Book profit under section 115JB cannot include gain from sale of agricultural land treated as capital receipt.

Profit from the sale of agricultural land was treated as a capital receipt outside the charge of capital gains under the regular provisions, because agricultural land is excluded from the definition of capital asset. The Tribunal also stated that Chapter XII-B operates only as an alternate method for computing book profit and does not enlarge the scope of total income under sections 4 and 5. Applying its earlier view on the same question and the CBDT circular relied on by the first appellate authority, it held that the amount could not be brought into book-profit computation under section 115JB, and the addition was deleted.

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Issues: Whether profit arising from the sale of agricultural land, which is not a capital asset, can be included in the computation of book profit under section 115JB of the Income-tax Act, 1961.

Analysis: The profit on transfer of agricultural land was held to be outside the charge of capital gains under the regular provisions, since agricultural land is excluded from the definition of capital asset. The Tribunal followed its earlier decision on the same question and treated the receipt as a capital receipt not liable to tax under the normal computation provisions. It was also held that Chapter XII-B provides only an alternate method of computing book profit and does not enlarge the scope of total income under sections 4 and 5. On that basis, and in view of the CBDT circular relied on by the first appellate authority, the addition could not be sustained in the book-profit computation.

Conclusion: The inclusion of the profit from sale of agricultural land in book profit under section 115JB was not justified and was deleted.

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