2015 (12) TMI 760 - AT - Income Tax

MAT - Computation of book profits u/s 115JB - AO sought to tax under MAT an amount being remission of liability of Bank - Held that - In the case in hand, the assessee got remission of liability of ₹ 43 lakhs under one time settlement by the ING Vysya Bank which has been disclosed by the assessee in the P&L A/c. This disclosure, in the P&L A/c is strictly as per the requirement of Schedule VI of the Companies Act and further in conformity with the mandatory accounting standard AS 5. Therefore, the treatment of the amount in the books of account and particularly in the P&L A/c, is as per the provisions of Schedule VI of the Companies Act as well as accounting standard AS 5. Hence, any disclosure in the notes to accounts would not require any change in the P&L A/c already prepared as per Schedule VI of the Companies Act. The decisions relied upon by the assessee are applicable on the facts and circumstances where if an item of income or expenditure which is required to be disclosed in the P&L A/c prepared as per provisions of Schedule VI of the Companies Act but instead of disclosing the said item in the P&L A/c, it was disclosed in the Notes to the accounts, then such item of income or expenditure will be treated as part of the P&L A/c for the purpose of computing book profits u/s 115JB. Once P&L A/c is admittedly prepared as per Schedule VI of the Companies Act, then neither the AO has any power to tinker with it nor the assessee is permitted to claim exclusion or inclusion of any item of income or expenditure as the case may be, for the purpose of computing book profits u/s 115JB except the permissible adjustment provided under the Explanation to sec.115JB of the Act itself. It is not disputed that this amount does not fall in the ambit of any of the clauses of Explanation to 115JB. Therefore, once this amount has been disclosed in the P&L A/c prepared strictly as per provisions of Schedule VI of the Companies Act, the same cannot be excluded for the purpose of computing book profits u/s 115JB. See Apollo Tyres (2002 (5) TMI 5 - SUPREME Court) as well as CIT vs. HCL Comnet Systems & Services Ltd. (2008 (9) TMI 18 - SUPREME COURT). - Decided against assessee.

Summary

Issues involved:
1. Dismissal of appeal by CIT(A) against the order for assessment year 2005-06.
2. Treatment of remission of liability by bank financial institution as capital receipt for taxation under Income Tax Act.
3. Interpretation of Sec. 115JB of the Income Tax Act and its applicability to various receipts.
4. Legislative intent behind the introduction of Minimum Alternate Tax (MAT) and its impact on book profits.
5. Exclusion of certain receipts from book profits under Sec. 115JB.
6. Compliance with statutory reporting requirements for determining book profits.
7. Applicability of judicial decisions on excluded receipts and their impact on the case.

Analysis:
1. The appeal was filed against the CIT(A) order for the assessment year 2005-06. The appellant contended that the dismissal of the appeal was unjust and contrary to the facts and circumstances of the case.

2. The issue revolved around the treatment of remission of liability by a bank as a capital receipt, excluded from the definition of income under Sec. 2(24) of the Income Tax Act. The appellant argued that such receipts should not be taxed under Sec. 115JB.

3. The interpretation of Sec. 115JB was crucial, with arguments presented regarding its applicability to various receipts and the legislative intent behind its introduction. The appellant highlighted the need to exclude certain receipts, including those under Sec. 2(24), from taxation under this section.

4. The legislative intent behind the introduction of MAT and its impact on book profits was discussed. The appellant emphasized the need to consider exemptions and concessions while computing the minimum amount of tax payable under the Act.

5. The exclusion of certain receipts from book profits under Sec. 115JB was a key point of contention. The appellant argued that receipts statutorily excluded from the definition of income should not be included in the computation of book profits.

6. Compliance with statutory reporting requirements for determining book profits was emphasized. The appellant pointed out the importance of following Rule 40B and Form No. 29B for accurate computation of book profits.

7. The case involved the applicability of various judicial decisions on excluded receipts and their impact on the proceedings. The appellant cited relevant judgments to support their arguments regarding the treatment of specific receipts for the purpose of computing book profits.

This detailed analysis covers the key issues raised in the legal judgment, providing insights into the arguments presented by the appellant and the decision rendered by the tribunal.