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2012 (4) TMI 215 - ITAT INDOREAppeal by assessee – profit on 'sale of ships' is not an income derived from the activities of a tonnage tax company referred to in Section 115 V and not to be include in the "Book Profit” and to be excluded in determining the Book Profits u/s 115JB of Income Tax Act - Assessee contented that assessee company was carrying on only one activity of operation of ships and therefore entire income relating to ships as recorded in the profit & loss account was to be taken as profit derived from the activities of tonnage tax company and the same was to be reduced from the book profit for the purpose of sec.115JB – Held that:- assessee has contended that the profits on sale of old ships are covered by clause (i) of sub-section (2) of section 115VI which is liable to be rejected as the profits from core activities as referred to in sub-section (2) forms part of a shipping income of a tonnage tax company and as per clause (i) of sub-section (2) of section 115VI, core activities of a tonnage tax company mean, inter alia, its activities from operating qualifying ships. In our opinion, the activity of sale of old ships cannot be regarded as an activity from operating qualifying ships - against assessee. 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)." - assessee submitted that profits on a sale of old ship are nothing but a capital receipt in the hands of the assessee and since the profit from such sale is chargeable to tax as capital gains u/s 50, the provisions of section 115JB are not attracted to such profit – revenue contented that what is to be excluded for the purpose of computing book profit u/s 115JB has been specifically provided in Explanation 1 to section 115JB(2) and the same does not cover capital gain or capital receipt relied on the decision of Hyderabad Special Bench of the Tribunal in the case of Rain Commodities Ltd. v. Dy. CIT- 2010 - TMI - 203366 - ITAT HYDERABAD – Held that:- the decision of Special Bench of the Tribunal at Hyderabad in the case of Rain Commodities Ltd. (supra) 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 section 115JB should be followed while computing the book profit and the normal provisions of computation of profit under any head of the Act shall not be applicable – in favour of revenue.
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