2020 (9) TMI 248 - HC - Income Tax

MAT Computation u/s 115JB - Tribunal held that the capital profits on sale of land, which are credited to the capital reserves account in the balance sheet, are not to be included under the book profits for the purpose of Section 115J? - whether Tribunal is justified in law by holding that the Assessing Officer has no power and jurisdiction to bring to tax the income which is includible under the book profit but not included under the book profit in the audited statement of accounts? - HELD THAT - As revenue fairly submitted that the substantial questions of law which arise for consideration in this appeal have already been answered against the revenue by a Bench of this Court in 'SRI HARIRAM HOTELS (P) LTD. Vs. COMMISSIONER OF INCOME- TAX AND ANOTHER' 2015 (12) TMI 1419 - KARNATAKA HIGH COURT In view of the aforesaid enunciation of law, the substantial questions of law framed by this Court in this appeal are also answered against the revenue and in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 115J of the Income Tax Act, 1961 regarding the inclusion of capital profits on the sale of land in book profits.
2. Jurisdiction of the Assessing Officer to tax income includible under book profit but not included in audited statement of accounts.

Interpretation of Section 115J - Capital Profits on Sale of Land:
The appeal under Section 260-A of the Income Tax Act, 1961 was admitted to consider whether the capital profits on the sale of land, credited to the capital reserves account in the balance sheet, should be included under book profits for the purpose of Section 115J. The Tribunal's decision was challenged on this issue. However, during the hearing, it was acknowledged that a previous judgment had already answered this question against the revenue. Citing the case of 'SRI HARIRAM HOTELS (P) LTD. Vs. COMMISSIONER OF INCOME- TAX AND ANOTHER,' it was concluded that the substantial questions of law framed in this appeal are also answered against the revenue and in favor of the assessee. Consequently, the appeal was dismissed on this issue.

Jurisdiction of Assessing Officer - Taxation of Income Not Included in Audited Statement:
The second issue raised in the appeal was whether the Assessing Officer had the power and jurisdiction to tax income that is includible under book profit but not included in the audited statement of accounts. The Tribunal's decision on this matter was also challenged. However, based on the acknowledgment during the hearing that the substantial questions of law had already been answered against the revenue in a previous judgment, the Court concluded that the questions framed in this appeal are also answered against the revenue and in favor of the assessee. As a result, the appeal was dismissed on this issue as well.

In summary, the High Court of Karnataka, in a judgment delivered by Mr. Justice Alok Aradhe and Mr. Justice H.T. Narendra Prasad, addressed issues related to the interpretation of Section 115J of the Income Tax Act, 1961 and the jurisdiction of the Assessing Officer to tax income not included in the audited statement of accounts. The Court relied on a previous judgment to rule against the revenue and in favor of the assessee on both issues, ultimately dismissing the appeal.