TaxTMI 
TaxTMI 
2021 (11) TMI 1072
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....tion purposes. ITA No.1535/Ahd/2018 - Revenue's appeal- AY 2012-13 4. Grounds of appeal raised by the Revenue read as under: "1. The Ld.CIT(A) had erred in law and on facts in not treating the Consideration received to release the right to sue as capital gain. 1.1 The Ld CIT(A) failed to appreciate that the impugned transaction is resultant to the sale of land which is a capital asset u/s 2(14) of IT Act. 1.2 The Ld CIT(A) failed to consider the fact that the consideration in question had been treated as a revenue receipt in the books of account of the assessee and has been reduced in the computation without any justification. 2. Without prejudice to the above, alternatively the Ld CIT(A) could have treated the receipts as Income from Other Sources 3. The Ld CIT(A) has erred in law in not adjudicating the issue of addition of the Consideration received to release the right to sue to Book Profits u/s 115JB of the IT Act" Assessee's C. O. No. 102/Ahd/2019 5. Grounds of Cross Objection raised by Assessee read as under: "1. The Ld.CIT(A) after carefully considering the facts of the case, submission of the Respondent as w....
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....rs instituted a case for violation of Agricultural Act before mamlatdar taking a plea that the transaction for purchase of land in 1986 with the original land purchasers is in breach of Agricultural Act on the ground that these purchasers were not agriculturists. However, mutation entries were entered into revenue records dated 15.02.1993. To assert its title on land, the assessee filed an objection before the competent authority that the original land owners had sold the land parcels in question to the erstwhile co-operative society i.e. assessee in year 1992 & its name was entered vide mutation entries dated 30.01.1992. In consequence of dispute arising towards rightful ownership of land parcels, the original land owners, original purchasers and assessee company went through various levels of litigations such as filing of objections, review application revision petition, disputes before Gujarat Revenue Tribunals. All these authorities however upheld the claim of the original purchasers to title and ownership with rightful possession of the disputed land. Assessee further carried the dispute by filing Special Civil Application seeking its claim on land parcels. Thereafter on inter....
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....ion for relinquishment for right to sue as long term capital gains chargeable to tax under the normal provisions of the Act and also for increase in the book profit for the purposes of deeming provision of Section 115JB of the Act, the assessee preferred appeal before the CIT(A). 10. The CIT(A) after taking note of the various observations of the AO, the written submissions made by the assessee in its defense and documentary evidences placed before him, came to the conclusion that the compensation so received is neither chargeable under the normal provision of the Act nor includible for the purposes of determination of book profit under s.115JB of the Act. 11. The relevant operative para of the order of the CIT(A) for reversal of action of AO under normal provisions of Act is quoted hereunder for easy reference: "2.3. 1 have carefully considered the facts of the case, assessment order, and submission filed by the appellant. The appellant company (erstwhile Ganesh Sagar Co-op. Society Limited) has purchased the agriculture land at Survey No.103/1 to 103/6, 104/1 to 104/3 ad measuring 42733 Sq. Mtr. at Thaltej vide conveyance deed dated 27/01/1992. Subsequently, appell....
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....ts. Aggrieved by this, the original owner preferred Civil Miscellaneous Appeal No.210 of 1997 in District Court, Ahmedabad who dismissed the appeal vide order dated 19/04/1999. Against the above order, original owner filed civil revision application No.1206 of 1999 lo 1208 of 1999 before Honourable High Court. The appellant company also filed regular civil suit No. 458 of 1995 against the original purchaser. The learned trial judge granted the application seeking ad-interim injunction in favour of appellant. Against the said order, original purchaser filed civil miscellaneous appeal No. 77 of 1995 in the District Court. The Honourable District Court set aside the order passed by trial court for deciding the appeal on merit. The appellant company also filed regular civil suit No. 432 of 1995 for joining as a necessary party between original owner and original purchaser. Meanwhile, the Honourable High Court has also directed to place all the five suits before one court i.e. Civil Judge (SD), Ahmedabad Rural and directed to conclude hearing of suit latest by 31/12/2006 without fail. But even otherwise, the above suits were not disposed off, thereby the original purchaser and the appel....
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....sputes regarding the ownership of the disputed land. Hence both the parties have agreed to appoint sole arbitrator to resolve their dispute outside of the court and both the parties have appointed Mr. Gautambhai C. Gandhi Sole Arbitrator and Mr. Gautambhni C. Gandhi accepted the same. Ultimately Sole Arbitrator has passed an award and according to the award the party of the first part shall have to sale the said land to the third party at the prevailing market rate and from the consideration amount 68% (approx) of the consideration amount shall have to paid to the party of the third part for releasing their rights to sue of the above said land and remaining consideration amount shall have to be retained with the party of the first part i.e. claimant of the arbitrations proceedings and according to the above said award party of the first part have agreed to sold the said land to the party of the second party for a consideration of Rs. 103,50,00,000/- say rupees One hundred and three crores fifty lacs only. Out of the said total consideration amount the party of the third part agreed to release its right to sue regarding the ownership of the said land for Rs.70,00,00,000/- (say rupee....
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....tuted capital gain. The AO has also emphasized that appellant has shown lands in the books of account as a fixed asset against which it has received damage for breach of contract in consequence to the acceptance of arbitration award. 2.6. Appellant has submitted rebuttal of all the points raised by AO during the course of appellate proceedings. The appellant company has stated that it was not having the right of a specific performance of contract to acquire the property by getting execution of the conveyance deed from the land owners. The right of property arises once there is ownership, title and possession to the property, and here the appellant's right to property does not arise as the land owner himself had no right to the property because the property was already transferred to the first purchaser which was not brought to the knowledge of the appellant company. Appellant submitted that when the landlord had already transferred the right in favour of first purchaser by entering into sale deed, then the appellant company cannot enjoy any right as the land owner himself who has transferred the right was not having any right to transfer property to the appellant compa....
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....mance and therefore was liable to be taxed as a capital gain. In the present case, the-appellant company does not have right of specific performance and only right available to the appellant was right to sue which under no circumstances can be considered as rights in the immovable property falling into the definition of section 2(14) of the I. T. Act, 1961 as light to sue is not a property being not an actionable claim. The appellant against the observation of AO that land has been shown in the appellant's books of account has submitted that merely book keeping entry cannot be termed as income unless income has actually resulted. In the present case, the disputed land never carne into the possession of the appellant company as well as no title, possession of ownership of the said disputed land with the appellant company, and therefore, the consideration paid in respect of conveyance deed executed with original land owner which was already sold by the original land owner to the first purchaser by merely showing in the balance sheet does not create fixed asset in the hands of the appellant company. The appellant submitted that it initiated litigation before the Mamlatdar, Land Re....
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....5 of the Income tax, which lays down that any profit or gain arising from the transfer of a capital asset shall be chargeable to income tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. The dissection of this section requires that (i) there should be a capital asset (ii1. there should be a transfer of capital asset (ill) as a result of transfer, there should be profit or gain which is chargeable to tax. The term capital asset has been defined in section 2(14} of the Income tax Act which lays down that capital asset means property of any kind held by an assessee whether or not connected with its business or profession. The transfer has been defined inclusively in section 2(47) of Income Tax Act. The term transfer of property has been defined in section 5 of Transfer at Properly Act as - 'transfer of property means an act by which a living person conveys property in present or in future to one or in future to one or more other living persons and to transfer property is to perform such act'. Section 6 of "Transfer of Property Act prescribes as to what may be transferred. It lays down t....
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....ehended breach or from disposing of the subject-mailer of the contract with a view to defeating specific performance thereof. All said and done, these are different remedies which an injured party has on breach of contrite!. But once there is a breach of contract and the defaulting party not only refuses to perform his part of the contract but also disposes of the subject-matter, the injured party has nothing left in the contract except the right to sue for damages. The amendment of clause (y) of .section 6 by the deletion of the italicised words has brought into sharp focus the distinction between properly and a mere right to sue. Before the amendment, only the right to sue for damages arising out of a tortuous act fell within the ambit of the said clause. The right to sue arising ex-contractual, therefore, did not fall within the mischief of the clause even if it were a mere right to sue. After the amendment a mere right to sue, whether arising out of tortuous act or ex-contractual is not transferable. In Mulla's Transfer of Property Act, Seventh edn., we find the following statement: "But a debt or actionable claim must be distinguished from a right to sue for damages. ....
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....ng to Rs.3.87crores. The assesses's case is that it is a capital receipt not taxable as business income or capital gains. The Revenue on the other hand draws support from both the lower authorities' action assessing the same as business income. The assessee admittedly is in real estate development business. It entered into the above identical verdict three development agreements with as many vendor parties followed by the latter paying it variable amounts in question totaling to Rs.3.87 crores in lieu of getting former's right to preemptive purchase or right to sue for specific performance surrendered in their favour. There is no evidence in the case file indicating the assessee to have undertaken even a single activity of development is all three parcels of land. We notice in this tactual backdrop that hon'ble jurisdictional high court's decision in Baroda Cement and Chemical case (supra) holds that the amount received in lieu of such a right to sue available after a vendor breaching the relevant agreement is not an actionable claim so as to be transferred u/s.6(e) of the Transfer and Property Act giving rise to assessable capital gains. Their lordship....
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....ained in the eyes of low and is accordingly deleted. The ground of appeal is accordingly allowed." 12. Aggrieved by the relief granted in first appellate order, the Revenue preferred appeal before the Tribunal. The assessee has also filed cross objection to defend the action of CIT(A). 13. When the matter was called for hearing, the learned CITDR for the Revenue relied upon the order of the AO and submitted that the CIT(A) misdirected himself in law and on facts and has arrived at a grossly wrongful conclusion in holding the receipt from the disputed land as capital receipt falling outside the chargeability of income under s.45 of the Act r.w.s. 2(24) of the Act. 14. To support the order of the AO, the learned CITDR reiterated the observations of the AO to rebut the findings of the CIT(A). The learned CITDR referred to various events, such as, the original land owners made application of Mamalatdar for violation of provisions of Agricultural Act, dropping of proceedings by Mamalatdar under s.84C of the Agricultural Land Act, the parties to the litigation going through various levels of litigation before the Court of law and ultimately referring the matter to arbitration an....
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....tion received for relinquishment of right to sue is liable to be taxed as capital gain is totally unfounded having regard to the long line of judicial precedents. It was contended that the compensation received for release of right to sue is neither capital asset within the meaning of Section 2(14) of the Act nor such gain is capable of taxability having regard to Nil cost of right to sue as held in the case of CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294(SC). The learned counsel relied upon the submissions made before the CIT(A) both on facts and on law as recorded in para 5 of the appellate order and contended that the conclusion drawn by the CIT(A) has a sound foundation and thus ought not to be disturbed. 16. We have carefully considered the rival submissions and assessment order as well as the first appellate order and also taken note of documents referred to and relied upon in terms of Rule 18(6) of the ITAT Rules, 1963. 16.1 The assessee company during F.Y. 2011-12 relevant to A.Y. 2012-13 in question received compensation amounting to Rs.70 Crore for relinquishment of right to sue as stated and admitted in para 7.7 of the assessment order. The advance paid to the o....
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....m of Section 2(14) of the Act, a right to a capital asset must fall within the expression 'property of any kind' and must not fall within the exceptions. Section 6 of Transfer of property Act which uses the same expression 'property of any kind' in the context of transferability makes an exception in the case of a mere right to sue. 16.4 The issue is no longer res integra. There are long line of judicial precedents which echoes the view that the right to receive the compensation for release of right to sue on account of breach of contract for sale of land is not a capital asset and thus not chargeable to tax as capital gains. Support is drawn from CIT vs. J. Dalmiya (1984) 149 ITR 215 (Del); Baroda Cements & Chemicals Ltd. vs. CIT (1986) 158 ITR 636 (Guj); CIT vs. A. A. Dehgamwalla & Ors. 195 ITR 28 (Bom.). 16.5 We also straightway notice that identical issue arose for consideration of the co-ordinate bench in Bhojison Infrastructure Pvt. Ltd. vs. ITO (2018) 99 Taxmann.com 26 (Ahd.) concerning A.Y. 2008-09 order dated 17.09.2018, which is referred to and relied upon on behalf of the assessee. The co-ordinate bench, after a detailed analysis, opined that mere 'right to sue', w....
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....ject to certain exclusions. Notwithstanding widest import assigned to the term 'property' which signifies every possible interest which a person can hold and enjoy, the 'right to sue' is a right in personam and such right cannot certainly be transferred. In order to attract the charge of tax on capital gains, the sin qua non is that the receipt must have originated in a 'transfer' within the meaning of Section 45 r.w.s. 2(47) of the Act. In the absence of its transferability, the compensation/damages received by assessee is not assessable as capital gains. 10.2 The co-ordinate bench of ITAT, Ahmedabad in the case of Deputy CIT(A) vs. Shekhar G. Patel ITA No.1997/Ahd/2010 order dated 19.03.2014 relied upon on behalf of the assessee has made reference to host of judicial pronouncements including the decision of the Hon'ble Gujarat High Court in the case of Baroda Cement and Chemicals Ltd. (supra) and concluded the issue in faovur of assessee. The Co-ordinate bench highlighted the relevant part of the decision of the Hon'ble Gujarat High Court which is reproduced hereunder: "18. The assessee had undoubtedly a right to sue M/s K.C.P. Ltd. for damages for breach of con....
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....transferred by extinguishment to the defaulter for valuable consideration. That is because a right to sue for damages not being an actionable claim, a capital asset, there could be no question of transfer by extinguishment of the assessee's rights therein since such a transfer would be hit by s. 6(e) of the Transfer of Property Act. In any view of the matter, it is difficult to hold that the sum of Rs.1,40,000 received by way of compensation by the assessee was consideration for the transfer of a capital asset." 10.3 The Hon'ble Gujarat High Court in Baroda Cement (supra), in turn, referred to the concept of breach of contract as discussed by the Hon'ble Bombay High Court in the case of Iron and Hardware (India) Co. vs. Shamlal & Bros. AIR 1954 Bom 423 as under (p. 645 of 158 ITR): "10. Chagla, C.J., had an occasion to consider this aspect of the law in Iron and Hardware (India) Co. vs. Shamlal & Bros. AIR 1954 Bom 423. The learned Chief Justice observed as under(p. 425) : 'It is well settled that when there is a breach of contract, the only right that accrues to the person who complains of the breach is the right to file a suit for recove....
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.... in Union of India vs. Raman Iron Foundry AIR 1974 SC 1265. In para 9 of the judgment, the Supreme Court considered the claim for liquidated damages for breach of contract between the parties. Pointing out that so far as the law in India is concerned, there is no qualitative difference in the nature of the claim, whether it be for liquidated damages or unliquidated damages, the Supreme Court proceeded to state the law as under (p. 1273): ''When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in s. 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred.' Quoting the statement of law enunciated by Chagla C.J., which is extracted earlier, the Supreme Court stated (p. 1273) : 'This statement in our view represents the correct legal position and ....
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....development agreement was thus frustrated by sale of land by the owner. The observation of the CIT(A) that assessee had obtained the possession of the property from seller is beleaguered one. As pointed out on behalf of the assessee, the possession are typically given to a developer for the purposes of development. Such act is in the nature of license to develop the property while the possession of the property continues to remain vested with the vendor. On a plain reading, we observe that consideration received for relinquishment of 'right to sue' does not fall under the provisions of Section 28(va) of the Act. We further find from the facts of the case that assessee has not received this amount under an agreement for not carrying out activity in relation to any business or not to share in knowhow, patent, copyright, trademark, license etc. as specified under s.28(va) of the Act enacted for its taxability under the head of business income. Consequently, we are of the considered view that compensation received in lieu of 'right to sue' could not be regarded as revenue receipt. Therefore, we find merit in the appeal of the assessee." 16.6 On perusal of the first appellate order, ....
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....r its grounds of appeal, the Revenue has pitched in the alternate that the CIT(A) ought to have treated the receipts as 'income from other sources'. No substantive argument was placed before us to address this plea. Furthermore, we see obvious folly in such misconceived plea. To reiterate, the AO himself has treated the compensation to be capital in nature and has brought the same to tax under the head 'capital gains' as per para 7.7 of assessment order. The predominant condition, among others, for chargeability of income under the head 'income from other sources' is that such income must generate on revenue account. The case sought to be built by the revenue, as an alternate, is completely contrary to its stated position. We see no merits. 16.9 Thus, in totality, we see no error in the conclusion drawn by the CIT(A) in favour of the assessee under the normal provisions of the Act for excluding impugned capital receipts from ambit of taxation. Hence, We decline to interfere with the first appellate order on this score. 17. Ground No. 1 & 2 of the revenue appeal is dismissed. 18. Ground no. 3 concerns taxability of compensation on the contours of MAT provisions embodied und....
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....nsidered the facts of the case, assessment order and submission of the appellant. Appellant has shown book profit U/s. 115JB of the Act of Rs.1,80,383/- in the return of income. Appellant has filed the chartered accountant certificate in Form No.29B as per Rule 40B along with Annexure - A and Schedule - I &. II showing details relating to the computation of book profit for the purpose of Section 115JB(4) of the I. T. Act, 1961. The AO has recomputed the book profit at Rs.69,70,18,553/-by not allowing reduction of exempt income of Rs.69,68,38,170/- certified by chartered accountant in Column 9 of Annexure - A of Form 29B as income not chargeable to tax. The AO has noted that the appellant has not given any reason for treating Rs. 69,68,38,170/- as not includible in the book profit. The AO has concluded the net profit as per P & L Account is Rs 69,70.18,553/- and the compensation received for release of right to sue is not excludible while computing the book profit u/s. 115JB. The AO has relied upon the judgment in the case of Technicarts (P) Ltd. Vs. ITO, Mumbai [12 Taxmann.com 1] and N. J. Jose Pvt. Ltd. Vs. ACIT [174 Taxman 141]. 3.4. The appellant has submitted that the ....
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....with the provisions of section 115JB. The auditor has further certified that the tax payable u/s. 115JB of the Income Tax Act in respect of A. Y. 2012-13 is Rs.38,160/- which has been determined on the basis of details in Annexure - A to the form. In Annexure - A, the auditor has noted that the net profit as per P &. L Account referred is Rs.69,70,18,553/-. However, Rs.69,68,38,170/- was not an income chargeable to tax, hence income offered to tax is Rs.1,59,787/-. The issue to be decided is whether AO was justified in not allowing the compensation received on right to sue which has been held as non taxable receipt reduced from the book profit for the purpose of section 115JB. 3.6. The AO has relied upon the decision of ITAT, Mumbai in the case of Technical Pvt. Ltd. decided on 31/03/2011. In this case, the assessee has claimed that for the purpose of calculating book profit u/s. 115JB, capital gain arising from sale of factory, land and building credited to P & L Account required to be deducted as it represented receipt in the nature of income on which 54EC deduction is available. The Honourable Bench relying upon the decision of Hyderabad Special Bench in the case of Rai....
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....able Supreme Court in the land mark case of Apollo Tyre Limited (supra) which is often relied in not allowing adjustment of exempt income has held as under- "The Assessing Officer, while computing the book profits of a company under section 115 J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained, in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to Section 115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the explanation. The use of the words "in accordance with the provisions of part II and III of the Schedule VI of the Companies Act" in section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon the authentic statement of accounts of the company. While so looking into accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provis....
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....tem as compensator received for relinquishment of right to sue of Rs.6969.54 lacs. However, while computing the book profit and tax payable u/s. 115JB, the appellant has excluded the said amount for calculating the lax under MAT. The appellant has submitted a detailed note relying upon the of jurisdictional High Court in the case of Baroda Cement & Chemical Ltd. that capital receipt of Rs,69,68,30,170/- is not subject to tax. The appellant has also submitted Form No. 29B as required u/s. 115JB(4) certifying the book profit of Rs.1,80,383/- and clarifying in Clause - 9 of Annexure - A of Form No. 29B that Rs.69,68,30,170/- was not an income chargeable to tax. 3.11. The Honourable Mumbai Bench 'J' in the case of M/s. JSW steel Limited [2017] 82 Taxmann.com 210 [Mumbai Tribunal) decided on 13/01/2017 after analysing the accounting standard has held that capital receipt falling within the category of capital surplus which is a non recurring and exceptional item which is 1o be disclosed as per the requirement of the Company Act cannot be reckoned as working result of the company so as to be treated as a part of book profit. "16. from our above analysis and disc....
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....edit of the profit & loss account and get indirectly taxed under book profit. The Special Bench of ITAT, Kolkata in the case of Sutlej Cotton Mills Ltd. V ACIT (supra) observed and held as under: "The pattern of the income-tax Act is that certain receipts are not to be taken as income at all while, in respect of certain receipts, there is an exemption from lax on fulfilling certain conditions and, in respect of certain other incomes, certain concessions or deductions are given. There is a basic dichotomy between receipts which are not taxable at all and receipts which are taxable but subject to exemption on fulfilling certain conditions. In the ease of capital gains, it is a receipt which is not taxable at all but for a deeming provision, liven the deeming provision is subject to exclusion in respect of certain receipts which fulfill certain conditions such as reinvestment. Section 115J has recognized this mid has provided in Explanation, clause (f), item (ii), that the amounts falling under Chapter 111 are to be excluded. When an amount which forms part of the book profit itself cannot be taxed under section 115J when it does not have the income character, it has to be ac....
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....e profit and loss account and the profit and loss account was prepared in accordance with Part II and Part III of the Sixth Schedule to the Income tax Act. A reference to the requirements of the Companies Act shows that it is concerned with the result of the working of the company. Consequently, it cannot be directly concerned with changes in the capital structure. In particular, the profit and loss account is concerned with items of income and expenditure and, therefore, any profit derived by reaction of a capital asset would not be an item of income. In a case where the profit and loss account was prepared in accordance with the provisions of Part 11 and Part 111 of Sixth Schedule to the Companies Act, the Assessing Officer will have no power to disturb the book profit except as slated in section 115J. The Assessing Officer is bound 10 proceed with the computation only on the basis of the book profit as shown in the profit and loss account unless it is discovered that the profit and loss account is not drawn up in accordance with the provisions of the Companies Act. As far as fixed assets and investments are concerned, the valuation of such assets is not a necessary part of the p....
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....tax as part of the book profit under the Explanation to section 11 5J..........,..,............." 17. From the above discussion we are of the opinion that surplus resulting in the books of the assessee company consequent upon waiver of loan amount is not required to be credited to the profit & loss account for the year in which waiver is granted and in any case it cannot be reckoned as working result of the company during the period covered by the account, so as to be treated as part of book profit of the company for that year under the Companies Act." 3.12. The honourable Mumbai Bench 'J' in the case of M/s. JSW Steel Limited (supra), after analyzing has considered all the available decisions both in favour of revenue and assessed has concluded that - "23. From the perusal of aforesaid decisions, at the outset, it may appear that on similar nature of issues there are divergent views of various benches of the Tribunal, however, one common point/ratio permeating through all the decisions, which can be deduced by us is that, if an assessee company is in receipt of a 'capital receipt' which is not chargeable to tax at all, that is, it does no....
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....h capital gains but with pure capital receipt, which does not even have anti 'income', 'profits or, gains' embedded therein. The impugned incentive granted to the Assessee is pure and simple capital receipt, in terms of our decision on ground no. i at Para 10 hereinabove, which in turn is supported by the principles laid down by the Apex Court, various high courts & Special Bench of the Tribunal. That being the case, it does not have any income or profit element embedded in it, since the incentive was granted to encourage industrial growth of industrially non developed area. No one can make profit out of the subsidy or incentive granted to it. Hence, it is not chargeable to tax under the Income Tax Act as held by the Apex Court in the case of Padmaraje (supra) and in the light of our fact finding as above, clearly not includible in P&L account prepared under Part II &. Part III of Schedule VI to the companies Act." The above decision has been affirmed by Honourable Rajasthan High Court, as the Honourable High Court has admitted the ground. (C) L H. Sugar Factory Ltd. ITA Nos. 417, 418 & 339/LKW/2013 dated 09/02/1016 wherein tribunal held that....
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.... Apex Court in the case of Indo Rama Synthetics (I) Ltd v. CIT reported in [2011] 30 ITR (SC), adjustment need to be made to the disclosures made in the notes on accounts forming part of the profit and loss account of the assessee and the profits arrived after such adjustment, should be considered for the purpose of computation of book profits u/s 115JB of the Act and thereafter, the Learned AO has to make adjustments for additions / deletions contemplated in Explanation to section 115JB of the Act." In this case Tribunal has discussed the entire issue in detail manner on similar set of facts and relied upon various decisions to come to the aforesaid conclusion. 3.14. In view of the above, the AO was not justified to add the capital receipt of Rs.69,68.38,170/- in the book profit u/s. 115JB of the I. T. Act, 1961. The ground of appeal is accordingly allowed." 19.5 Aggrieved by the relief granted by the CIT(A) on the contours of S. 115JB of the Act, the Revenue has challenged the first appellate order before the Tribunal. 20. We have examined the impugned controversy on levy of minimum alternate tax under s.115JB of the Act on the compensation receipt on rele....
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....ome' and the term 'income' must be construed in the same manner as the one defined under Income Tax Act. As a corollary, it is impermissible to cover such capital receipts under S. 115JB in an unregulated manner. At this stage, we notice a pertinent plea taken on behalf of the assessee that the receipt being of capital nature does not enter into the computation provision at all and hence, there is no question of including the same in book profits for the purposes of Section 115JB of the Act. 21.2 The view as propounded that the capital receipts unless specifically included as 'income' cannot brought to tax even under alternate provision gains traction from the fact that clause (ii) of Explanation (1) to Section 115JB which provided for an adjustment to the book profit of the Company, require a company to exclude those income which do not form part of total income under S. 10, 11 and 12 subject to some exceptions. Thus, those items of income which are exempt under S. 10 are specifically excluded from book profit. If that is so, by extension of the innate logic, those items of receipts which are not income at all, requires to be excluded at the threshold and rather in preference t....