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DATE: August 19, 2015 (Date of pronouncement)
DATE: August 22, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 115JB: (i) Even if an amount is credited to the P&L A/c, the assessee can seek exclusion of that amount for purposes of “book profits” if a note to that effect is inserted in the A/cs (ii) The exemption conferred by S. 115JB to sums exempt u/s 10 should be extended to all sums which are not chargeable to tax

The profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit., i.e., the Net profit disclosed in the Profit and Loss account should be reduced by the amount of profit arising on transfer of capital asset and the amount so arrived at shall be taken as “Net profit as shown in the profit and loss account” for the purpose of computation of book profit under Explanation 1 to sec. 115JB of the Act. Alternatively, since the said profit does not fall under the definition of “income” at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act

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DATE: August 12, 2015 (Date of pronouncement)
DATE: August 22, 2015 (Date of publication)
AY: 2004-05
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CITATION:
S. 115JB: Dept’s grievance that if amount is not credited to P&L A/c, accounts are not correctly prepared as per Schedule VI to the Companies Act, 1956 and adjustment to book profits can be made is not acceptable if auditors and ROC have not found fault with A/cs

The Assessing Officer does not have power to embark upon the fresh enquiry with regard to the entries made in the books of accounts of the Company when the accounts of an assessee Company is prepared in terms of Part II Schedule VI of the Companies Act scrutinized and certified by the statutory auditors, approved by the Company in general meeting and thereafter filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. If the grievance of the revenue is to be accepted, then the conclusiveness of accounts prepared and audited in terms of Section 115JB of the Companies Act would be set at naught

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DATE: August 14, 2015 (Date of pronouncement)
DATE: August 22, 2015 (Date of publication)
AY: 2007-08
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S. 115JB: Amount towards waiver of loan under OTSS, credited to "General Reserves" and not to the P&L Account cannot be added to "book profits"

Assessing Officer has not specified categorically that as to how the Part II & III of Schedule VI has not been followed or is against the prescribed accounting standard there is a requirement of law that waiver of loan taken for utilizing capital expansion is to be routed only through profit and loss account and cannot be credited to the ‘General Reserve’, i.e. directly in the Balance sheet

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 29, 2015 (Date of publication)
AY: 1999-00
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CITATION:
S. 28(va)/ 115JA: non-compete consideration received prior to insertion of s. 28(va) is not taxable. Amount credited to reserves without a corresponding debit to the P&L A/c cannot be added to the "book profits"

To invoke clause (b) of the Explanation below Section 115JB (identical to Section 115JA) of the Act, two conditions must be satisfied cumulatively viz. there must be a debit of the amount to the Profit and loss account and the amount so debited must be carried to Reserves. Admitted position in this case is that there is no debit to the Profit and loss account of the amount of Reserves. The impugned order has in view of the self evident position taken a view that in the absence of the amount being debited to Profit and Loss account and taken directly to the reserve account in the balance sheet, the book profits as declared under the Profit and Loss account cannot be tampered with

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DATE: June 10, 2015 (Date of pronouncement)
DATE: June 22, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 115JB: In computing the "book profits" the entire capital gains have to be included without computing the benefits of indexation

The book profits as contemplated in section 115JB means the net profit, which has been shown/credited in the profit & loss account as prepared under the relevant provisions of the Companies Act. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself

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DATE: March 11, 2015 (Date of pronouncement)
DATE: March 23, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Companies, if authorized by the MoA & AoA, are competent to make and receive gifts. Natural love and affection is a not necessary requirement for a gift. The gift is neither taxable as income s. 56 (pre-amendment) nor as capital gain nor as income u/s.2(22)(e) nor u/s.115JB

Three elements are essential in determining whether or not a gift has been made, a) delivery. b) donative intent,’ and c) acceptance by the donee. Companies are competent to make and receive gifts and natural love and affection are not necessary requirement. Only requirement for company is to make gifts as per respective memorandum and article of association, which authorize the company for the same

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DATE: February 11, 2015 (Date of pronouncement)
DATE: February 16, 2015 (Date of publication)
AY: 2006-07, 2007-08
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S. 115JB: Distinction between "reserve" & "provision" explained. Statutory reserve created u/s 45-IC of RBI Act is not a "diversion of income at source" and cannot be excluded from book profits

Diversion of income at source by way of overriding title as a principle is applicable when under a statutory or contractual obligation or under the provisions of Memorandum and Articles of Association, the earning is divested and the assessed has no title over a particular receipt. When such charge exists, the amount or income so charged must be excluded from income of the assessed as income never reaches his hands and in fact belongs to a third person. Thus, the income stands diverted at source. Diversion of income at source implies that income or the amount mentioned therein belongs to a third party and was not income of the assesse

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DATE: October 17, 2014 (Date of pronouncement)
DATE: October 24, 2014 (Date of publication)
AY: 2008-09
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CITATION:
Various arguments on the applicability of s. 14A & Rule 8D where the AO has not recorded satisfaction, where the shares are held in strategic/ subsidiary companies, held as stock-in-trade, where there are surplus funds and the quantum of disallowance under Explanation (f) to s. 115JA/ 115JB considered

(i) When it is said that rule 8D is mandatory (i.e., AY 2008-09 onwards), all that is meant is where the said expenditure cannot be reasonably ascertained with reference to the assessee’s accounts, toward which the AO is to issue …

HSBC Invest Direct (India) Ltd vs. DCIT (ITAT Mumbai) Read More »

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DATE: October 17, 2014 (Date of pronouncement)
DATE: October 21, 2014 (Date of publication)
AY: 2005-06
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CITATION:
S. 115JB: AO entitled to tinker with P&L A/c if assessee's claim not permitted by accounting principles

The question that had arisen was whether the Assessing officer was entitled to disturb the net profit shown by the assessee in the profit and loss account prepared as per the Companies Act, 1956.in order to enable anybody to understand …

Padinjarekara Agencies Pvt. Ltd vs. ACIT (ITAT Cochin) Read More »

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DATE: September 30, 2014 (Date of pronouncement)
DATE: October 12, 2014 (Date of publication)
AY: 2004-05
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CITATION:
S. 115JB: Cost of use of land amortized in books cannot be added back for computing book profits

This is a land taken for use from the State government without transferring the title for relief and rehabilitation for land evacuees because of submerges and where construction of such alternative facility is a condition for setting up a project. …

ACIT vs. NHPC Ltd (ITAT Delhi) Read More »