Law:

Section:

Section 115(J) of the Income-tax Act, 1961 - Zero tax companies Book profit under section 115J cannot be increased by TDS on dividend income debited to dividend account and not debited to profit and loss account in accordance with provisions of Parts II and III of Schedule VI of Companies Act Section 115J, more particularly the Explanation permits increases of the amounts specified in clauses (a) to (f) provided any such amount is debited to the profit and loss account. The Assessing Officer has the limited power of making increases or reductions as provided for in the Explanation and does not have jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J. Hence, it is not possible to agree with the view that the book profit under section 115J is required to be increased by the TDS when admittedly the said amount is not debited to the profit and loss account in accordance with provisions of Parts II and III of Schedule VI to the Companies Act, but is debited to the dividend account. Manish J. Shah for the Assessee. Manish R. Bhatt for the Commissioner. JUDGMENT (Oral judgment) D. A. Mehta, J.-The Income-tax Appellate Tribunal, Ahmedabad Bench-C has referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961 (the Act), at the instance of the assessee. "Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the book profit under section 115J is to be increased by the tax deducted at source of Rs. 5,73,451 in spite of the fact that the same is not debited to the profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act ?" The assessment year is 1988-89, the relevant accounting period being the financial year ended on March 31, 1988. The assessee a limited company filed return of income on February 6, 1989, declaring taxable income of Rs. 2,35,379 under section 115J of the Act. The Assessing Officer did not accept the book profit worked out by the assessee under section 115J of the Act and added the sum of Rs. 5,73,451 to the book…

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