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TMI Blog2001 (2) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law. Hence, they are disposed of by this judgment. For the sake of convenience, we are relying upon the facts in Income-tax Appeal No. 27 of 2000. Facts : The assessee, Veekaylal Investment Co. Pvt. Ltd., filed its return of income for the assessment year 1989-90 declaring a net loss of Rs. 29,120. During the previous year relevant to the above assessment year 1989-90, the assessee sold part of the land admeasuring 36,693 sq. yards to Manish Builders, Bacchubhai Parekh and S. N. Apte and others. In the return of income, the assessee treated the income derived from the above property as long-term capital gains and offered Rs. 2.70 lakhs for taxation. The assessee was carrying on the business of investment. The Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved, the Department has filed this appeal. Arguments : Mr. Desai, learned senior counsel appearing on behalf of the Department, contended that section 115J related to certain companies. That, it forms part of Chapter XII-B. That section 115J begins with a non obstante clause. He contended that the said section was introduced by the Finance Act, 1987. That, by virtue of the said section, it is provided that in the case of a company whose total income, as computed under the Act, is less than 30 per cent. of the book profits computed under that section then the total income chargeable to tax will be 30 per cent. of the book profits as computed. That, for the purposes of section 115J book profits will be the net profits as shown in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us items enumerated in Parts II and III of Schedule VI to the Companies Act and he contended that all the said items in clause 3 of Part II of Schedule VI indicated that book profits, essentially, were commercial profits. That, the said items in clause 3, essentially, referred to the working results of the company. He contended that, on the other hand, receipt of capital gains resulted in a change in the capital structure of the company. That, capital gains have not been contemplated by clause 3 of Part 11 of Schedule VI to the Companies Act. That, under, clause 3, the items enumerated only deal with working results of the company. They do not touch upon the capital structure of the company. That, according to the accounting practice, a cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the book profit then the assessee has to prepare a profit and loss account for the previous year in accordance with Parts II and III of Schedule VI to the Companies Act. In other words, a plain reading of section 115J shows that if the assessee is a company and its total income under the Income-tax Act is less than 30 per cent. of its book profits then, fictionally, it will be deemed that its total income chargeable to tax would be an amount equal to 30 per cent. of such book profits. Hence, in such a case, the total income of the assessee is first required to be computed under the Income-tax Act and if the total income so computed is less than 30 per cent. of the book profits then the profit and loss account shall have to be prepared in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken in circumstances of exceptional or non-recurring nature shows clearly that capital gains should be included for the purposes of computing book profits. That, capital gains would certainly be one of the various items whose information is required to be given to the shareholders under the said clause 3(xii)(b). So also, the disclosure is required to be made in respect of investment in the capital of a partnership firm if the company is a partner on the date of the balance-sheet (see page 1651 of the Companies Act by A. Ramaiya, fourteenth edition). Similarly, profits or losses on such investments are also required to be disclosed. (see clause 3(xii)(a) of Part II of Schedule VI to the Companies Act). In the circumstances, the question i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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