Whether diminution in the value of investment is eligible for deduction while computing book profit u/s 115JB?
Calcutta High Court in the case of PCIT-2, Kolkata Vs Balmer Lawrie and Company Limited was concerned with the issue as to whether prior period expenditure can be claimed as an expenditure in the year in which the liability crystallises? Further issue was whether diminution in the value of investment is eligible for deduction while computing book profit u/s 115JB of the Act?
The Division bench of Calcutta High Court in this case was considering department’s appeal whether any substantial question of law arose when the assessee had claimed Rs 4.08 crore as prior period expenditure on account of same having crystallised during the year though it related to earlier years and also claimed diminution in the value of investment amounting to Rs 11.82 crores u/s 115JB of the Act on account of investment in a company which turned sick.
The Ld Judges after considering the facts of the case and decisions cited held that the tribunal correctly allowed the claim of deduction on account of prior period expenditure as it crystallised during the year.
Further, the claim on account of diminution in the value of investment was held to have been correctly allowed as it could not have been said to be provision for unascertained liability.
Thus, department’s appeal was dismissed as no substantial question of law arose.
The copy of the order is as under: