Book profit

Computation — Book profit is to be computed with reference to each assessment year —as held by HydTrib in Singareni Collieries Company Ltd v ACIT — In favour of: The Revenue (Partly) ; ITA Nos. 490/H/2007 : Assessment Year 2000–2001

Decided on: 31 March 2011

Computation — Sick Company — Profits earned by a company during period of sickness are to not be excluded from ambit of book profit of non-sick years.

While computing the book profit in any assessment year during the period of sickness, if there is any book profit in that assessment year that book profit has to be deducted from the net profit shown in the profit and loss account of the assessee.

Prior period expenditure — Prior period expenditure is not deductible from the net profit while computing both under normal computation and under s 115JA and 115JB.

Bad debt — Provision for bad and doubtful debt is provisions made for a probable diminution of the value of an asset and are not includible in book profit.

Interest under s 234B and 234C — Interest is chargeable under s 234B and 234C on failure to pay advance tax in respect of tax payable under s 115JA/JB.

Interest under s 234B — Interest under s 234B is to be charged after allowing adjustment of MAT credit under s 115JA/JB.

Deduction under s 35E — If there is income from commercial exploitation, the expenditure will be allowed to the extent of it becomes ‘Nil’.

Revision — When the facts demand an enquiry into a veracity of the claim and the assessment has been concluded without such an enquiry, order can be said to be prejudicial to the interests of revenue within the meaning of s 263.

Business Expenditure — Prospecting expenditure in the mining sector is specifically provided under s 35E and cannot be allowed under s 37.

Business expenditure — Matter remitted to AO to examined the issue whether the expenditure incurred on plantation resulted in creation of current asset/trading asset and basis for valuation of such asset.