Section 115JB(2A)

Section 115JB(2A) — the law in short

What the courts have decided on section 115JB(2A), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ACIT v Reliance Industrial Investments and Holdings Ltd — a compound financial instrument needs a liability component before s.115JB(2C) bites ITATHelps taxpayerValidity unconfirmed
  On conversion to Ind AS our convertible debentures were parked under "other equity" and a note called them the equity component of a compound financial instrument. The Assessing Officer has treated the whole amount as transition amount and is adding one-fifth a year to book profit. Can he?
  Not if the instrument has no liability component. Ind AS 32 requires a compound financial instrument to have both a liability component and an equity component, and where the balance sheet shows the debentures as an instrument entirely equity in nature, they are not a compound financial instrument, are therefore no part of the transition amount defined in s.115JB(2C), and no one-fifth adjustment can be made.
• The India Cements Ltd v DCIT — what goes into the Ind-AS "transition amount" under s.115JB(2C) ITATHelps taxpayerValidity unconfirmed
  We converged to Ind AS in FY 2016-17 and claimed one-fifth of the transition reserve as a reduction from book profit. The Assessing Officer has knocked out three components. Which of them can he actually exclude?
  Only the six items expressly listed in sub-clauses (A) to (F) of clause (iii) of the Explanation to s.115JB(2C) come out of the transition amount. Everything else adjusted in other equity (other than capital reserve and securities premium reserve) on the convergence date stays in, and one-fifth of it goes into book profit — as a decrease as much as an increase — in the year of convergence and each of the following four previous years.
• ITD Cementation India Ltd v DCIT — an omitted Ind-AS reduction from book profit can still be claimed before the appellate authority ITATHelps taxpayerValidity unconfirmed
  We forgot to claim the one-fifth transition amount and the s.115JB(2A)(b) other-comprehensive-income reduction in the return. We raised it by letter during the assessment. The CIT(A) has thrown it out because no revised return was filed. Is that the end of it?
  No. The bar on entertaining a fresh claim without a revised return operates against the Assessing Officer, not against an appellate authority. Where the material was before the CIT(A) he should have examined it and granted the reduction from book profit if it was allowable, and the Tribunal restored the two Ind-AS claims to the Assessing Officer to be reconsidered on the revised Form 29B.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.