2014 (9) TMI 1190 - AT - Income Tax

Tribunal partially allows appeal, directs AO to recompute income. Share of income from AOPs included in book profit.

Goldgerg Finance (P.) Ltd. Versus  Assistant Commissioner of Income-tax, Circle-3, Thane

Goldgerg Finance (P.) Ltd. Versus  Assistant Commissioner of Income-tax, Circle-3, Thane - [2015] 152 ITD 766 Issues Involved:1. Taxability of the assessee's share of income from two AOPs under Section 86.2. Inclusion of the share of income from AOPs in the book profit for the purpose of Section 115JB.Issue-wise Detailed Analysis:1. Taxability of the Assessee's Share of Income from Two AOPs under Section 86:The assessee, a member of two AOPs (Cosmos Estate and Cosmos Properties), claimed exemption on its share of income under Section 10(2A). However, during the assessment proceedings, the assessee clarified that the correct exemption should be under Section 86. The AO rejected this claim, arguing that since the AOPs claimed deductions under Section 80IB(10), the income was not exempt under Section 86. The AO taxed the assessee's share of income from the AOPs, except for a small amount of Rs. 24,066 from Cosmos Properties, which was considered exempt.The CIT(A) upheld the AO's decision, leading the assessee to appeal. The assessee argued that the share of income should be computed as per Section 67A, which prescribes the method for computing a member's share in the income of an AOP. The assessee contended that the maximum taxable amount should be Rs. 24,066, as determined by the AO, and that including the entire share of profit would result in double taxation.The tribunal found merit in the assessee's argument, noting that Section 67A should be applied to compute the share of income. It emphasized that the income of the AOPs, charged to tax in their own hands at the maximum marginal rate, should not be included in the assessee's total income. The tribunal set aside the lower authorities' orders and directed the AO to recompute the assessee's income as per Section 67A, considering the final determination of the AOPs' total income.2. Inclusion of the Share of Income from AOPs in the Book Profit for the Purpose of Section 115JB:The AO included the assessee's share of income from the AOPs in the book profit for calculating tax under Section 115JB. The assessee argued that this inclusion was incorrect, as the income had already been taxed in the hands of the AOPs. The tribunal, however, disagreed with the assessee, noting that the share of income was credited in the P&L account and formed part of the book profit.The tribunal referred to the definition of book profit under Section 115JB, which is the net profit shown in the P&L account, subject to specific adjustments. It observed that the adjustments listed in Explanation 1 to Section 115JB did not provide for the exclusion of the share of profit from AOPs. Since the P&L account, including the share of income from AOPs, was approved by the Board of Directors, the tribunal found no reason to exclude this income while computing book profit under Section 115JB.Conclusion:The tribunal allowed the appeal in part for statistical purposes, directing the AO to recompute the assessee's income as per Section 67A and Section 86. However, it upheld the inclusion of the share of income from AOPs in the book profit for the purpose of Section 115JB.