Capital receipt and book profit adjustment principles limit taxation under MAT when only statutory additions are permitted.

A receipt treated as capital in nature, rather than a trading receipt, is outside ordinary revenue income on the principles applied from Supreme Court authorities distinguishing capital recoveries from business receipts. On that footing, the amount was held not liable to tax as revenue income. In computing book profit under the MAT provision, only adjustments expressly authorised by Section 115JB can be made, and the Assessing Officer cannot recast audited accounts on a different view of profit. Because the receipt was capital in nature, it was not includible in book profit. The tribunal's view was upheld and the assessee succeeded on both issues.

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Issues: (i) Whether the amount received by the assessee was a capital receipt or a revenue receipt; (ii) Whether the amount was includible for computation of book profit under Section 115JB of the Income-tax Act, 1961.

Issue (i): Whether the amount received by the assessee was a capital receipt or a revenue receipt.

Analysis: The receipt was examined in the light of the Supreme Court authorities relied upon, which distinguish between amounts received for loss or surrender of a capital asset or source of income and amounts arising from ordinary business receipts. On that basis, the amount was held not to be a trading receipt but one received on the capital side.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the amount was includible for computation of book profit under Section 115JB of the Income-tax Act, 1961.

Analysis: The computation of book profit under the MAT provision was considered in the light of the settled principle that the Assessing Officer cannot go beyond the statutory adjustments specifically permitted by the provision and cannot recast the audited accounts on a different notion of correct profit. Since the amount was held to be capital in nature, it was not liable to be added to book profit.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Final Conclusion: The Tribunal's view was upheld, the assessee succeeded on both substantial questions of law, and the departmental appeal failed.

Ratio Decidendi: A receipt characterized as capital in nature cannot be treated as revenue income, and while computing book profit under the MAT provision, only the adjustments expressly authorized by the statute can be made.

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