2008 (2) TMI 557

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....of law arising from the order under challenge are the following: "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the capital gains is part of the book profits under section 115J of the Income-tax Act, 1961? 2. Whether there were materials for the Appellate Tribunal to hold that even though section 115J is a deeming provision the long-term capital gain which itself is deemed income and which is saved by the operation of section 54E is liable to be included in the book profit under section 115J of the Act?" During the previous year relevant to the assessment year 1989-90, among other items, the appellant has substantial income of Rs. 26,03,245 being long-term ....

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....nsfer of capital assets and though chargeable to income-tax, the benefit of deduction/exemption available on investments made in specified assets in terms of section 54E of the Act, cannot be denied to the assessee even if assessment is made under section 115J of the Act. According to him, there is nothing in Chapter XII-B providing for disallowance of eligible exemption under section 54E of the Act on capital gains in the course of assessment based on book profit. 4. Learned senior counsel appearing for the Revenue, on the other hand contended that no deduction can be allowed in the computation of book profit except to the extent permissible under section 115J(1A) of the Act. We are unable to accept the contention of the assessee, becau....

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....der section 115J which does not provide for any deduction in terms of section 54E of the Act. The assessee has no case that the long-term capital gains are not profit not includible in the profit and loss account prepared in terms of Schedule VI to the Companies Act. Since there is no provision in Chapter Xll-B for deduction of capital gains in the computation of book profit, the assessee is not entitled to the deduction claimed. The Bombay High Court in the decision in CIT v. Veekaylal Investment Co. P. Ltd. [2001] 249 ITR 597 also took the view that capital gains is part of profit which cannot be excluded in the computation of book profit. Even though learned senior counsel for the assessee contended that the case decided by the Bombay Hi....