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TMI Blog2018 (12) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the book profit and the same deserves to be deleted. The next contention of the assessee is that SICA was exempt from the provisions of section 115JB of the Act. In the instant case, there is no dispute that the assessee company’s net worth was negative and the assessee satisfied the condition to hold the company as sick industrial company. Though the SICA was repealed w.e.f. 2003, the provision was not removed from the Income Tax Act. On the similar facts, the Coordinate Bench in B.V. REDDY TRANSPORTS PVT. LTD. VERSUS ASST. COMMISSIONER OF INCOME TAX [2018 (6) TMI 281 - ITAT HYDERABAD] decided the issue in favour of the assessee - there is no case for making adjustment s u/s 115JB of the act and the assessee is entitled for relief - Decided in favour of assessee - I.T.A.No.233/Viz/2017 - - - Dated:- 12-12-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N.Hari, AR For The Respondent : Shri D.K.Sonowal, CIT DR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Guntur vide I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of accounts and it is not open for the AO to revisit the Profit Loss account to make the adjustment to the Profit Loss account for the purpose of book profit u/s 115JB of the Act. For this proposition, the assessee relied on the decision of Hon ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT 255 ITR 273 and the decision of Hon ble Bombay High Court in CIT, Mumbai Vs. Forever Diamonds Pvt. Ltd., Mumbai and requested not to make any adjustment to the book profit for the purpose of MAT. 3. The AO considered the explanation offered by the assessee and observed that as per Clause(b) of Explanation 1 to sub-section (2) of Section 115 JB, Book profit means the net profit as shown in the Profit Loss account for the relevant previous year prepared u/s 115JB, as increased by the amounts carried to any reserves by whatever name called, other than the reserve specified u/s 33AC of the act (i.e. Reserve for Shipping Business). In the instant case, the assessee has derived the profit of ₹ 4,33,66,168/- on sale of the asset and the amount was directly carried to Capital Reserve in the Balance Sheet without crediting the said amount to the Profit Loss A/c, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company. 3.2. In view of the above, in the instant case, the assessee company has not filed any evidences/ documents/ orders issued by BIFR declaring the assessee company as Sick Industrial Company under the provisions of Sec.17(1) of the SICA. Therefore, the assessee company cannot be considered as Sick Industrial Company for the purpose of calculating Minimum A1ternate Tax(MAT) under the provisions of Sec.115JB of the Income Tax Act, 1961.Therefore, the AO rejected the claim of the assessee on this ground and relied on the decisions of Sumer Builders (P) Ltd. Vs. CIT (2012) 50 SOT 198 Mumbai and the Special Bench decision of ITAT in the case of Rain Commodities Ltd. Vs. CIT [2010] 40 SOT 265 and held that the assessee is not permitted to take the profit derived by sale of profits directly to the balance sheet and is required to be credited to the Profit Loss account which is taxable u/s 115JB of the Act. Accordingly the AO adjusted the book profit and assessed the sum of ₹ 4,33,66,168/- u/s 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al companies was not removed from the statute, hence, submitted that the provision of non-application MAT tax to Sick Industrial company is applicable in the case of the assessee as the company s liabilities are more than the assets and the company s net worth became negative. In support of his contention, the Ld.AR relied on the decision of ITAT Hyderabad A Bench in the case of B.V.Reddy Transports Pvt. Ltd., Chittoor Vs. ACIT, Tirupathi vide I.T.A. No.13/Hyd/2016 dated 30.05.2018. Accordingly, argued that the order of the Ld.CIT(A) required to be set aside and allow the appeal of the assessee. 6. On the other hand, the Ld.DR argued that as per section 115JB, Explanation 1 of sub section (2) the net profit shown in the books required to be as increased by the amounts carried to any reserves by whatever name called rather than the reserve specified u/s 33AC In the instant case, the reserves carried to the general reserve was not relating to section 33AC of the Act, since the assessee is not engaged in the shipping business. Therefore, argued that the assessee is not permitted to take the reserves directly to the balance sheet without routing it through Profit Loss account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the A.Y.2012-13, the assessee sold the landed property (fixed asset) for a consideration of ₹ 4,33,85,000/- which resulted in profit of ₹ 4,33,66,168/-. The assessee has taken the said profit directly to capital reserve account, but not routed it through the Profit Loss account. Therefore, contended that the profit which was not credited to the Profit Loss account is not taxable u/s 115JB of the Act. Since the company s Profit Loss account, Balance Sheet was compiled in accordance with the Companies Act and Approved in the Board meeting the assessee contended that the AO is not permitted to disturb the book profit arrived by the assessee unless it is permitted by the provisions of section 115JB of the act. The assessee relied on the decision of Apollo Tyres Ltd. Vs. CIT (supra) and also the decision of Hon ble High Court of Bombay in the case of CIT Vs. Forever Diamonds Pvt. Ltd., Mumbai. Before us, the assessee relied on the decision of ITAT Mumbai in the case of Bhagwan Industries Ltd., cited supra which was affirmed by the Hon ble High Court of Bombay in I.T.T.A. No.436 of 2015. In this case also the assessee has not credited the resultant profit on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble Supreme Court that the AO has only the power to examine whether books of account are certified by authorities under the Companies Act as having been properly maintained in accordance with the provisions of the Companies Act. The AO, thereafter, has limited power of making adjustments as provided inExplanation to section 115J. The relevant portion of the judgment of the Hon ble Supreme Court is reproduced below as a ready reference. The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to section 115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the Explanation. The use of the words in accordance with the provision of Parts II and III of Schedule VI to the Companies Act in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be brought to tax u/s 115JB of the Act. In the instant case, the capital gains on sale of asset resulted into Nil income. Therefore, even applying the case law in the case of Veekaylal Investment Co.(P) Ltd., the assessee is entitled for relief. In the instant case there was no profit in the ordinary course of business and the profit derived by the assessee was on account of sale of asset which was a capital profit. The assessee has not shifted the business profits to the balance sheet. The capital gains on sale of asset as per section 45 results in to loss but not the positive income. Therefore the facts of the assessee s case are identical to the decision of Bombay high court in the case of Bhagwan Industries Ltd, and the said case is squarely applicable in the assessee s case. Further the case law relied up on buy the Ld.AR also supports the assessee s case since the capital gains results in to loss. Thus we hold that the lower authorities committed an error in making adjustment to the book profit and the same deserves to be deleted. 9. The next contention of the assessee is that SICA was exempt from the provisions of section 115JB of the Act. In the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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