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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 ..... the ld. CIT(A)-XXX for the assessment year 2005-06. 2. The first ground raised by the assessee reads as follows : "The ld. CIT(A) has erred in confirming that the Capital Receipts i.e., surplus arising from sale of factory land and building which is not taxable as per the provisions of section 45 read with section 54EC of the Income-tax Act to be brought under tax net, by considering such surplus as part of the "Book Profit" as per the provisions of section 115JB of the Income-tax Act, 1961." 3. The ld. Counsel for the assessee Shri Satish Chandra gave elaborate submissions which are as follows : "The assessee company is engaged in the business of manufacturing pressure cookers for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute income under the Act cannot be brought to tax net by employing the mechanism of section 115JB. The above contentions were not acceptable to the ld. CIT(A). In para 3.8 the ld. CIT(A) noted that the main argument of the assessee is that by virtue of sub-section (5) of section 115JB, the assessee is entitled to avail all the exemptions and deductions provided in the Income-tax Act while calculating the book profit including the deduction under section 54EC. This argument of the assessee cannot be accepted in view of the Board's Circular No. 13/2001, dated 9-11-2001 (252 ITR (St.) 50); decision of Karnataka High Court in India Thermal Power Co. Ltd. v. Dy. CIT 286 ITR 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every assessee, being a company, mentioned in this section." 4.1-1 AAR New Delhi had occasion to consider sub-section (4) of section 115JA in Advance Ruling Petition No 14 of 1997, in reported in 234 ITR at page 335. The AAR observed that section 115JA(4) implies that all other provisions of the Act will continue to apply to every assessee company. That means every assessee company will come within the scope of section 115JA, and save as specifically provided therein will continue to be governed by other provisions of the Act. 4.1-2 This seems to be the perception of the CBDT as well in Circular No. 13 of 2001 dated 9th November, 2001. This circular was issued primarily to clarify 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profit, all the provisions of the Act including the provision relating to charge, definitions, recovery, payments, assessment etc. would apply in respect of this section. 6.4 Hence, as per the said circular all the provisions of the Act including inter alia the provision relating to asset would apply in respect of section 115JB, except tax payable under the provision and the manner of computation of book profit. The word 'asstt' according to the Apex Court can bear a very comprehensive meaning, it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer [(see Kalawati Devi Harlalka v. CIT 661 ITR 680 (SC)]. 6.5 Again, in S. Sankappa v. ITO 68 ITR 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) is no longer a good law in view of Apex Court judgment in Apollo Tyres. There is nothing in the judgment of the Apex Court in Apollo Tyres which contradicts the legal portion set out by the Special Bench of the Tribunal in Sultej Cotton Mills Ltd.'s case as stated above. 7.1 In Syncome Formulations (I) Ltd.'s case, the Special Bench held that the deduction as 80HHC in a case of MAT assessment is to be worked out on the basis of adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to computation of profits and gains of business or profession. This decision has nothing to do with the issue involved in the present appeal. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain arising on transfer of assets to holding company is not includible in the profits of the assessee company." 8.1 The Tribunal confirmed the order of CIT(A) holding that the capital receipts which do not constitute income under the Income-tax Act cannot be brought to tax net by employing the mechanism of section 115W and the said section has not intended to bring all non-income item within the domain of Income-tax Act. 9. The decision of Bombay High Court in Keekaylal Investment Co. Pvt. Ltd. 249 ITR 597 does not come in the way of the assessee as the assessee has credited the Capital Gains in the profit loss account which forms the very basis for computing the book profit under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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