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TMI Blog2012 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... e income from sale of ship is not a capital receipt which has to be included while computing the book profit u/s 115JB as per decision of ITAT Mumbai Bench in the case of ITO v. Frigsales (India) Ltd. [2005] 4 SOT 376 (MUM)." 2. The assessee in the present case is a shipping company. The return of income for the year under consideration was filed by it on 29.11.2006 declaring total income of Rs. 24,45,413/- including tonnage income of Rs. 2,86,396/-declared u/s 115VG since it had opted for tonnage tax u/s 116VP which was approved by the concerned Addl. CIT, Range 5(1). In the return of income, the assessee had declared book profit u/s 115JB at Rs. 21,59,034/-. During the course of assessment proceedings, it was noticed by the AO that the assessee has excluded the book profit derived from the activities of tonnage tax company worked out at Rs. 11,95,22,747/- while computing the book profit u/s 115JB. From the perusal of working of the book profit so excluded as made u/s. 115VO, the AO noticed that the profit earned by the assessee on sale of ships amounting to Rs. 1,82,23,143/- was included by the assessee in the profit derived from the activities of tonnage tax company. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income as per tonnage tax scheme is to be computed in accordance with the provisions of section 115V-I of the Income-tax Act. While computing its profit under the provision of section 115V-I of the Income-tax Act, the appellant company has included profit on the sale of ships amounting to Rs. 1,82,23,140/-. The Assessing Officer has held that this profit of the appellant is not attributable to profit on core activities and incidental activities as per provisions of section 115V-I of the Income-tax Act and therefore the profits of the Appellant on the sale of ships cannot be taken as part of the profits under the provisions of section 115V-I of the Income-tax Act. As per provision of section 115VO of the Income-tax Act, income of the company as per tonnage tax scheme computed under section 115V-I is not to be included while computing the book profits for the purpose of section 115JB of the Income-tax Act. Therefore, it is only the profit computed under section 115V-I of the Income-tax Act that is required to be excluded while computing the book profit of the appellant for the purpose of section 115JB of the Income-tax Act. The profit to the appellant on the sale of ships is deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act, 1956,which are certified by the auditors and passed by the company in general meeting. The Assessing Officer has only the power of examining whether the books of accounts are duly certified and whether such books have been properly maintained in accordance with the Companies Act. The Assessing Officer does not have the jurisdiction to go beyond the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115JA." In those cases Supreme Court was dealing with the provisions of section 115JA of the income tax act and it was held that where the books of accounts are audited, Assessing Officer has no power to make the adjustment to the book profit other than those permitted under explanation. Provisions of section 115JB are similar to the provisions of section 115JA of the income tax act and therefore, above decision of Supreme Court are equally applicable to the provisions of section 115JB of the income tax act. The appellant has relied on the judgment of ITAT Mumbai Bench in the case of Fringsales (India) Limited (supra) but has not elaborated as to how the ratio of the said case can be applied to the case of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115VI, is excluded from the book profit of the company for the purposes of section 115JB. The provisions of sub-section (1) of section 115VI are reproduced hereunder : (1) For the purposes of this Chapter, the relevant shipping income of a tonnage tax company means - (i) its profits from core activities referred to in sub-section (2); (ii) its profits from incidental activities referred to in sub-section (5): Provided that where the aggregate of all such incomes specified in clause (ii) exceeds one-fourth per cent of the turnover from core activities referred to in sub-section (2), such excess shall not form part of the relevant shipping income for the purposes of this Chapter and shall be taxable under the other provisions of this Act. The contention raised by the learned counsel for the assessee before us is that the profit earned by the assessee from sale of old ships forms part of shipping income of a tonnage tax company being profits from core activities as referred to in sub-section (2) of section VI. The said provisions are reproduced below : "(2) The core activities of a tonnage tax company shall be - (i) its activities from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tonnage tax company under the special provisions contained in Chapter XIIG and not for the purpose of computing book profit u/s 115JB. Even otherwise, section 115VN provides that any profits or gains arising from a transfer of a capital asset being an asset forming part of the block of qualifying asset shall be chargeable to tax in accordance with the provisions of section 45 read with section 50 and the capital gains so arising shall be computed in accordance with the provisions of sections 45 to 51. As per the said provisions, the profits arising from the transfer of capital assets thus are taken out of the relevant income of a tonnage tax company and are taxed separately under the head "Capital gains" as per the provisions contained in sections 45 to 51. The same, therefore, does not form part of relevant shipping income of a tonnage tax company as referred to in section 115VI which is liable to be excluded from the book profit of the company for the purposes of section 115JB as provided in section 115VO. We, therefore, find no merit in ground No.1 raised by the assessee in this appeal and dismiss the same. 9. As regards ground No.2 relating to the assessee's alternative cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties Ltd. (supra) wherein it was held, after taking into consideration all the relevant aspects of the matter as well as the judicial pronouncements cited by both the parties, that in the absence of any provision for exclusion of capital gains in the computation of book profits under the provisions contained in the Explanation to section 115JB, the assessee was not entitled to the exclusion thereof as claimed. In the said case, reliance, inter alia, was placed on behalf of the assessee on the provisions of sub-section (5) of section 115JB as has been done by the learned counsel for the assessee in the present case. It was held by the Special Bench of ITAT in this context that the expression "save as otherwise" provided in section 115JB used in sub-section (5), clearly means that what is provided in section 115JB should be religiously followed and any thing over and above than what is specifically provided in section 115JB will be subject to other provisions of the Act. It was held by the Tribunal that the provisions of section 115JB have an overriding effect upon other provisions of the Act and, therefore, the method of computation of book profit provided in the Explanation to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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