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TMI Blog2011 (3) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... other brand owners, During the previous year ended on 31-3-2005, it did not carry on its manufacturing activity. The assessee claimed that for the purpose of calculating book profit under section 115JB, capital gain arising from sale of factory land and building credited to the profit and loss account, requires to be deducted as it represents receipt in the nature of income not taxable under section 50/54EC. The assessee relied on the decision in the case of ITO v. Frigsales (I.) Ltd. 4 SOT 376 (para 5 of Asst. order). The ld. Assessing Officer negative the claim of the assessee. According to him (para 5 of Asst. order) Explanation (I) to (vii) of section 115JB do not mention that capital gain not chargeable to tax by virtue of section 54EC shall be reduced from the net profit for arriving at book profit for levying MAT under section 115JB. The ld. Assessing Officer placed reliance on the following decisions : (i) Apollo Tyres Ltd. v. CIT 255 ITR 273 (SC). (ii) CIT v. Veekaylal Investment Co. (P.) Ltd. 248 ITR 597 (Born). 2. On appeal before the CIT(A), the assessee contended as follows : (I) Sub-section (5) of section 115JB states that sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 182 (Kar.); decision of Apex Court in Apollo Tyres Ltd., 255 ITR 273; decision of AAR in National Hydro Electric Power Corpn. Ltd. 273 ITR 171 and Special Bench decision in DCIT v. Syncome Formulations (I) Ltd. 292 ITR (AT) 144 (Mum.) (SB). 3.1 In para 3.15 the ld.CIT(A) observed that once profit and loss account is prepared in accordance with Parts II & III of Schedule VI of Companies Act, 1956, no variation can be made except as provided in Explanation under section 115JB. Hence, contention of the assessee is not sustainable either in law or on the principle of consistency. 3.2 The ld.CIT(A) further observed in para 3.17 that the finding of the Tribunal given in para 13 in the case of Sutlej Cotton Mills Ltd. 45 ITD 22 (Cal.) (SB) is no longer a good law after the decision of the Apex Court in Apollo Tyres. 3.3 The ld. CIT(A) also observed that the decision in Suraj Jewellery (India) Ltd. 21 SOT 79 (Mum.) is in direct contradiction to the Supreme Court's decision in Apollo Tyres and Special Bench decision in Syncome Formulation (I) Ltd. Hence not a good law. Moreover, in Suraj Jewellery (India) Ltd. 21 SOT 79 (Mum.) the amount of capital gain was not credited to profit and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rify that all Companies are liable for payment of advance tax and on default interest under sections 234B and 234C, as the case may be, will be chargeable. However, this circular contains a few significant observations in para 2 which are extracted below: "Sub-section (1) lays down the manner in which income-tax payable is to be computed, sub-section (2) provides for computation of 'book-profit'. Sub-section (5) specifies that save as otherwise provided in this section, all the provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the Act including the provision relating to charge, definitions recoveries, payment, assessment etc. would apply in respect of provisions of this section." 5. At this juncture it is respectfully submitted that there is cleavage of judicial opinion as to whether sections 115JA & 115JB are self-contained code or not even after the insertion of sub-section (4) and sub-section (5) in section 115JA and 115JB respectively. Mumbai Tribunal held in the case of Frigsales (India) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 760 (SC) the Supreme Court observed that the word 'asstt' is used in the Income-tax Act in a number of provisions in a comprehensive sense and includes all proceedings starting with the filing of return or issue of notice and ending with determination of the tax payable by the assessee. Though in some sections the word 'asstt' is used only with reference to computation of income, in other sections it has the more comprehensive meaning. 6.6 It is respectfully submitted that what is envisaged in newly inserted sub-section (5) of section 115JB is that except for substitution of tax payable under the provision and the manner of computation of book profits, all other provision of the Act including computation of income and determination tax payable would apply in respect of this section 115JB. 6.7 'Tax' as per section 2(43) of the Act means income-tax chargeable under the provisions of this Act. If that be so while determining the MAT liability the capital gain not chargeable to tax by virtue of section 54EC and income exempt under section 50 have to adjusted from the book profit computed as per the provisions of section 15JB(2). 6.8 In support the assessee relies on the following d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal. 7.2 Board's Circular No. 13/2001 as also the decision in Jindal Thermal Power Co. Ltd. related to liability for payment of advance tax and interest under sections 234B and 234C on default by companies liable of MAT assessment. These aspects are not under dispute in the present appeal. 7.3 In National Hydro Electric Power Corporation Ltd.'s case decided by AAR the applicant company, supplied electricity at the tariff rate notified by Central Electricity Regulatory Commission (CERC) and recovered the sale price from the beneficiaries. For the purpose of computation of book profit the applicant had deducted the advance against depreciation component from the total sale price and the balance amount alone had been taken to profit & loss account. The AAR held that the amount of advance against depreciation so set apart from the sales in the profit & loss account was nothing sort of "creation" of "reserve". As reserve it fell within clause (B) of Explanation to section 115JB and therefore, advance against depreciation had to be added to the total income and included for the computation of 'book profits' under section 115JB. This ruling also does not render any help to the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 115JB. The contention of the assessee is that once the income from capital gain is exempt under sections 50 and 54EC, then such capital gain cannot be considered for the purpose of computing book-profit under section 115JB because, though it is income, it is exempt from taxation in view of applicability of the provisions of sections 50 and 54EC of the Act. 9.1 Recently, in DCIT v. Bombay Diamonds Co. Ltd. (ITA No. 7488/MUM/07), dated 30-11-2009 Mumbai 'B' Bench of the Tribunal held that if books of account are not prepared in accordance with Part II and Part IIII of Schedule VI to Companies Act, 1956 the Assessing Officer can make adjustment in the Book Profits under section 115JB even if the books of account are audited or certified by the auditors and accepted by the Shareholders. 9.2 The decisions of Mumbai ITAT in Frigsales (I) Ltd. and Suraj Jewellary (India) Ltd. Supra have not been interfered with so far by any higher court and therefore the same are required to be followed by the co-ordinate Benches of the Tribunal as also the Subordinate lower authorities." 4. We find that the issue has been decided by the Hyderabad Special Bench in the case of Rain Commodit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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