From the fact, it is apparent that querist is a company and therefore no Alternate Minimum Tax (AMT) would be applicable. For the companies Minimum Alternate Tax (MAT) would be applicable u/s. 115JB of the Act.
So while calculating “book profit” under Explanation 1 to section 115JB(1), the agricultural income falling u/s. 10(1) to be excluded as per Explanation (ii)
||Assessee changed its method of providing depreciation from ‘Straight Line Method (SLM) to “Written Down Value (WDV) during the year under consideration which resulted into shortfall in depreciation. Such shortfall was charged to P & L Account. AO disallowed claim of such additional depreciation on the count that Sec. 205 of the Companies Act does not entitled an assessee to claim depreciation for earlier years placing reliance on “McDowell and Co. v. CTO – 154 ITR 148”. Whether the change in method of accounting for depreciation was in accordance with Accounting Standards issued under the Companies Act? Whether AO has jurisdiction to go behind the “book profits” shown in P & L Account except to the extent of prescribed adjustments once it is found that books of accounts are certified by authorities under the Companies Act? What is the treatment of income on account of change in the method of depreciation? What is the treatment of additional claim / write back of depreciation in the books of account upon change in the method calculating the same?
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||CA. H. N. Motiwalla
||Book profit - AO has no jurisdiction to change book profit
The assessee has changed method depreciation from SLM to WDV and shortfall (deficiency) is charged to profit and loss account as per accounting standard. Thus prepared accounts is per schedule VI of the Companies Act, 1956 (i.e. schedule III of the Companies Act, 2013) and certified by the authorities under the Companies Act. Therefore the Assessing Officer has no jurisdiction to go behind the “book profit” shown in P & L account except to the extent of prescribed adjustment mentioned under section 115JB of the Income tax Act, 1961. As per the Supreme Court in Apollo Tyres Ltd. v. CIT [255 ITR 273], while interpreting similar provision under section 115J of the Act.
CIT v. Tulsyan NEC Ltd. [330 ITR 227], the Supreme Court held that the fact that the amount of credit to be allowed or to be set off is not frozen and is ambulatory does not take away / destroy the right of the assessee to the amount of tax credit.
It would mean such income would be taxed on standalone basis, so as to be taxable even in the hands of the person, whose aggregate income including such income falling under the provisions falls below taxable limit.
Therefore, irrespective of the “head” under which it is assessable such income would be taxed at flat rate of 60%.
Deduction in respect of profits and gains from housing projects under section 80-IBA of the Income-tax Act, 1961 has been inserted by the Finance Act, 2016, with effective from April 1, 2017 i.e. from assessment year 2017-18.
Section 80C provides that an assessee, being an Individual or HUF shall be allowed a deduction from gross total income of an amount not exceeding Rs. 1,50,000/- in respect of amount paid or deposited in the previous year in the specified savings listed in section 80C(2) of the Act. One of amount for which a policy holder is entitled for deduction is amount deposited to effect or to keep in force an insurance on the life of the policy holder. However, as per section 80C(3A) only premium paid on insurance policy which is not in excess of 10% of the actual capital sum assured, is allowable for deduction.
As per the Bombay High Court in Ramanlal Kacharulal Tejmal [146 ITR 368] excess stock found represents investment of the assessee in property and therefore same can be assessed under section 69 of the Act.