NATIONAL HYDROELECTRIC POWER CORPN.LTD. vs COMMR.OF INCOME TAX

The Supreme Court addressed the accounting treatment of Advance Against Depreciation (AAD) under Section 115JB of the Income-tax Act, 1961. The Court held that since AAD is deducted from sales and does not constitute a debit in the profit and loss account, it cannot be classified as a reserve under clause (b) of Explanation-I to Section 115JB. Consequently, the Court ruled in favor of the assessee, stating that the AAD should not be added back to the book profit for tax computation purposes.