Tribunal directs Assessing Officer to adjust exempted interest income in book profit computation under sec. 115JB

The Tribunal allowed the appeal in part, directing the Assessing Officer to reduce the exempted interest income from the computation of book profit under sec. 115JB. The Tribunal emphasized the applicability of sec. 10(15)(i) for tax exemption on the interest income and instructed the AO to consider the revised form submitted by the assessee for accurate computation of book profit. The matter was remitted back to the AO for compliance with statutory formalities and to ensure a fair hearing process for the assessee.

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Issues involved: Appeal against order of ld. CIT(A) for A.Y. 2002-03, Ground no. 5 regarding tax free interest income u/s 10(15)(i) for MAT u/s 115JB.

Summary:

Issue 1: Ground no. 5 - Tax free interest income u/s 10(15)(i) for MAT u/s 115JB
The Tribunal recalled the appeal to decide on ground no. 5 raised by the assessee regarding the tax treatment of interest income of Rs. 72,98,52,500 under sec. 10(15)(i) for Minimum Alternate Tax (MAT) u/s 115JB. The Tribunal noted that the AO and CIT(A) had not allowed tax exemption on this interest income. However, in a previous order, the Tribunal had decided in favor of the assessee on a similar issue related to taxability of interest income on SLR Power Bonds. The Tribunal found that the income from bonds was exempted u/s 10(15)(i) and should be reduced from the computation of book profit as per clause 2 of Explanation 1 to sec. 115JB.

Issue 2: Compliance with statutory formality
The AO had disallowed the claim of the assessee due to a difference in interest computation and non-submission of revised form no. 29B. The assessee intended to submit the revised form as additional evidence, but the CIT(A) declined to admit it. The Tribunal held that reduction of the exempted income was permissible as per Explanation 1 to sec. 115JB. However, for completeness, the matter was remitted back to the AO to record the revised form no. 29B and compute the book profit accordingly, ensuring a fair hearing to the assessee.

The Tribunal partly allowed the appeal for statistical purposes, directing the AO to follow the observations and provide a reasonable opportunity of hearing to the assessee.

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