2019 (6) TMI 1041 - AT - Income Tax

MAT computation - double addition - capital gain already credited to the profit and loss account - AO included in the computation of the book profit u/s 115JB - HELD THAT - D/R requested that the issue may be restored to the file of the AO for fresh verification as to whether it is a double addition. Mr. J. P. Khaitan, the ld. Sr. Advocate had no objections. As agreed by both the parties, we set aside this issue to the file of the AO with a specific direction to examine the claim of the assessee that, the addition made in the determination of book profit u/s 115JB, of the profit on sale of pledged securities is nothing but double addition, as the assessee has already included this profit in its profit and loss account for the year ended 31/03/2014 drawn up under the Companies Act, 1956. If the assessee had already included this profit from long term capital gain in the profit and loss account for the year ended 31/03/2014, drawn up under the Companies Act, 1956, no separate addition can be made, once again under Explanation (1) of Section 115JB. With these directions we set aside this issue to the file of the AO. Hence this ground is allowed for statistical purposes. Whether section 115JB authorises AO to add back to the book profit the sum written off as irrecoverable by the debit of the profit and loss account? - HELD THAT - As assessee, submitted that there was discussion on this issue in the body of the assessment order but while making the computation of book profit u/s 115 JB, there is no addition/deletion of this amount of bad debts written off by the AO. When there is no addition, then there is no grievance for the assessee. Thus, this ground raised by the assessee is dismissed as not arising out of the assessment order.

Summary

Issues Involved:
1. Whether long term capital gain credited to the profit and loss account can be added a second time to the book profit under section 115JB of the Income Tax Act, 1961?
2. Whether section 115JB of the Income Tax Act, 1961 authorized the assessing officer to add back the sum written off as irrecoverable by the debit of the profit and loss account to the book profit?

Issue 1:
The Hon'ble High Court directed the Tribunal to determine if the long term capital gain credited to the profit and loss account can be added a second time to the book profit under section 115JB of the Income Tax Act, 1961. The Tribunal found that the Assessing Officer had determined the book profits in a manner that included the long term capital gain. However, upon further examination, it was revealed that the loss for the year had already taken into account the profit on sale of pledged securities, leading to a potential double addition. Both parties agreed to set aside this issue for fresh verification by the Assessing Officer to determine if the profit on sale of pledged securities had already been included in the profit and loss account. The Tribunal allowed this ground for statistical purposes.

Issue 2:
The second question involved whether the assessing officer was authorized under section 115JB of the Income Tax Act, 1961 to add back a sum written off as irrecoverable by the debit of the profit and loss account to the book profit. The assessment order did not show any such addition by the assessing officer. The parties confirmed that no adjustment for the bad debts written off was made while determining the book profits. The Tribunal, therefore, dismissed this ground raised by the assessee as it did not arise from the assessment order. Consequently, the appeal of the assessee was allowed in part by the Tribunal.

In conclusion, the Tribunal addressed the specific issues raised by the Hon'ble High Court, providing detailed analysis and directions for further verification by the Assessing Officer. The judgment clarified the treatment of long term capital gains and bad debts written off in the computation of book profits under section 115JB of the Income Tax Act, 1961, ensuring a thorough examination of the relevant aspects in accordance with the law.