Law:

Section:

Section 115JB of the Income-tax Act, 1961 - Minimum alternate tax - Assessment year 2001-02 - Whether in terms of clause (i) of Explanation to section 115JB(2) it is only if reserves created had gone to increase book profits in any year when provisions of section 115JB were applicable, that assessee would be entitled to reduce amount withdrawn from such reserves if such withdrawal is credited to profit and loss account - Held, yes - Whether for that purpose amount withdrawn from any reserve must, in effect, impact net profit as shown in profit and loss account and unless an adjustment has effect of increasing net profit as shown in profit and loss account, that entry cannot be said to be a credit to profit and loss account - Held, yes - Fixed assets of assessee-company were revalued in assessment year 2000-01 and amount of enhancement in valuation was credited to revaluation reserve - Figure of profit remained untouched in that year so far as revaluation of assets was concerned - During relevant assessment year, certain amount being differential depreciation, was transferred out of said revaluation reserve and was credited to profit and loss account which Assessing Officer disallowed by placing reliance on proviso to clause (i) of Explanation to section 115JB(2) - Whether since amount of revaluation reserve had not gone to increase book profits at time it was created, benefit of reduction was rightly denied to assessee - Held, yes FACTS The assessee-company was engaged in the business of manufacture of yarn and polyester. During the previous year ending 31-3-2000 relevant to the assessment year 2000-01, its fixed assets were revalued resulting in increase in the net book value of such assets by Rs. 2,88,58,19,000 which was credited to the revaluation reserve. Consequently, the balance sheet for that assessment year resulted in enhancement of cost of fixed assets by the said amount with corresponding credit to revaluation reserve. For the previous year ending 31-3-2001, relevant to the assessment year 2001-02, the profit and loss account showed the charge of depreciation at Rs. 1,27,57,06,000 which was reduced by transfer from revaluation reserve to the extent…

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