ACMEVAC PUMPS & ENGG. PVT. LTD., THANE V. ACIT - 2(1)(1), MUMBAI

ITA 5155/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3749 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Keywords: Capital asset
• Section: 143(3); 142(1); 115JB

Judgement Text

1 ITA 5155/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5155/MUM/2017 (ASSESSMENT YEAR: 2012-13) ACMEVAC PUMPS & ENGG PVT LTD, 15-16, R.K.INDUSTRIES ESTATE, BEHIND VOLVO, OPP BANJARA DHABA, SURVEY NO.148, GATE NO.3, MALJI PADA, VASAI (E) THANE 401 208 PAN : AACCA4547R VS ASST.COMMISSIONER OF INCOME-TAX- 2(1)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI HIRO RAI RESPONDENT BY SHRI VIRENDER SINGH DATE OF HEARING 14-06-2018 DATE OF PRONOUNCEMENT 10-08-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE CIT(A)-4, MUMBAI DATED 23-05-2016 AND IT PERTAINS T O AY 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER ON IRRELEVANT AND INCONSEQUENTIAL GROUNDS BY HOLDING T HAT THE PAYMENTS MADE TO FORMER TENANTS, M/S. BALKRISHNA PUJARI OF RS. 40,50 ,0007- AND M/S. INSTAVAC ENGG. PVT. LTD. FOR OBTAINING VACANT POSSESSION OF THE PROPERTY BELONGING TO THE APPELLANT WAS NOT A PERMISSIBLE DEDUCTION ALLOW ABLE IN COMPUTATION OF CAPITAL GAINS AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SECTION 48(1) OF THE INCOME-T AX ACT. 2 ITA 5155/MUM/2016 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER ON AN ERRONEOUS PREMISE BY HOLDING THAT THE APPELLANT HAD NOT PREPARED ITS PROFIT AND LOSS ACCOUNT AS PER PART II AND PART TIT OF THE SCH EDULE VI OF THE COMPANIES ACT, 1956 AND THEREFORE, INCOME FROM CAPITAL GAINS SHOULD BE INCLUDED FOR THE PURPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115 J OF THE INCOME-TAX ACT. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER ON E OR MORE GROUNDS OF APPEAL AT THE TIME OF HEARING OF THE APPEAL PETITIO N. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF VACUUM PU MPS, FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 28-09-2012 DECLA RING TOTAL INCOME OF RS.2,16,64,470. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPO NSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAILS, AS CALLED FOR. THE ASSESSMENT H AS BEEN COMPLETED U/S 143(3) ON 16-03-2015 DETERMINING TOTAL INCOME AT RS .3,37,14,470 UNDER NORMAL PROVISIONS OF THE INCOME-TAX ACT, BY MAKING ADDITION TOWARDS DISALLOWANCE OF COMPENSATION PAID TO ILLEGAL OCCUPA NTS OF PREMISES OF RS.1,20,50,000. THE AO ALSO RECOMPUTED BOOK PROFIT U/S 115JB OF THE ACT, BY MAKING ADJUSTMENTS TOWARDS PROFITS EARNED F ROM TRANSFER OF PROPERTY OF RS.3,86,18,988 DIRECTLY CREDITED TO THE CAPITAL RESERVE ACCOUNT IN THE BALANCE-SHEET WITHOUT ROUTING IT THR OUGH P&L ACCOUNT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A), BUT COULD NOT SUCCEED IN HIS ATTEMPT AS THE LD.CIT(A) HAS DIS MISSED APPEAL FILED BY THE ASSESSEE AND UPHELD ADDITION MADE BY THE AO TOWARDS COMPENSATION PAID TO ILLEGAL OCCUPANTS OF PREMISES AND ADJUSTMENTS TO BOOK PROFIT COMPUTED U/S 115JB OF THE ACT FOR THE D ETAILED REASONS RECORDED IN HIS APPELLATE ORDER DATED 23-03-2016. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFOR E US. 3. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF 3 ITA 5155/MUM/2016 COMPENSATION PAID TO TENANTS OCCUPYING THE LAND AND BUILDING FOR RS.1,20,50,000. THE FACTS WITH REGARD TO THE IMPUG NED DISPUTE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS TRANSFERRED LAND AND BUILDING AND COMPUTED LONG TERM CAPITAL GAIN. IT IS NOTED FROM THE COMPUTATION OF LONG TERM CAPITAL GAIN THAT THE ASSE SSEE HAS CLAIMED COMPENSATION OF RS.1,20,50,000 STATED TO BE PAID FO R REMOVING ILLEGAL OCCUPANTS. THE ASSESSEE CLAIMS TO HAVE PAID COMPEN SATION OF RS.80 LAKHS TO M/S INSTAVAC ENGG PVT LTD TO VACATE THE OC CUPATION OF THE PREMISES. THE ASSESSEE ALSO CLAIMS TO HAVE PAID A SUM OF RS.40 LAKHS TO ONE MR. BALKRISHNA T POOJARI, THE TENANT FOR TER MINATION OF AGREEMENT AND VACATING THE SAID PREMISE. THE AO DISALLOWED C OMPENSATION CLAIMED BY THE ASSESSEE AS EXPENSES INCURRED EXCLUS IVELY FOR TRANSFER OF PROPERTY ON THE GROUND THAT THE SAID TWO OCCUPANTS HAVE ILLEGALLY OCCUPIED THE PREMISES AND HENCE, ANY COMPENSATION P AID TO REMOVE ILLEGAL OCCUPATION IS INADMISSIBLE AS DEDUCTION WHI LE COMPUTING CAPITAL GAINS. THE AO HAS TAKEN SUPPORT FROM THE DECISION OF ITAT, MUMBAI IN THE CASE OF ITO VS NARENDRA S KAPADIA (1996) 58 ITR 329. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LO WER AUTHORITIES WERE FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPE CTIVE IN THE LIGHT OF EVIDENCES FILED BY THE ASSESSEE TO PROVE PAYMENT OF COMPENSATION TO TWO TENANTS, WHO OCCUPIED THE BUILDING TO HAND OVER VACANT POSSESSION OF THE PROPERTY TO THE BUYERS, IN SPITE OF THE FACT THAT THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS INCLUDING MEMORANDUM OF UNDERSTANDING BETWEEN THE PARTIES TO AGREE FOR PAYMENT OF COMPENS ATION AND VACATING THE PREMISES, DECLARATION-CUM-INDEMNITY BOND GIVEN BY TWO TENANTS TO HAND OVER VACANT POSSESSION OF THE PROPERTY TO THE ASSESSEE AND ALSO ORDER OF THE CIVIL JUDGE, THANE IN CIVIL SUIT NO.22 4 OF 2004 WHERE BOTH THE PARTIES AGREED AND FILED A COMPROMISE PETITION BEFORE THE COURT TO 4 ITA 5155/MUM/2016 SETTLE THE DISPUTE. THE LD.AR FOR THE ASSESSEE FUR THER REFERRING TO THE COPY OF AGREEMENT FOR SALE ENTERED INTO BETWEEN THE ASSESSEE AND THE PAYMENTS SUBMITTED THAT AS PER THE AGREEMENT FOR SA LE, THE FACT THAT THERE IS A DISPUTE IN THE PROPERTY BY WAY OF CIVIL SUIT BEFORE THE COURT IS RECORDED. THE ASSESSEE ALSO FILED VARIOUS EVIDENCE S BEFORE THE AO INCLUDING PAYMENT OF COMPENSATION BY ACCOUNT PAYEE CHEQUES AND OTHER DETAILS. THE AO HAS DISALLOWED COMPENSATION PAID FOR TENANTS FOR VACATING THE PREMISES ONLY ON THE GROUND THAT THE S AID COMPENSATION HAS BEEN PAID FOR PREMATURE TERMINATION OF TENANCY AGREEMENT BUT NOT FOR VACATING ILLEGAL OCCUPATION OF PREMISES. THE L D.AR FURTHER REFERRING TO VARIOUS CASE LAWS INCLUDING THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS A VENKATARAMAN & ORS 13 7 ITR 846 HELD THAT ANY PAYMENTS MADE TO THE TENANTS TO OBTAIN VAC ANT POSSESSION WAS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH TRANSFER OF PROPERTY AND HENCE, ALLOWABLE AS DEDUCTION. IN THIS CONNECTION, HE HAS RELIED UPON THE FOLLOWING JUDGEMENTS:- 137 ITR 846 (MAD) CIT V A VENKATARAMAN & ORS. 160 ITR 840 (DEL) CIT V SHANKUNTALA RAJESHWAR 234 ITR 95 (AP) NAOZAR CHENOY V CIT 359 ITR 644 (MAD) CIT V SPENCERS AND CO. LTD 242 ITR 582 (BOM) CIT V MISS PIROJA C PATEL 205 TAXMAN 449 (DEL) CIT V EAGLE THEATRES 298 ITR 268 (KAR) MRS. JUNE PERRETT V ITO 87 TTJ 273 (MUM-TRIB) KETAN BOLONJKAR V ACIT 35 ITD 285 (MUM-TRIB) CHIMANLAL PAPER CO. P LTD. V I TO 5. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.DR SUBMITTED THAT THE LOWER AUTH ORITIES HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT COMPENSATION PAI D BY THE ASSESSEE IS NOT FOR VACATING ILLEGAL OCCUPATION OF PREMISE, BUT FOR PREMATURE TERMINATION OF LEAVE AND LICENCE AGREEMENT AND HEN CE, THE SAME CANNOT BE CONSIDERED AS COMPENSATION PAID FOR GETTI NG VACANT 5 ITA 5155/MUM/2016 POSSESSION OF THE PROPERTY FROM THE TENANTS. THE L D.DR FURTHER SUBMITTED THAT THE LD.CIT(A) HAS DISCUSSED THE ISSU E AT LENGTH IN THE LIGHT OF VARIOUS CASE LAWS AS PER WHICH THE CLAIM O F THE ASSESSEE THAT IT HAS PAID COMPENSATION TO GET PROPERTY VACATED FROM TENANTS IS NOT SUPPORTED BY ANY EVIDENCE. THE ASSESSEE, EXCEPT FU RNISHING CERTAIN SELF SERVING DOCUMENTS IN THE FORM OF DECLARATION C UM INDEMNITY BOND AND MOU BETWEEN PARTIES, FAILED TO EXPLAIN HOW AMOU NT PAID FOR PREMATURE TERMINATION OF LEAVE AND LICENCE AGREEMEN T COMES WITHIN THE MEANING OF COMPENSATION PAID FOR VACATING ILLEGAL O CCUPANTS OF THE PREMISES. THEREFORE, THE LOWER AUTHORITIES WERE RI GHT IN DISALLOWING COMPENSATION PAID BY THE ASSESSEE AND THEIR ORDER S HOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AO HAS DISALLOWED COMPENSATION CLAI MED TO HAVE PAID TO TWO TENANTS, M/S INSTAVAC ENGG. PVT LTD AND SHRI BALKRISHNA T POOJARI, PROP OF RUPA HOTEL OF RS.1,20,50,000 ON THE GROUND THAT THE SAID AMOUNT IS NOT ALLOWABLE AS DEDUCTION WHILE COMPUTIN G CAPITAL GAIN FROM TRANSFER OF PROPERTY. THE ASSESSEE HAS FILED VARIO US DOCUMENTS INCLUDING DECLARATION CUM INDEMNITY BOND, MOU ENTER ED INTO BETWEEN THE PARTIES ALONGWITH ORDER OF THE CIVIL COURT, THA NE IN A COMPROMISE PETITION FILED BY THE ASSESSEE ALONGWITH ONE OF THE TENANTS, SHRI BALKRISHNA T POOJARI. INSOFAR AS THE ANOTHER TENAN T, M/S INSTAVAC ENGG. PVT LTD, THE ASSESSEE HAS FILED AFFIDAVIT CUM INDE MINITY BOND. ON PERUSAL OF ALL DOCUMENTS FILED BY THE ASSESSEE, WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE SAID PARTI ES ARE OCCUPYING THE PREMISES ON LEAVE AND LICENCE BASIS. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS TERMINATED LEAVE AND LICENCE AGREEMENT BEFORE COMPLETION OF THE TERM OF AGREEMENT FOR WHICH IT HA S PAID COMPENSATION. IT IS ALSO AN ADMITTED FACT THAT THERE IS A DISPUTE BETWEEN THE TENANTS AND 6 ITA 5155/MUM/2016 THE ASSESSEE AND SUCH DISPUTE HAS BEEN PENDING BEFO RE THE CIVIL COURT OF THANE. ALL THESE EVIDENCES GO TO PROVE AN UNDIS PUTED FACT THAT THE TWO TENANTS HAVE OCCUPIED THE PREMISES FOR WHICH TH E ASSESSEE HAS PAID COMPENSATION TO GET VACANT POSSESSION OF THE P ROPERTY TO BE HANDED OVER TO THE PURCHASERS. WHETHER SAID COMPEN SATION HAS BEEN PAID FOR GETTING VACANT POSSESSION FROM ILLEGAL OCC UPANTS FROM THE TENANTS, WHO OCCUPY THE BUILDING DOES NOT MATTER AS LONG AS THE ASSESSEE HAS PAID COMPENSATION FOR GETTING VACANT P OSSESSION OF THE PREMISES. IN THIS CASE, ON PERUSAL OF FACTS AVAILA BLE ON RECORD, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE HAS PAID COMPENS ATION TO TWO TENANTS FOR GETTING VACANT POSSESSION OF THE PROPER TY. ONCE THE ASSESSEE HAS PAID COMPENSATION FOR GETTING VACANT P OSSESSION OF THE PROPERTY FROM THE TENANTS, THEN THE SAID COMPENSATI ON IS ALLOWABLE AS DEDUCTION WHILE COMPUTING CAPITAL GAINS FROM TRANSF ER OF PROPERTY. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS A VENKATARAMAN & ORS (SUPRA) WHE RE IT WAS CATEGORICALLY HELD THAT THE PAYMENT MADE TO THE TEN ANTS TO OBTAIN VACANT POSSESSION WAS AN EXPENDITURE INCURRED WHOLLY AND E XCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY AND THE SAID A MOUNT WAS DEDUCTIBLE AS AN EXPENDITURE. THIS LEGAL PROPOSITION IS FURTH ER SUPPORTED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF MRS JUNE PERRETT VS ITO (2008) 298 ITR 268 (KAR) WHEREIN IT WAS HELD THAT EXPENDITURE INCURRED FOR VACATING ILLEGAL TENANT IS DEDUCTIBLE AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH TRANSFER OF PROPERTY WHILE COMPUTING CAPITAL GAINS. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS EAGLE THEATERS (2012) 205 TA XMAN.449 HAS TAKEN A SIMILAR VIEW AND HELD THAT AMOUNT PAID TO THE TEN ANTS FOR VACATING THE PREMISES FOR FACILITATING THE SALE OF BUILDING IS R EQUIRED TO BE DEDUCTED IN 7 ITA 5155/MUM/2016 COMPUTING CAPITAL GAIN OF THE BUILDING SOLD AS INCU RRED SOLELY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND RESPECTFULLY FOLLOWING THE CASE LAWS DISCUSSED ABOV E, WE ARE OF THE CONSIDERED VIEW THAT COMPENSATION PAID BY THE ASSES SEE TO TWO TENANTS FOR GETTING VACANT POSSESSION OF THE PROPERTY IS DE DUCTIBLE AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH TRANSFER OF THE PROPERTY WHILE COMPUTING CAPITAL GAINS. THE REFORE, WE DIRECT THE AO TO ALLOW COMPENSATION PAID BY THE ASSESSEE AS AN EXPENDITURE OF TRANSFER WHILE COMPUTING CAPITAL GAIN FROM TRANSFER OF PROPERTY. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS COMPUTATION OF BOOK PROFIT U/S 115JB OF THE INCOME-TAX ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS RE-COMPUTED BOO K PROFIT U/S 115JB OF THE INCOME-TAX ACT, 1961 IN RESPECT OF CAP ITAL GAIN DERIVED FROM SALE OF PROPERTY OF RS.3,86,18,988 WHICH WAS D IRECTLY CREDITED TO RESERVES AND SURPLUS ACCOUNT IN THE BALANCE SHEET W ITHOUT ROUTING IT THROUGH P&L ACCOUNT. ACCORDING TO THE AO, THE ASSE SSEE HAS NOT PREPARED ITS FINANCIAL STATEMENTS IN ACCORDANCE WIT H PARTS II & III OF SCHEDULE VI OF COMPANIES ACT, 1956 AND HENCE, THE SAME CAN BE RECOMPUTED TO ARRIVE AT CORRECT BOOK PROFIT U/S 115 JB OF THE ACT. THE AO HAS TAKEN SUPPORT FROM THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS VEEKAYLAL INVESTMENTS CO PVT LTD (2001) 249 ITR 597 (BOM). IT IS THE CONTENTION OF THE ASSESSEE TH AT ONCE BOOKS OF ACCOUNT ARE PREPARED IN ACCORDANCE WITH PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND CERTIFIED BY THE AUDIT ORS AND APPROVED BY THE BOARD OF DIRECTORS, THEN THERE IS NO SCOPE FOR THE AO TO MAKE ADJUSTMENTS TO BOOK PROFIT EXCEPT AS PROVIDED UNDER EXPLANATION 1 TO SECTION 115JB. IN SUPPORT OF ITS ARGUMENTS, ASSESS EE HAS RELIED UPON 8 ITA 5155/MUM/2016 THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F APOLLO TYRES LTD VS CIT 255 ITR 273 (SC). THE ASSESSEE ALSO RELIED UPO N THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS AKS HAY TEXTILE TRADING & AGENCIES PVT LTD 304 ITR 401 (BOM). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE FACT WITH REGARD TO THE IMPUGNED DI SPUTE ARE THAT THE ASSESSEE HAS CREDITED PROFIT DERIVED FROM TRANSFER OF PROPERTY TO THE RESERVES & SURPLUS ACCOUNT IN THE BALANCE-SHEET WIT HOUT ROUTING IT THROUGH P&L ACCOUNT. THE AO HAS RECOMPUTED BOOK P ROFIT U/S 115JB OF THE ACT, ON THE GROUND THAT THE FINANCIAL STATEM ENTS PREPARED BY THE ASSESSEE ARE NOT IN ACCORDANCE WITH PARTS II AND II I OF SCHEDULES VI TO THE COMPANIES ACT, 1956. THE AO FURTHER OBSERVED THAT THE ASSESSEE OUGHT TO HAVE CREDITED PROFIT DERIVED FROM TRANSFER OF PROPERTY IN THE P&L ACCOUNT, BUT DIRECTLY CREDITED TO RESERVES & SURPLU S ACCOUNT IN THE BALANCE-SHEET WITHOUT ROUTING IT THROUGH P&L ACCOUN T AND HENCE, IT CANNOT BE CONSIDERED THAT THE FINANCIAL STATEMENT O F THE ASSESSEE ARE IN ACCORDANCE WITH PARTS II AND III OF SCHEDULES VI TO THE COMPANIES ACT, 1956. THE ASSESSEE CLAIMS THAT THE FINANCIAL STATE MENT OF THE ASSESSEE ARE PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULES VI TO THE COMPANIES ACT, 1956 AND CERTIFIED BY THE AUDITORS AND APPROVED BY THE BOARD OF DIRECTORS, THEREFORE, THERE IS NO SCOPE FO R THE AO TO MAKE ADJUSTMENTS TOWARDS BOOK PROFIT U/S 115JB, EXCEPT A S PROVIDED UNDER EXPLANATION 1 TO SECTION 115JB OF THE INCOME-TAX AC T, 1961. 10. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL ON RECORD, WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD VS CIT (SUPRA) HAS CONSIDERED THE ISSUE IN THE LIGHT O F PROVISIONS OF SECTION 115JB OF THE INCOME-TAX ACT, 1961 AND PARTS II AND III OF SCHEDULES VI TO THE COMPANIES ACT, 1956 AND HELD THAT THE AO DOES NOT HAVE THE 9 ITA 5155/MUM/2016 JURISDICTION TO GO BEYOND THE NET PROFIT SHOWN IN T HE P&L ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATIONS. THE US E OF THE WORDS, IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULES VI TO THE COMPANIES ACT, 1956, IN SECTION 115J WAS MADE FO R THE LIMITED PURPOSE OF EMPOWERING THE AO TO RELY UPON AUTHENTIC STATEMENT OF THE ACCOUNTS OF THE COMPANY. WHILE SO, LOOKING INTO TH E ACCOUNTS OF THE COMPANY, THE AO HAS TO ACCEPT THE AUTHENTICITY OF T HE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT, WHICH OBLIGATE THE COMPANY TO MAINTAIN ITS BOOKS OF ACCOUNT IN A MANNE R PROVIDED BY THAT ACT, AND SAME TO BE SCRUTINIZED AND CERTIFIED BY TH E STATUTORY AUDITORS AND APPROVED BY THE COMPANY IN GENERAL MEETING AND THEREAFTER TO BE FILED BEFORE THE REGISTRAR OF COMPANIES, WHO HAS A STATUTORY OBLIGATION TO EXAMINE AND BE SATISFIED WITH THE ACCOUNTS OF TH E COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF T HE COMPANIES ACT. THE AFORESAID OBSERVATIONS OF THE APEX COURT CONCLU DES THE ISSUE BY HOLDING THAT THE AO DOES NOT HAVE A POWER TO EMBARK UPON THE FRESH ENQUIRY WITH REGARD TO THE ENTRIES MADE IN THE BOOK S OF ACCOUNT OF THE COMPANY, WHEN THE ACCOUNTS OF THE ASSESSEE COMPANY IS PREPARED IN TERMS OF PARTS II AND III OF SCHEDULES VI TO THE CO MPANIES ACT, 1956. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS BHAGWAN INDUSTRIES LTD 255 ITR 273 ( BOM) WHERE THE ISSUE INVOLVED IS PROFIT DERIVED FROM TRANSFER OF L AND CREDITED TO CAPITAL RESERVE ACCOUNT IN THE BALANCE-SHEET RATHER THAN RO UTING IT THROUGH P & L ACCOUNT IN THE MANNER PROVIDED AS PER PARTS II AND III OF SCHEDULES VI TO THE COMPANIES ACT, 1956. THE HONBLE BOMBAY HIGH COURT, AFTER CONSIDERING THE DECISION RENDERED BY THE HONBLE AP EX COURT IN THE CASE OF APOLLO TYRES VS CIT (SUPRA) AND THE JUDGMENT IN THE CASE OF CIT VS AKSHAY TEXTILE TRADING & AGENCIES PVT LTD (SUPRA) H ELD THAT THERE IS NO 10 ITA 5155/MUM/2016 SCOPE FOR THE AO TO RECAST P&L ACCOUNT ONCE THE ACC OUNTS HAVE BEEN PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULES VI TO THE COMPANIES ACT, 1956. THUS, THE ISSUE OF RCOMPUTAT ION OF BOOK PROFIT U/S 115JB IS NO LONGER RES INTEGRA AS THE SAID DISP UTE HAS BEEN RESOLVED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF APOLLO TYRES VS CIT (SUPRA) AS WELL AS THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS BHAGWAN INDUSTRIES LTD (SUPRA). THO UGH, THE EARLIER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS VEEKAYLAL INVESTMENTS CO PVT LTD (SUPRA) ON WHICH THE REVENUE HAS PLACED ITS RELIANCE, WE FIND THAT THE SUBSEQUENT JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT HAS FOLLOWED THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF APOLLO TYRES LTD VS CIT (SUPRA). THEREFORE , WE ARE OF THE CONSIDERED VIEW THAT THE LATEST JUDGEMENT RENDERED BY THE HONBLE BOMBAY HIGH COURT PREVAILS OVER THE EARLIER JUDGMEN T RENDERED BY THE SAME HIGH COURT. THEREFORE, BY FOLLOWING THE LATES T JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BHA GWAN INDUSTRIES LTD (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS INCORRECT IN RECOMPUTING BOOK PROFIT TO MAKE ADJUSTMENTS TOWARDS CAPITAL GAIN DERIVED FROM TRANSFER OF PROPERTY. HENCE, WE DIREC T THE AO TO DELETE ADJUSTMENTS MADE TOWARDS LONG TERM CAPITAL GAIN DERIVED FROM SALE OF PROPERTY TO THE BOOK PROFIT COMPUTED U/S 115JB OF T HE INCOME-TAX ACT, 1961. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2018. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 10 TH AUGUST, 2018 PK/- 11 ITA 5155/MUM/2016 COPY TO : 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT(A) 4. CIT 5. DR/TRUE COPY/ /TRUE COPY/ SR.PRIVATE SECRETARY, ITAT, MUMBAI