TaxTMI 
TaxTMI 
2018 (4) TMI 1757
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..... The grounds of appeal raised by assessee are reproduced hereunder:- "1. That on the facts and in the circumstances of the case, the disallowance and / or denial of different claims and / or relief made by the Learned Commissioner of Income Tax (Appeals) ''Ld. CIT(A)'] has been grossly unjustified, erroneous and unsustainable and necessary direction be given for appropriate relief in accordance with law. 2(a) That on the facts and in the circumstances of the case, Ld. CIT(A) was not justified rather grossly erred in not allowing deduction in respect of leave encashment of Rs. 13,780,734 claimed on provision basis. 2(b) That on the facts and in the circumstances of the case and without prejudice to ground No.2(a) taken here in above, in the unlikely event the claim made by the Appellant is disallowed, then necessary direction may please be given to the Learned Assessing Officer ('Ld Assessing Officer') to allow deduction for leave encashment on payment basis in the relevant years(s). 3. That on the facts and in the circumstances of the case, Ld. CIT(A) was not justified rather grossly erred in not allowing exclusion of sales tax incenti....
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..... Union of India 292 ITR 470 (Cal), however, AO disregarded the contention of assessee by observing that the judgment of Hon'ble jurisdictional High Court in the case of Exide Industries (supra) was stayed by Hon'ble Supreme Court. Accordingly, AO disallowed the same and added to the total income of assessee. 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee submitted before Ld. CIT(A) that the liability on account of leave encashment has accrued to it, therefore, same should be allowed as deduction. The assessee before Ld. CIT(A) relied on the several judgments of Hon'ble Supreme Court and Hon'ble High Courts. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- "Decision: It is found that provision for leave encashment is specifically covered by clause (f) of section 43B and deduction for the same can be allowed only on payment basis. Further, the Apex Court vide its Interim order dated 08-09- 2008 and 08-05-2009 against the order of Exide Industries Ltd. (Supra) has allowed the operation of section 43B(f) to continue until further order. Further the issue has....
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.... Hon'ble ITAT, Kolkata in the case of ITO, Wd- 3(1), Asansol vs MGB Transport in ITA No. 2280/Kol/2011, which incidentally is related to disallowance u/s 40(a)(ia) of the Act. Generally speaking it is true, that stay of an order of lower court affects only the parties of the concerned suit and the stay does not necessarily mean that ratio of the order of lower court does not remain in force. However, the issue under consideration in the case of Exide Industries Ltd. (supra) was the very legality of section 43B(f). Therefore, the stay of Hon'ble High Court order has wider ramification and its scope is not limited only to the parties to the suit. Therefore, the order of High Court in the case of Exide Industries Ltd. (supra) is at present not operational. Rather, the provision of section 43B(f) is to be considered to be in force in view of interim order of Hon'bte Supreme Court. Considering this legal position, with due respect to Hon'ble High Court, I am following the interim order of Hon'ble Supreme Court. In view of the same and the facts mentioned in the assessment order, the disallowance of Rs. 1,37,80,734/- made by the AO is confirmed. Hence, ground no. 4 ta....
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....vestment subsidy for Rs.39,870,574/- and Rs.59,75,000/- respectively while computing the book profit u/s 115JB of the Act. 10. During the year, assessee declared profit after taxes in its profit and loss account for Rs.45,55,43,545/- only. The assessee while determining the book profit u/s.115JB of the Act has reduced following receipts:- Sl.No Particulars Amount 1 Sales tax remission since capital in nature 3,98,70,574/- 2 State capital subsidy since capital in nature 59,75,000/- The assessee claimed that the above receipts are not taxable in the hands of assessee under the normal provision of computation of income. Therefore, same are also eligible for deduction u/s 115JB of the Act. The assessee also submitted that sales tax remission and state capital subsidy was received by it under the West Bengal Incentive Scheme, 2000, which was given to it to achieve industrialization of backward areas as well as to generate employment opportunities. However, the AO observed that there is no provision under the Income Tax Act for allowing deduction on account of capital receipt under the provision of Sec. 115JB of the Act. Accordingly, AO ....
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....it and loss account of the assessee prepared under the Companies Act. As per the audited accounts of the assessee, the statutory auditors have reported that, that in their opinion, the profit and loss account and the balance sheet are in compliance with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, and further reported that the balance sheet and profit and loss account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted. The appellant has contended that an item without any element of profit or income ,when credited to the profit and loss account prepared under Part-2 & Part III of Schedule IV of the Companies Act, 1956, lays down that' P& L should be made to closely disclose the "working" of the company. Since, in the present case, the subsidy has been credited to P& L a/c, in order to work out the real profit of the company u/s 115JB said amount needs to be deducted, following the decision of the Hon'ble Supreme Court in Apollo Tyres (2002) 255 ITR 273 (SC) rw Indo Rama Synthetics (I) Lt....
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.... presented before the shareholders and the A.O has held that the same should also be included in computing Book Profits under section 115JB. It is well settled that the adjustments to the profit and loss account of the company can be carried out only in accordance with the provisions set out in the Explanation to section 115J. This is in view of the definition of 'book profit' as given in the Explanation to section 115JB, the net profit as shown in the profit and loss account, in the relevant previous year, can only be adjusted i.e., increased or reduced, as the case may be, by reference to heads referred in clauses (a) to (ha) and clauses (i) to (iv) of the Explanation to section 115JB. It is found from findings of fact on record that the assessee admittedly, had itself credited the amounts of S.T subsidy and state investment subsidy to the profit and loss account which was duly certified by the auditors ,in view thereof the A.O correctly held that no adjustment could be made subsequently for computation of MAT profits by reducing the impugned receipts from the 'book profit' for the purpose of 115JB of the Act. It is the case of the assessee that ....
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.... in the case of Frigsales (India) Ltd. (2005) 4 SOT 376 (MUM) has not applied the ratio of the decision of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT[2002] 255 ITR 273/122 Taxman 562. But the fact remains that the propositions laid down by the hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) have been reiterated and relied upon by the Supreme Court in the case of CIT v. HCL Comnet Systems & Services Ltd. [2008] 305 ITR 409/174 Taxman 118 which has been rendered in the context of section 115JA of the Act. As per sub-section (5) of section 115JB of the Act, which reads as "save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section". Having regard to expression "save as otherwise provided in this section" used in this sub-section (5) of section 115JB of the Act, we are of the considered opinion that the expression "save as otherwise provided in this section 115JB" clearly means that what is provided in section 115JB should be religiously followed and anything over and above the matter provided in section 115JB will be subject to other provisions of the Act. The ....
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....ted for preparation of P&L a/c laid before the annual general meeting. Except for the above two cases, the AO has no power to alter the net profit shown by the companies for the purpose of computing the book profit. Thus, it is clear that under MAT, the Assessing Officer should take the net profit as computed by the assessee and then make the adjustments under sec. 115JB. The moot question that needs to be decided is whether Parts IT and II of Sch. VI to the Companies Act permit the exclusion of the capital gain from the P&L Account or not? In other words, can a P&L A/c drawn up without considering the capital gain said to be in accordance with the provisions of Parts II and II of Sch. VI to the Companies Act or not?" It was accordingly held that in the absence of any provision for exclusion of exempted capital gain in the computation of book profit under the provisions contained in Explanation to section 115JB of the Act, the assessee is not entitled to the exclusion thereof as claimed. Thus, the argument that impugned capital receipts are to be reduced from the net profit shown in the profit and loss account prepared under the Companies Act for the purpose of computing b....
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.... interpretation is to transform the concept of chargeability which is also there in Section 9(1) (i), particularly when one reads Section 9(1)(i) with Section 5(2) (b) of the Act. What is contended on behalf of the Revenue is that under Section 9(1) (i) it can "look through" the transfer of shares of a foreign company holding shares in an Indian company and treat the transfer of shares of the foreign company as equivalent to the transfer of the shares of the Indian company on the premise that Section 9(1)(i) covers direct and indirect transfers of capital assets" ... The language of the section is unambiguous and there is no doubt regarding its interpretation particularly when there is specific mechanism provided in sec.115JB, which is a code in itself for computation of deemed income of MAT companies. The exclusion of the impugned capital receipts sought by the appellant is not tenable by giving purposive interpretation particularly since such interpretation is to transform the concept of Book profit for the purpose of section 115JB of the Act. On the contrary, the sections which impose the charge or levy, should be strictly construed and this position though was reiterat....
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.... came in second appeal before us. 12. Ld. AR for the assessee submitted that the co-ordinate Bench of this Tribunal in the case of Sicpa India (P) Ltd./ vs. DCIT (2017) 80 taxmann.com 87 (Kolkat-Trib) after considering the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (20102) 255 ITR 273/122 taxman 562 has decided the issue in favour of assessee. The ld. AR in support of assessee's claim also relied on the judgment of Hon'ble Supreme Court in the case of CIT vs.Chaphal Kar Brothers, Pune reported in 400 ITR 279 (SC). He requested the Bench to decide the issue on merit. On the other hand, Ld. DR supported the order of Authorities Below. 13. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. From the foregoing discussion, we note that subsidy was given by the Govt. of West Bengal for the purpose of enabling the entrepreneurs to establish new industry and also expand the existing industries. Under normal computation of income the subsidy given to promote the industries are not subject to tax, therefore, an it....
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....t, 1956 and make additions or subtraction as is given in the explanation to Sec.115JB(2) of the Act. 23. We have already seen that the issue whether subsidies in question can be regarded as income at all is no longer res integra and has been concluded by the Hon'ble Jammu & Kashmir High Court in the case of Balaji Alloys (supra). In the aforesaid decision the Hon'ble J & K High Court on identical facts held that excise duty subsidy and interest subsidy were capital receipts not chargeable to tax. In view of the aforesaid decision of the Hon'ble High Court rendered on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24. When a receipt is not in the character of income, can it form part of the book profits for the purpose of Sec.115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Dy. CIT v. Binani Industries Ltd. [2016] 178 TTJ 658 : had to deal with a case where the question was as to whether receipts on account of forfeiture of share warrants amounting to Rs. 12,65,75,000/-, being a capital receipt, would be liab....
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....n which the income in question was taxable but was exempt under a specific provision of the Act and but for the exemption, the income would be chargeable to tax and such items of income should also be included as part of the book profits. But where a receipt is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H. Sugar Factory Ltd. (supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture (P.) Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary company which is not treated as income" u/s 2(24) of the Act and since it does not form part of the total income u/s.10 of the Act and therefore does not enter into computation provision at all under the normal provisions of the Act, the same should be considered for the p....
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....nation of book profits u/s.115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue." Similarly, we further find that Hon'ble Supreme Court in the case of Chaphas Kar Brother Pune (supra) has decided the issue in favour of assessee. The relevant extract is reproduced below:- "27. Since the subsidy scheme in the West Bengal case is similar to the scheme in the Maharashtra case being to encourage development of Multiplex Theatre Complexes which are capital intensive in nature, and since the subsidy scheme in that case is also similar to the Maharashtra cases, in that the amount of entertainment tax collected was to be retained by the new Multiplex Theatre Complexes for a period not exceeding four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case." The undisputed fact is that the incentive received by assessee is not in the nature of income earned during the course of business. Therefore, in our considered view, same cannot be regarded as "income" for the purpose of MAT u/s 115JB of the Act. Thus, the amount of incentive received by assessee should be excluded from th....
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.... on sale of government securities is not required to be treated as part of book profit because only business income is required to be computed in book profit. The facts of the appellant's case are different as the issue is profit from sale of assets and the decision is prior to the judgment of the Apex Court in the case of Apollo Typre 255 ITR 273 (SC), wherein it was held that the AO has limited powers of adjustment to book profit to the extent provided in section 115JB. The appellant has also placed reliance upon the case laws in ITO v. Frigsales (India) Ltd. (2005)4 SOT 376 (Mum), ITO v. Suraj Jewellary (2008) 21 SOT 79 (Mum), CIT v. India Discounts Company Ltd. (1970) 75 ITR 191 (SC), CIT v. M/s Shoorji Vallabhdas and Co. [1962] 46 ITR 144 (Hon'ble Supreme Court) and Sutlej Cotton Mills v. CIT [1979] 116 ITR 1 (SC) After careful consideration, it is found that facts of the appellant's case are different from those in the case of laws cited. The appellant has itself credited the income to the audited profit and loss account, prepared in accordance with part II and III of Schedule VI to the Companies Act, which was certified as having been prepared correctly....
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....the other hand, Ld. DR raised no objection if any direction is issued for giving credit for the adjustment of refund during the year against pertaining to AY 2011-12. 22. After hearing both the parties, we direct AO to allow the credit of refund pertaining to AY 2011-12 adjusted against the demand for the year under consideration as per the provision of law. In terms of above direction, this ground of assessee is allowed for statistical purpose. 23. Next issue raised by assessee in ground No.7 is that Ld. CIT(A) erred in charging interest u/s. 234C of the Act on the assessed income rather than on returned income. 24. Ld. AR before us brought to our notice that AO has charged interest u/s 234C of the Act on assessed income whereas the provision of section 234C of the Act require to charge the interest on the income declared by assessee in its returned income. Accordingly, he prayed before us to give necessary direction to AO to levy the interest u/s 234C of the Act on the income declared by assessee in its income tax return in place of charging the same on assessed income. On the contrary, Ld. DR agreed to the submission made by Ld. AR. 25. After hearing rival parties an....