2020 (9) TMI 870 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on exempt income reduction under section 115JB

Income-tax Officer, Ward 5 (2), New Delhi. Versus Buniyad Developers Pvt. Ltd.

Income-tax Officer, Ward 5 (2), New Delhi. Versus Buniyad Developers Pvt. Ltd. - TMI Issues:Adding capital gains from the sale of agricultural land to compute book profit under section 115JB of the Income-tax Act, 1961.Analysis:The Revenue challenged an order regarding the addition of capital gains from the sale of agricultural land to compute book profit under section 115JB for the assessment year 2009-10. The Assessing Officer added the profits from the sale of land to the income, which the assessee claimed as exempt under section 10 of the Act. The CIT(A) allowed the assessee's contention, considering the land's location more than 8 Kms away from the Municipal limits. The CIT(A) directed the Assessing Officer to compute tax by reducing the exempt income from book profits as per section 115JB(2)(k)(ii) of the Act.The Revenue contended that the CIT(A) exceeded authority by granting relief when the assessee already offered the income for tax. However, the assessee argued that profits from the sale of agricultural land are exempt under section 10 and should be excluded from book profits under section 115JB. The Tribunal noted that the land sold was indeed exempt under section 10 and upheld the CIT(A)'s direction to reduce the exempt income from book profits.The Tribunal referred to the Supreme Court's decision in a similar case, emphasizing that mistakes in including exempt income in book profits should be rectified by Revenue Authorities. Therefore, the CIT(A)'s decision to direct the Assessing Officer to compute tax by reducing the exempt income from book profits was deemed legally justified. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s findings as legally sound and without merit.