TaxTMI 
TaxTMI 
2011 (7) TMI 86
X X X X Extracts X X X X
X X X X Extracts X X X X
....8 for which the relevant previous year was financial year ended on 31-3-1997. (b) The appellant carries on business of manufacture of alloy free cuttings and special sheets, black and bright bars, electrical stampings, laminations, strip wound cores, bolts and nuts, rivets and spikes for special purpose machinery etc. (c) One M/s. Powmex Steel Limited was merged with the appellant with effect from 1-10-1995 and become a division of the appellant. (d) Exports were made by the said division under the Advance Licence Scheme of the Government in terms of which raw materials required for the export of high-speed steels could be imported duty-free. Under the said scheme, it was permissible to procure the raw materials for the export product from the local market and subsequently, import the raw materials duty-free on the basis of Advance License granted by the Government. (e) The benefit of making import without payment of customs duty accrues, according to the appellant, only at the time of actual import and if the domestic price of the raw materials is lower than that of the landed cost of the imported materials, it would not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Accordingly, the said amount was claimed as a deduction from the profits as per profit and loss account. (k) In the computation of book profit under section 115JA of the Act, the appellant claimed that the profit of Rs. 6,02,91,024 credited to the profit and loss account on account of disposal of fixed assets did not form part of the book profits for the purposes of the said section. (l) In the order dated 31-3-2000 passed under section 143(3) of the Act, the Assessing Officer treated the sum of Rs. 228.34 lakh as the appellant's income on the ground that the appellant had itself shown the same as such in its books of account. The Assessing Officer in computing the book profits under section 115JA did not exclude the sum of Rs. 6,02,91,024 on account of profit on sale of fixed assets on the ground that the Department had preferred an appeal before this Hon'ble Court against the order dated 14-7-1999 of the Tribunal. In the said order, the Assessing Officer also considered rent of Rs. 1.32 lakh and repairs and maintenance of Rs. 2,43,131 in respect of guest house for the purpose of disallowance under section 37(4) of the Act. (m) Bei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment year 1997-98? (sic)." 6. Mr. Khaitan, the learned Senior Counsel appearing on behalf of the appellant, at the very outset, has fairly conceded before us that so far the point No. (i) is concerned, in view of the decision of the Supreme Court in the case Britannia Industries Ltd. v. CIT [2005] 278 ITR 546/148 Taxman 468, the said point should be decided against his client by answering the same in the affirmative. Similarly, according to Mr. Khaitan, so far the point No. (iv) is concerned, in view of the Supreme Court decision in the case Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470/196 Taxman 549/9 Taxman.com 36 (SC), the aforesaid point should also be answered against his client in the affirmative. 7. Mr. Khaitan has, therefore, restricted his submissions to the point Nos. (ii) and (iii) as indicated above. 8. As regards the point No. (ii) is concerned, Mr. Khaitan contended that as provided in section 28 (iiia) of the Act, it is the profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) which is chargeable to Income-tax but not a notional figure given in the accounts which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of India; (iiic) any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971; (iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992); (iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992); (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; (v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm: Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... meaning assigned to it in clause (10-D) of section 10; (vii) any sum, whether received or receivable, in cash or kind, on account of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35-AD;] Explanation 1.--[Omitted by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988) with effect from 1-4-1989. Explanation 2.--Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business." [Emphasis supplied]. 10A. If we compare the language employed in sub-section (iiia) with which we are concerned in the present case with the next two sub-sections, i.e., (iiib) and (iiic) as indicated above, it will appear that while in case of sub-section (iiia), it is the profit on actual sale of licence that will be chargeable to tax but in the cases covered by sub-sections (iiib) or (iiic), cash assistance (by whatever name called) received or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... did not come within the purview of section 28(iiia) of the Act when the license had not been sold and no profit had come in the hand of the appellant. 14. We, therefore, answer the point No. (ii) in favour of the assessee and in the affirmative. 15. As regards the point No. (iii) formulated by the Division Bench, in order to appreciate the said question, it would be profitable to refer to the provisions contained in section 115JA of the Act which is quoted below: "115JA. Deemed income relating to certain companies.--(1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 [but before the 1st day of April, 2001] (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (2) Every assessee, being a company, shall, for the purpose....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1997 3[but ending before the 1st day of April, 2001] shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.--For the purposes of this clause,-- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation, is nil; or (iv) the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or (v) the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in sub-section (4....