Law:

Section:

Section 115JB of the Income-tax Act, 1961 - Minimum alternate tax - Assessment year 2001-02 - Whether for purpose of computing book profit under section 115JB, amount withdrawn from revaluation reserve created after 1-4-1997, and credited to profit and loss account, is not to be reduced from net profit as per profit and loss account unless book profit had been increased by amount of reserve in year of creation of such reserve - Held, yes FACTS The assessee-company was engaged in the business of manufacture of, inter alia, yarn and polyester. For the relevant assessment year, it computed book profit under section 115JB after reducing the net profit by the amount withdrawn from the revaluation reserve created on revaluation of fixed assets. The Assessing Officer did not allow the said reduction on the ground that since the revaluation reserve had been created in the assessment year 2000-01 and had not been added back while computing book profit for that year, in terms of proviso to clause (i) of Explanation 1 to section 115JB, such reduction was not permissible. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer, holding that reduction from net profit in arriving at the book profit was not permissible in respect of withdrawal from any reserve created after 1-4-1997 and it could only be done if the book profit had been increased by the amount of reserve in the year of creation of such reserve. On appeal, the Tribunal upheld the order of the Commissioner (Appeals). On appeal to the High Court : HELD In fact, it was not disputed that the assessee took benefit of additional depreciation on account of revaluation of the fixed assets by increasing the revaluation reserve in the assessment year 2000-01 and, consequently, the same definitely had the effect of reducing the net profit for the said assessment year. Looking to the scheme of the provision of section 115JB, which is a Minimum Alternate Tax (MAT) provision and so introduced by the Legislature to be applicable to those companies which avoid paying tax by debiting in the profit and loss account, various expenses/entries, etc., as specified in section 115JB,Explanation 1, such as…

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