May 2008
S. 115JB — Extra-ordinary items in profit and loss a/c to be deducted for MAT
By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
Reading Time 2 mins
fiogf49gjkf0d
New Page 1
18 (2008) 111 ITD 124 (Hyd.)
Gulf Oil Corporation Ltd. v. ACIT,
Circle-1(4), Hyderabad
A.Y. 2002-2003. Dated : 21-9-2006
S. 115 JB — Extra-ordinary items appearing in profit and loss
a/c to be deducted in computing MAT liability.
The assessee company returned a loss of Rs.34.27 crores.
Provisions of S. 115JB were attracted. The as-sessee had shown two
extra-ordinary items — credit of write-offs/provisions : Rs.3.06 lacs and debit
of Advisory fee for sale of investments : Rs.109.96 lacs — in the P & L A/c. It
was contended by the Revenue that these items are generally classified as part
of P & L Appropriation A/c and hence should be ignored while computing MAT
liability. The assessee computed MAT liability on Rs.978.55 lacs, whereas the
Revenue contended that it should be on Rs.1085.45 lacs. (Ignoring the two referred above).
The learned CIT(A) confirmed the addition, on the ground that
the above items pertain to previous year. The Tribunal allowed the appeal and
referred to the following :
(a) Part-II and Part-III of Schedule VI does not make any
distinction between P & L A/c and P & L Appropriation A/c. It is a manner of
presentation.
(b) Generally, P & L Appropriation A/c includes items of
extra-ordinary nature, dividend, etc. However, as per schedule VI to Companies
Act, 1956, all these items form part of P & L A/c.
(c) The starting point for computing book profits should be
Profit & Loss A/c carried to balance sheet. From this amount, the various
adjustments (additions and deductions) as stated in S. 115 JB should be made.
Explanation to S. 115 JB does not provide for increase/decrease of
extra-ordinary items.
(d) AS-5 merely states that prior period expenses and
extra-ordinary items should be shown separately to know their impact on
operating results. It does not say that these items do not form part of P & L
A/c.
Cases referred :
(i) Apollo Tyres Ltd. v. CIT, (2002) 255 ITR 273
(ii) Bastar Wood Products Ltd. v. Dy. CIT, (1995) 78
Taxman 126
(iii) NSC Estates (P) Ltd. v. Dy. CIT, (2002) 125
Taxman 220
