclusion....
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....ins. These are all findings of facts. We fail to see that how does a question of law arise from this issue. The same is therefore not entertained. 11. Question (vi) relates to deletion of an addition in respect of provision for bad and doubtful debts of Rs.8,64,03,258/- in computing the book profits under section 115JB of the Act. The Commissioner of Income-tax (Appeals) deleted the addition inter alia following his own order in the Appellant's case for Assessment Year 2002-03. The Tribunal declined to interfere with the order of the Commissioner of Income-tax (Appeals). Before us, both the parties agree that the question as to the inclusion of the provision for bad and doubtful debts in computing the book profits under section 115JB of the Act have been admitted in the Appellant's own case for Assessment Year 2002-03 in Income Tax Appeal No.1658 of 2016 vide order dated 4th March, 2019. The appeal is therefore admitted on the aforesaid question of law. 12. Question (vii) relates to deletion of an addition in respect of expenditure of Rs.39,00,000/- incurred on construction of Jukehi Road at Kymore which belonged to the Government of Madhya Pradesh in computing the book profi....
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....ange, capital subsidy received towards purchase of assets and state capital investment received from W.B.I.D.C. for computation of Book profit under section 115JB of the Act. The Commissioner of Income - tax (Appeals) deleted the addition holding that the foreign exchange gain of Rs.37,07,480/- and capital subsidy received towards purchase of assets of Rs.1,13,605/- had been adjusted against the cost of the fixed assets in view of the provisions of Section 43A and Explanation 10 to Section 43(1) respectively. Further, State Capital Investment Subsidy received from WBIDC of Rs.26,90,000/- constituted capital receipt in the hands of the appellant, hence, not taxable and therefore the same could not be added back in computing book profit under Section 115JB of the Act. The Tribunal agreed with the findings of the Commissioner of Income-tax (Appeals). As the question deletion of the of addition of sales tax subsidy in computing the book profits under Section 115JB is admitted for the reasons set out in paragraphs 9 and 10 hereinabove [reframed question (iv)], the appeal is admitted on the aforesaid question of law also. 16. Question (xi) relates to the deletion of the provision for ....
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.... any appeals for the past years. Further, this issue has been considered by this Court in CIT v Echjay Forgings (P) Ltd (supra), the relevant paragraph of which is reproduced below- "(III) Whether the net profit was required to be increased by an amount of Rs. 5,00,000 being the provision for gratuity - 8. As stated above, no reasons have been given by the Assessing Officer for adding the said amount to the net profit. The assessee has made the provision for gratuity on the basis of actuarial calculations. Hence, it cannot be said that the provision for gratuity is not an ascertained liability." In that view of the matter no substantial question of law can said to arise on this issue. 21. Question (xiii) relates to exclusion of write back of excess provisions made in earlier years in computing book profits under Section 115JB of the Act. The Commissioner of Income-tax (Appeals) found that Mineral Right Tax and Cess on Coal and Limestone was written back in the assessment year which was created prior to 1.4.1997 and hence does not fall under the provisions of clause (i) of Explanation of Section 115JB(2). The Tribunal upheld the order of the Commissioner of Inco....