By Ashok Dhere, Jagdish D. Shah, Chartered Accountants
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New Page 9
22 ACIT v. Vijay Furniture Mfg. Co. Pvt. Ltd.
ITAT ‘F’ Bench, Mumbai
Before Sushma Chawla (JM) and
Abraham P. George (AM)
ITA No. 7104/Mum./2005
A. Y. 2000-01. Decided on : 9-7-2008
Counsel for revenue/assessee : B. K. Singh/
Jayesh Dadia
S. 115JA of the Income-tax Act, 1961 — Capital gain earned
during the year was directly credited to capital reserve in balance sheet —
Whether AO justified in adding such gain to the book profit — Held, No.
Per Sushma Chawla :
Facts :
During the year under consideration the assessee had earned
capital gain of Rs.8.81 crore. In the accounts the said capital gain was
credited directly to the capital reserve in the balance sheet. The as-sessee had
claimed the capital gain as exempt u/s. 54E of the Act.
As per the accounts of the assessee, there was a book loss.
However as per the Assessing Officer, the capital gain was required to be
credited to the profit and loss account. Thus, according to him, there was a
book profit u/s.115JA. Applying the ratio of the Bombay High Court decision in
the case of Veekaylal Investment Co. Ltd., he assessed the income at Rs.2.66
crore, after adjusting the book loss disclosed in the Profit and Loss Account
against the capital gains.
The CIT(A), relying on the Apex Court decision in the case of
Appollo Tyres Ltd. and of the Mumbai High Court decision in the case of Kinetic
Motor Co. Ltd., held that the Assessing Officer had no power to recast the
profit disclosed in the audited accounts. Accordingly, the appeal filed by the
assessee was allowed.
Held :
The Tribunal relying on the decisions of the Apex Court in
the case of Appollo Tyres Ltd. and of the Mumbai High Court in the case of
Akshay Textile Trading & Agencies Pvt. Ltd. agreed with the CIT(A) and held that
the AO has no power to recast the profit once the same was certified by the
statutory auditors, and only those adjustments which are permitted by
Explanation to Ss.(2) of S. 115JA of the Act, can be made.
Cases referred to :
1. Appollo Tyres Ltd. v. CIT, 255 ITR 273 (SC)
2. CIT v. Akshay Textile Trading & Agencies Pvt. Ltd.,
203 Taxation 303 (Bom.)
3. Kinetic Motor Co. Ltd. v. DCIT, 262 ITR 330
(Mum.)
4. CIT v. Veekaylal Investment Co. Ltd., 249 ITR 330
(Bom.)
