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Issues Involved:
1. Tax computation u/s 115JB of the Income Tax Act, 1961. 2. Taxability of insurance claim as short-term capital gain u/s 45(1A) of the Act. Summary: Issue 1: Tax Computation u/s 115JB of the Income Tax Act, 1961 Facts in brief are that the assessee filed its return of income declaring total income at 'NIL' under regular provisions and Rs. 1,22,87,684/- u/s 115JB of the Act. The AO completed the assessment u/s 143(3) by assessing the income at 'NIL' under the relevant provisions and Rs. 1,34,45,470/- under section 115JB of the Act. Subsequently, the AO noticed that the assessee during the financial year 2002-03 received an insurance claim of Rs. 1,54,93,244/- and the assessee directly credited to the Balance Sheet without crediting to the Profit & Loss Account. As per the Companies Act, 1956 the assessee company has to claim any loss arriving out of capital assets in the Profit & Loss Account. Accordingly, loss on sale of asset (or) loss on assets discarded (or) theft on loss of an asset is written off in the P&L account prepared in accordance with the provisions of Part-II and III of Schedule VI of the Companies Act, 1956 and accordingly any claim of insurance received on behalf of the asset also has to be credited as income in the P& L A/c. whereas, the assessee-company has directly credited the insurance received in the Capital Reserve. Had the insurance claim been credited in the income side of the P&L A/c, the Book Profit would have been increased by a like amount and accordingly, the tax payable could have been higher u/s 115JB of the Act. The non-crediting of insurance receipt in the P&L Account is not in accordance with the provisions of the Companies Act. Hence, the amount of insurance of Rs. 1,54,93,244/- has to be credited in the book profit for tax u/s 115JB of the Act. Accordingly, the Assessing Officer has computed the income of the assessee by taking into consideration the amount of Rs. 1,54,93,244/- by adjusting as per sec. 115JB of the Act. On being aggrieved, the assessee carried the matter before the CIT(A). It was submitted before the learned CIT(A) that the AO has no power to make an adjustment under sec. 115JB of the Act. For that the assessee has relied on the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT (255 ITR 273) and also some other judgments. The learned CIT(Appeals) after considering the submissions of the assessee observed that the AO was not justified in invoking the provisions of sec. 115JB(2) of the Act and adding the insurance claim of Rs. 1,54,93,244/- received to the book profit by following the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra). The learned DR has submitted that when there is a loss of an asset, the same is to be routed through the Profit & Loss Account. When the assessee has received the insurance claim, it has been directly credited to the capital account which is contrary to Part II and Part III of Schedule VI of the Companies Act. He strongly relied on the decision of the Tribunal in the case of DCIT v. Bombay Diamond Co. Ltd. (2010) 33 DTR (Mumbai) (Trib) 59 and in the case of M/s. Sumer Builders Pvt. Ltd. (2012-TIOL-183-ITAT-MUM) as also the decision of the Hon'ble Calcutta High Court in the case of GKW Ltd. v. CIT ((12011) 200 Taxman 396 (Cal). The learned DR further submitted that the learned CIT(Appeals) allowed the ground raised by the assessee by following the decision in the case of Apollo Tyres Ltd. (supra) which has no application to the facts of the case. According to section 115JB of the Act the Assessing Officer has every power to go beyond the book profit, if the accounts are not prepared in the manner provided by Part II & Part III of Schedule IV of the Companies Act, 1956. We have heard both the sides, perused the records and gone through the orders of the authorities below. There was a fire accident in the assessee's premises in which certain plant and machinery is destroyed. The loss occurred on account of the
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