TaxTMI 
TaxTMI 
2014 (1) TMI 866
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5. Any other ground that may be urged at the time of hearing of appeal. 3. The Assessee filed return of income for AY 2002-03 on 31.10.2002 admitting a total income of Rs. !,98,86,905/-. This was processed u/s 143(1) on 5.2.2003. Subsequently AO noticed that that there was escapement of income and issued notice u/s 148 for reopening the Assessment. The AO observed that the assessee company had not furnished any computation of Book Profit as per sec.115JB and accordingly, the assessee company was asked to file computation of income u/s.115JB of the Act. The appellant company vide its reply dated 7.11.06 stated that the reply had already been filed in response to the notice u/s.154 and contended that there was no computation u/s.115JB since the said provision is not applicable in their case. It was also stated by the appellant that the financial statements were prepared combining the assets and liabilities, income and expenditure of jointly controlled entities of (1) BSE, RBM PATI Joint Venture and (2) M/s.BSE/C&E Joint Venture on line-by-line basis which is in contravention of the provisions of Companies Act, 1956. Therefore, the provision of Sec.115JB are not applicable and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of profit from the firms (which firms are separately assessed to tax) so as to arrive at the book profit for the purpose of computing taxable income right from the year of getting share from the joint venture i.e. from AY 2000-01 onwards. In course of the assessment proceedings for the AY 2000-01, while issuing the notice u/s.142 and 143(2) the assessee was asked information with regard to the MAT and the assessee vide its letter dt.20.11.2002 had explained in detail the applicability of MAT. After thoroughly examining the contention and explanation of the assessee in regard to applicability of MAT u/s.155 JB and after satisfying himself with the explanation during the hearing, the AO completed the assessment u/s.143(3) without invoking the provision of sec.115JB. Similarly for the AY 2001-02 the AO had raised the same issue and the assessee vide its letter dt.20.11.02 and contented and explained in regard to nonapplicability of MAT provisions as was explained for the AY 2000-01. The AO again completed the assessment u/s.143(3) without invoking the provision of sec.115JB vide order dated 27.2.2003. Even for the AY under appeal, the assessment was originally completed u/s.143(1) wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oint venture profits would amount to double taxation. He also cited various decisions where it was held that the method of accounting consistently followed cannot be rejected. He has referred to the decision of Mumbai Bench ITO Vs. Frigsales (India) Pvt Ltd (4 SOT 376) wherein it has been held that receipt which is not in the nature of income cannot be assessed to tax. Hence, the CIT(A) held that the book profit computed by the AO without reducing the share of income of joint venture is not proper and justified. On the basis of method of accounting followed by the assessee consistently and therefore directed the AO to reduce the share of joint venture while computing the book profit. 8. Aggrieved the revenue is in appeal before us. 9. We have heard both the parties and perused the record as well as gone through the orders of the authorities below. The main contention of the assessee before the lower authorities appears to be that the assessee company has been disclosing its share in joint ventures while preparing its annual accounts and the same is being mentioned in the annual accounts in the notes to the accounts. It is also stated by the assessee that financial statements were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts into the books of the company has resulted in the net profit of Rs.11,09,10,108/- from Joint ventures which forms part of the profit & loss of Rs.13,74,21,107/- computed in the P&L account of the assessee company. 12. The next issue to be considered is whether such profits from the Joint Ventures should be excluded in computing the Book Profits for the purpose of sec 115JB. No doubt this share of profits from the Joint ventures may not taxable in the computing the taxable income under the normal provision of Income Tax Act by the virtue of application of Sec.86 of the Income Tax Act, whether by virtue of such non taxability of the share of income from Joint Ventures , the same should be excluded while computing Book profits also. 13. Sec 115JB reads as under: Special provision for payment of tax by certain companies. 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on 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, 2012, is less than 82eigh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Explanation [1].-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called , other than a reserve specified under section 33AC; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or amounts of expenditure relatable to any income to which 88[section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or] (g) the amount of depreciation, (h) the amount....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; (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) to (vi)..... (vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 171 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lanation to sec 115JB. None of the explanations provided for exclusion of share of profits from AOP on which tax is not payable by the memebrs of AOP. The share of income from an AOP is includible in the hands of the members of the AOP for taxation u/s 67A of the Act. But as per sec 86 of the Act, if the conditions stipulated therein are satisfied, then income tax shall not be payable by the Assessee in respect of his share of income of the Association of Person. 16. By sec 86, an assessee is exempted from paying tax on his share of income from AOP; but the share of income from AOP is not excluded from his total income as is done under sec 10. Under Explanation (ii) to sec 115JB the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the profit and loss account should be excluded from the Book profits. But the share profits of the AOP is exempt under sec 86 Of the Act and not under sec10, 11 or 12 of the Act. Hence the share of income from AOP, which has been credited to the P&L account of the Assessee cannot be excluded from Book profits unle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in view of explanation (ii) to sec.115JB. But the share of profits from AOP, which may be exempt from taxation in the hands of the members by the virtue of sec 86, cannot be excluded while computing the Book profits of the members of AOP, under any of the explanations u/s 115JB. 19. In this context the decision of the Special Bench 'B' Hyderabad in the case of Rain Commodities Limited vs. DCIT, Circle 3(1), Hyderabad (40 SOT 265) (Hyd) (SB) wherein the Tribunal has held as follows: "Thus, from a reading of the section 115JB as well as analyses of various High Courts and Supreme Court decisions, the inescapable conclusion is that the book profits have to be calculated on the net profits computed as per Parts II and III of Schedule VI to the Companies Act, 1956 and as adjusted by the amounts mentioned in the Explanation. No further rebates or deductions after such adjustments, notwithstanding the fact whether any income is taxable or not under the normal provisions of the Income Tax Act. Computation of income under the normal provisions and the book profits are two parallel computations. While normally followed method of accounting in the books may also be taken for....