AO cannot alter the profit declared in the Audited Account prepared under Companies Act for the purpose of sec. 115JB: Bombay HC [Read Judgment]

VAT Law - Telegana - Taxscan

In CIT v. M/s. Century Textiles and Industries Ltd., the division bench of the Bombay High Court held that the AO cannot alter the profit declared in the audited account prepared under the Companies Act for the purpose of section 115JB of Income Tax Act as laid down by the Apex Court.

The assessing officer completed assessment against the respondent –assessee by adding the arrears of depreciation for the Assessment Year 2000-01 and 2001- 02 to the audited book profits to determine the book profits for the purpose Section 115JB of the Act.The assessee maintained that its accounts had been prepared in accordance with the provisions of the Companies Act which were duly audited and the same cannot be altered to determine book profit for purpose of Section 115JB of the Act except as provided in the Explanation thereto. In support of their argument, the assessee relied upon the Apex Court decision in CIT vs.Apollo Tyres Ltd [255 ITR 273] wherein it has been stated that the book profit as prepared and certified in accordance with the provisions of the Companies Act.

Both the first and second appellate authorities allowed the claim of the assessee and therefore, the Revenue approached the High Court for relief.

The bench noted that the decision of the Tribunal was in view of the decision of Apollo Tyres Ltd (supra) the Assessing Officer has to accept the book profits arrived at in terms of the Companies Act, certified by the auditors and accepted at the General Meeting of the Company. The only adjustment to arrive at the book profits for the purposes of Section 115JB of the Income Tax Act is provided in the Explanation thereto.

Dismissing the contention, the division bench comprising of Justice M.S Sanklecha and Justice A.K Menon said, “the Revenue is unable to point out any flaw / error in the impugned order of the Tribunal. Nor is it in any position to state that any appeal from the order of the Tribunal for Assessment Year 2004- 05 has been filed. Although Mr. Toprani, learned Counsel for the Assessee states that an appeal has been filed but it is still awaiting admission. However, he is unable to give its regular number.”

It was noted that in the Apex Court decision cited above and in the decision of the Same Court in Kinetic Motor Co. Ltd, it was held that it is not permissible to the Assessing Officer to tinker with the profit declared in the audited account maintained in terms of Schedule VI of the Companies Act.

Read the full text of the Judgment below.

taxscan-loader