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2021 (5) TMI 789 - AT - Income TaxMAT - book profit u/s.115JB - Additions towards amount received on sale of Floor Space Index (FSI) - Treated as income from Long Term Capital Gains while computing the income of the assessee under normal provisions of the Act - when there is no cost incurred by the assessee for obtaining any additional benefit of 0.8 by way of additional FSI, then, whether any sum received by the assessee pursuant to a sale of such additional FSI could be brought to tax under the head income from capital gains ? - whether such receipt of sum would be exigible to tax while computing book profit u/s.115JB - HELD THAT - We hold that assessee could not have pre-empted any change in the Development Control Regulation Rules in the city of Coimbatore at the time of purchase or before the sale. Admittedly no cost was incurred by the assessee for getting such benefit by way of additional FSI. Hence, it could be safely concluded that the additional benefit derived by the assessee by way of getting vested with additional FSI on the land and building owned by the assessee is only a wind fall gain by operation of law, and which had not costed the assessee any money. We find that the entire issue in dispute is squarely covered by the decision of the Hon ble Jurisdictional High Court in the case of Kailash Jyoti No.2 CHS Ltd 2015 (11) TMI 400 - BOMBAY HIGH COURT Thus we hold that the sum received by the assessee on sale of additional FSI, is not exigible for long term capital gains and accordingly the same is hereby directed to be excluded under normal provisions of the Act. Taxability of same sum while computing book profit u/s.115JB - We find that assessee had admittedly offered the said receipt of ₹ 4,76,25,000/- had admittedly offered the said receipt to tax while computing book profits u/s.115JB. There is absolutely no dispute that such receipt is indeed a capital receipt and that the same does not form part of operational working results of the assessee company. Even according to the case of the Revenue, the said receipt is only inseparable from land, building and accordingly it only partakes the character of a capital receipt. We hold that merely because a particular receipt , which is in the capital field, had been offered to tax by the assessee voluntarily in the return of income while computing book profits u/s 115JB of the Act, it cannot be brought to tax merely on that ground. It is very well settled that there is no estoppel against the statute. We hold that the sum being a capital receipt from its inception, is to be excluded while computing book profits u/s.115JB of the Act and also on the ground that it does not form part of operational working results of the company. Accordingly, the additional ground raised by the assessee vide letter dated 19/01/2021 is allowed. Applicability of provisions of Section 115JB - We find that the decision relied upon by the ld AR was rendered in the context of section 143(1A) of the Act. The provisions of Section 115JB of the Act start with a non-obstante clause and is a self contained code by itself. By giving due weightage to the intention behind introduction of provisions of section 115J, 115JA and 115JB of the Act, we are not inclined to agree to the contentions of the ld AR. We find that this issue has already been addressed by this Tribunal elaborately in assessee s own case for the Asst Year 2011-12.These provisions are in force from the year 1987 onwards commencing from Section 115J which had gradually migrated to Section 115JB of the Act without digressing from the true intention behind introduction of these provisions in the Act. Hence, the primary argument that Section 115JB of the Act is not applicable to the assessee company in the instant case is hereby rejected. Accordingly, the ground No.1 raised by the assessee is dismissed.
Issues Involved:
1. Taxability of the sum received on the sale of Floor Space Index (FSI) under normal provisions of the Income Tax Act, 1961. 2. Inclusion of the sum received on the sale of FSI in the computation of book profits under Section 115JB of the Income Tax Act, 1961. 3. Applicability of provisions of Section 115JB of the Income Tax Act, 1961 to the assessee company. Detailed Analysis: Issue 1: Taxability of the sum received on the sale of FSI under normal provisions of the Income Tax Act, 1961 The primary issue was whether the sum of ?4,76,25,000 received on the sale of FSI should be treated as income from Long Term Capital Gains. The assessee argued that this amount was a capital receipt and hence not taxable. The Assessing Officer (AO) contended that FSI is inseparable from the land and building, thus treating the receipt as long-term capital gains. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, distinguishing it from the case of CIT vs. Sambhaji Nagar Co-op Housing Society Ltd., where TDR was sold separately. The Tribunal, however, noted that the assessee did not incur any cost for obtaining the additional FSI, which was a windfall gain due to changes in Development Control Regulation Rules. Citing the Hon’ble Jurisdictional High Court's decision in Kailash Jyoti No.2 CHS Ltd., the Tribunal concluded that the sum received for the additional FSI is not exigible to tax as long-term capital gains under normal provisions of the Act. Issue 2: Inclusion of the sum received on the sale of FSI in the computation of book profits under Section 115JB of the Income Tax Act, 1961 The assessee had included the sum of ?4,76,25,000 in its book profits under Section 115JB. The Tribunal noted that this receipt is indeed a capital receipt and does not form part of the operational working results of the company. It held that a capital receipt, even if voluntarily offered to tax by the assessee, cannot be brought to tax under Section 115JB. The Tribunal referenced its own decision in the assessee’s case for A.Y.2011-12 and the Hon’ble Calcutta High Court's ruling in PCIT vs. Ankit Metal and Power Ltd., which stated that non-income receipts cannot be included in book profits under Section 115JB. Consequently, the Tribunal directed the exclusion of ?4,76,25,000 from the computation of book profits under Section 115JB. Issue 3: Applicability of provisions of Section 115JB of the Income Tax Act, 1961 to the assessee company The assessee challenged the applicability of Section 115JB, arguing that it should not apply since there was no tax payable under normal provisions due to a loss. The Tribunal referred to its earlier decision in the assessee’s case for A.Y.2011-12, which upheld the applicability of Section 115JB, emphasizing that these provisions are intended to collect tax based on book profits when normal provisions result in zero tax. The Tribunal rejected the argument that Section 115JB should not apply to the assessee and dismissed the ground. Conclusion: The Tribunal partly allowed the appeal, ruling that the sum of ?4,76,25,000 received on the sale of FSI is not taxable under normal provisions as it is a capital receipt. It also directed the exclusion of this sum from the computation of book profits under Section 115JB. However, the Tribunal upheld the applicability of Section 115JB to the assessee company.
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