TaxTMI 
TaxTMI 
2018 (9) TMI 1899
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....high court's decision in Exide Industries Ltd. vs. Union of India (2007) 292 ITR 470 (Cal) quashing the statutory provision itself to be ultra vires. Hon'ble apex court has stayed operation thereof vide order dated 08.05.2009. It further emerges that this tribunal's order in assessee's case itself in preceding assessment year ITA 439/Kol/2016 has restored the very issue back to the Assessing Officer to be decided afresh after awaiting final order of hon'ble apex court. We adopt the same course of action in the impugned assessment year as well. The assessee's instant former substantive ground is restored back to the Assessing Officer to be decided afresh after the final outcome in Revenue's appeal in Exide Industries Ltd. This first substantive is accepted for statistical purposes. 3. The assessee's second substantive ground challenges correctness of both the lower authorities' action in not allowing exclusion of sales tax incentive and state capital investment subsidy availed during the year amounting to Rs.4,14,13,831/- and Rs.18,20,000/-; respectively being capital in nature in computing book profits section 115JB of the Act. Both the parties are unanimous herein as we....
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....ome Tax Act nor includible in profit and loss account prepared under part 2nd and part 3rd of Schedule-VI to the Companies Act, 1956 for the purpose of MAT. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- "Decision: The order of AO and the detailed submissions made by the appellant has been considered. The appellant has sought to exclude sales tax incentive of Rs. 3,98,70,574/- and state capital investment subsidy of Rs. 59,75,000/- received by then under West Bengal Incentive Scheme (WBIS), 2000 from computation of book profit under section 115JB of the Act. The Assessing Officer has held that the appellant's claim for exclusion of incentives received does not fall under any of the exclusions provided in Explanation 1 to Section 115JB of the Act. Whereas, the appellant has claimed that sales tax and capital investment subsidies are capital receipt and do not have an element of income or profit and deserve to be excluded from computation of Book profit u/s 115JB. It is undisputed fact that the impugned sales tax incentive of Rs. 3,98,70,574/- and state capital investment subsidy of Rs. 5....
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....r, under clause (2) of Part II of Schedule VI to the Companies Act where a Company receives the amount on account of surrender of leasehold rights, the Company is bound to disclose in the profit and loss account the said amount as non-recurring transaction or a transaction of an exceptional nature Irrespective of its nature i.e. whether capital or revenue." Hence, it is not a case of the assessee that the impugned capital receipts was not includible in the profit and loss account prepared in terms of Schedule VI to the Companies Act. Only in the computation of book profit under section 115JB of the Act, the assessee claimed exclusion of sales tax incentive and S.C.I subsidy as capital receipts. In the circumstances, when the appellant has itself included the impugned sales tax incentive and capital investment subsidy in the P&L, the same cannot be excluded under any of the Explanations under section 115JB. The proviso to section 115JB prescribes that the accounting policies, accounting standards and the method and rates of depreciation adopted for preparing the Book Profits under section 115JB shall be the same as adopted for the purpose of preparing such accounts includin....
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.... 115JB has overriding effect over all other provisions of the Act. Section 115JA and 115JB have also overriding effect over all other provisions of the Act to the extent of the matter provided in these sections. Sub-section (4) was inserted in section 115JA of the Act. A provision similar to sub-section (4) of section 115JA was not there in section 115J of the Act. Sub- section (4) of section 115JA reads as "save as otherwise provided in this section, all other provisions of the Act shall apply". It is, thus, clear that all other provisions of the Act shall apply but subject to the provisions otherwise provided in section 115JA of the Act. In other words, the provisions specifically provided in section 115JA shall have overriding effect over all other provisions of the Act. The provision for computing book profit by increasing or reducing the net profit as shown in the profit and loss account prepared in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act is specifically provided in section 115J or 115JA or 11SJ6 itself as the case may be, and consequently all other 'provisions of the Act providing the manner of computation of total Income....
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.... para 52, relied upon by the appellant the ratio decidendi of the decision by the Jaipur Tribunal is not available in the judgement, as the Tribunal has followed its judgement for the preceding Assessment Year. It is well settled that it is only the ratio decidendi, which has a binding effect as an authority. Hence, I respectfully disagree with the said judgement cited by the appellant, .However, the issue is found to be clarified by the decision of the Hyderabad Special Bench of the Tribunal in the case of Rain commodities Ltd (2010) 41 DTR 449, which is applicable to the issue. It is found that the Special Bench of the Tribunal in the aforementioned decision has held as under(short notes): "It is settled law that Assessing Officer has the power to alter the net profit. In the following two cases, the Assessing Officer can rewrite the P&L a/c i.e. to say that Assessing Officer should recalculate the net profit and then follow the adjustments of MAT as usual: (1) If it is discovered that P&L a/c is not drawn up in accordance with Parts II and III of Sch.VI to the Companies Act. However, the Assessing Officer cannot disturb the net profit as shown by the assessee where ther....
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....td. 249 ITR 597, holding that the book profits have to be computed in accordance with Parts II and III of Schedule VI to the Companies Act. This is in conformity with the decision of the Apex Court in the case of Apollo Tyres Ltd. (supra). The Mumbai High Court in the case of Akshay Textiles Trading & Agencies (P.) Ltd. (supra) has held that there is no question of law in view of the decision of the Apex Court in the case of Apollo Tyres Ltd. (supra). From this it is not inferred that the decision of the Bombay High Court in the case of Veekaylal Investment Co. (P.) Ltd. (supra), is no longer good law. Therefore, this case does not help the assessee. Therefore, the A.O has rightly held that only permissible adjustments as provided for in Explanatoin-1 to sec. 115JB are to be made ,as held by the hon'ble Karnataka High Court in N.J.Jose & Co. v. Asstt. CIT [2010] 321 ITR 132(KER) that no further deductions and allowances other than stipulated in Explanation 1 are available. The Honourable Apex Court on the interpretation of provisions has held in the case of Vodafone International Holdings B.V. vs. Union of India reported in [2012J 17 taxmann.com 202 (Se) as follows:- ....
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.... profit, and permissible adjustments are to be done strictly as per the Explanation-1 to section 115JB of the Act and therefore, no assistance from any other section of the Act can be taken for that purpose. The decisions of the Hon'ble Supreme Court in the cases of Apollo Tyres Ltd. (supra) and HCL Comnet Systems & Services Ltd. (supra) had clearly laid down a law that the Assessing Officer has only limited power of making increases and reductions to the net profit shown in the profit and loss account except as provided for in the Explanation to section 115J or 115JA of the Act. In view of the above discussions, it is clear that the Assessing Officer, while computing the book profit of a company under section 115J of the Act, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having being properly maintained in accordance with the Companies Act, and the Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to section 115JB of the Act. These receipts in question are not covered by any of the clauses (1) to (vii) of Explanation 1 to section 115....
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....t day of April,2001, is less than seven and one half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one half ten per cent. The Assessee being a company the provisions of Sec.115JB of the Act were applicable. Every assessee, being a company, shall, for the purposes of section 115JB of the Act, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). In so preparing its book of accounts including profit and loss account, the company shall adopt the same accounting policies, accounting stand and method and rates for calculating depreciation as is adopted while preparing its accounts that are laid before the company at its annual general meeting in accordance with provisions of Sec.210 of the Companies Act. Explanation below Sec.115JB of the Act provides that for the purposes of section 115JB of the Act, "book profit" means the net profit as shown in the profit and loss account for the relevant previous....
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....t real working results of company. (ii) Inclusion of receipt which are not in the nature of income in computation of book profits for MAT would defeat two fundamental principles, it would levy tax on receipt which was not in nature of income at all and secondly it would not result in arriving at real working results of company. Real working result could be arrived at only after excluding this receipt which had been credited to P&L a/c and not otherwise. (iii) There was a disclosure of the factum of forfeiture of share warrants amounting to Rs. 12,65,75,000/- by the Assessee in its notes on accounts vide Note No. 6 to Schedule 11 of Financial Statements for year ended 31.3.2009. Profit and loss account prepared in accordance with Part II and III of Schedule VI of Companies Act 1956, included notes on accounts thereon and accordingly in order to determine real profit of Assessee, adjustment need to be made to disclosures made in notes on accounts forming part of profit and loss account of Assessee. Profits arrived after such adjustment, should be considered for purpose of computation of book profits u/s 115JB of the Act and thereafter, AO had to make adjustments for addit....
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....rovides that the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) is to be reduced from the Net profit, if they are credited to the Profit and Loss account. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of "income", are excluded for the purpose of computing "Book Profit", since the said receipts are exempted u/s 10 of the Act while computing total income. Thus, it is seen that the legislature seeks to maintain parity between the computation of "total income" and "book profit", in respect of exempted category of income. If the said logic is extended further, an item of receipt which does not fall under the definition of "income" at all and hence falls outside the purview of the computation provisions of Income tax Act, cannot also be included in "book profit" u/s 115JB of the Act. Hence, we find merit in the submissions made by the assessee on this legal point.' 26. The admitted factual and legal position in the present case is that subsidies in question is not in the nature of income. Therefore they cannot be regarded as income even for th....