TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 1899
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....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 well in pointing out that the above co-ordinate ben....
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....ule-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. 59,75,000/- were admittedly disclosed by the appellant co and included in the net profit determined as per profit and los....
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....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 including profit and loss account and laid before the company at its annual general meeting. Therefore, whatever accounting policy was adopted....
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....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 under the normal provisions of the Act cannot be applied while computing book profit under 'section '115J or 115JA or 115JB, as the case ma....
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....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 there are no such allegations, fraud or misrepresentation but only a difference of opinion as to whether a particular amount should be properly shown in the P&L a/c or in th....
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....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:- "71 We have to give effect to the language of the section when it is unambiguous and admits of no doubt regarding its interpretation, particularly when a legal fiction is embedded in that s....
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.... 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 115JB of the Act and thus cannot be reduced from book profits u/s. 115JB of the Act. The finding by the A.O denying the exclusion of impugned sales tax incentive of Rs. 3,98,70,574/- and state capital investment su....
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....te 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 year prepared under sub- section (2), as increased by- certain items debited in the profit and loss account in arriving at the net profit and as reduced by- certain items that are credited in the profit and loss account. In other words, all that one ha....
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....d 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 additions/deletions contemplated in Explanation to section 115JB of the Act. 25. The Tribunal in the aforesaid decision made a reference to the decision of the Special Bench of the ITAT in the case of Rain Commodities (supra) which in turn was based on the ratio laid down in the de....
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.... 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 the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the vie....