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of <h1>Court rulings on rent, repairs disallowance, book profit inclusion, and notional income taxability with interest charges.</h1> <h3>GKW Ltd. Versus Commissioner of Income-tax, West Bengal - IV</h3> GKW Ltd. Versus Commissioner of Income-tax, West Bengal - IV - [2012] 347 ITR 429 (Cal.) Issues Involved:1. Disallowance of rent and repairs referable to guest house under section 37(4).2. Taxability of notional figure of Rs. 228.34 lakh as income under section 28(iiia).3. Inclusion of profit on sale of fixed assets amounting to Rs. 6,02,91,024 in book profit under section 115JA.4. Applicability of advance tax provisions under section 115JA and charging of interest under section 234B.Issue-wise Detailed Analysis:1. Disallowance of Rent and Repairs Referable to Guest House under Section 37(4):Mr. Khaitan, the learned Senior Counsel for the appellant, conceded that this issue should be decided against his client in view of the Supreme Court decision in Britannia Industries Ltd. v. CIT [2005] 278 ITR 546/148 Taxman 468. Consequently, the Tribunal's decision to disallow rent and repairs and maintenance charges of the guest house is upheld.2. Taxability of Notional Figure of Rs. 228.34 Lakh as Income under Section 28(iiia):Mr. Khaitan argued that under section 28(iiia) of the Act, only the profits on the actual sale of a licence granted under the Imports (Control) Order, 1955, are chargeable to Income-tax, not a notional figure. The Tribunal erred in treating Rs. 228.34 lakh as income since it was a notional figure and not actual profit. The court found merit in this argument, noting that the legislature intended only actual profits from the sale of licenses to be taxable, unlike cash assistance or duty drawbacks under subsections (iiib) and (iiic), which are automatically chargeable to tax. The Tribunal's decision to treat the notional figure as income was thus a substantial error of law. The point is answered in favor of the assessee.3. Inclusion of Profit on Sale of Fixed Assets in Book Profit under Section 115JA:Section 115JA mandates that if an assessee's total income is less than thirty percent of its book profit, the total income chargeable to tax shall be deemed to be thirty percent of such book profit. The assessee must prepare its profit and loss account in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. This includes disclosing profits on the sale of fixed assets as non-recurring transactions. The court found that the profit on the sale of fixed assets amounting to Rs. 6,02,91,024 must form part of the book profit under section 115JA, agreeing with the Tribunal's decision.4. Applicability of Advance Tax Provisions and Charging of Interest under Section 234B:Mr. Khaitan conceded that this issue should also be decided against his client in view of the Supreme Court decision in Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 549/9 Taxman.com 36 (SC). Consequently, the Tribunal's decision to uphold the charging of interest under section 234B is affirmed.Conclusion:The appeal is allowed in part. The point regarding the taxability of the notional figure of Rs. 228.34 lakh is decided in favor of the assessee. The points concerning the disallowance of guest house expenses, inclusion of profit on the sale of fixed assets in book profit, and applicability of advance tax provisions are decided against the assessee. There will be no order as to costs.
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