TMI Blog2005 (6) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to exclude the capital gains in the calculation of deemed profits under section 115JA, without appreciating the applicability of the decision of Indo Marine Agencies (Kerala) (P.) Ltd. v. Asstt. CIT [1995] 51 TTJ (Coch.) 18 relied upon by the Assessing Officer which was also confirmed by Bombay High Court in the case of CIT v. Veekaylal Investment Co. (P.) Ltd., 249 ITR 597 dated 8-2-2001." 2. The assessee-company is dealing in air-conditioners and refrigeration parts. The first issue is regarding the addition of Rs. 10,00,000 on account of sundry creditors suspense account. The facts are that in the list of sundry creditors, the total outstanding amount was shown as Rs. 14,08,600. In response to the Assessing Officer s query regarding sundry creditors, the assessee submitted confirmation letters from six creditors. The Assessing Officer, therefore, was satisfied that the sundry creditors were genuine to that extent. The Assessing Officer found that the sundry creditors suspense account had a further outstanding sum of Rs. 10 lakhs. According to the Assessing Officer, the assessee was not able to identify the persons to whom this amount was payable. Since the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The assessee is also directed to co-operate for the same. 3. The second issue is regarding application of section 115JA of the Income-tax Act, 1961, in respect of capital assets sold. The facts are that the book profits including sale of capital asset were Rs. 83,26,670 whereas for the purpose of taxation the income offered was Rs. 1,32,840. According to the Assessing Officer, as the book profits were more than the returned profits, the assessee should have offered of its income under section 115JA of the Act. In this regard, the stand of the assessee was that the capital gains arising under section 50 of the Income-tax Act, 1961, on a depreciable asset was invested for purchase of another asset. It was submitted that the object of bringing section 115JA of the Act on the statute was that every corporate entity would pay a minimum corporate tax on the profit declared in its accounts. It was argued that these profits were profits from business and not capital gains. It was argued that while interpreting a statute, one has to adopt a construction that would promote the general legislative purpose underlying the provisions of the statute. It was argued that section 115J was inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act. On the other hand, in the case of Indo Marine (Kerala) Pvt. Ltd. a decision which was passed after the decision of the Special Bench of the Tribunal did not take into account the decision of the Special Bench and held that the capital gains on the sale of assets should be considered for the purpose of computation under section 115J of the Income-tax Act. The decision of the Kerala Bench was erroneous as it was contrary to the decision of the Special Bench of the Tribunal in the case of Sutlej Cotton Mills. " 3.2 Before us, the learned Departmental Representative supported order of the Assessing Officer, while the learned Authorised Representative of the assessee supported the order of the learned CIT(A). The issue before us is that whether the capital gain to be included in the computation of profit under section 115JA of the Act or not. The case of the assessee is that due to the sale of capital assets, the assessee has earned profit to the tune of Rs. 83,26,670. The assessee claimed exemption on these capital gains under the provisions of section 50 of the Income-tax Act. The Assessing Officer computed the capital gains under the provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loss account for reflecting the correct working results of the company. The capital gains, in this case, are exempt under section 50 of the Act and this fact has not been disputed by the department. Therefore, these capital gains are not in the nature of income and they cannot be taxed as income under the provisions of section 115JA of the Act. It is a settled legal position that section 115J is self-contained code. This is applicable only to the provisions of section 115JA. But in section 115JA a new sub-section (4) has been brought out on the statute which was not there is section 115J. Sub-section (4) of section 115JA now starts that "save as otherwise provided all other provisions of the Act shall apply". Thus, sub-section (4) has been introduced first time in section 115JA. Now other provisions of the Act will continue to operate in view of sub-section (4). Therefore, the exempt income under section 50 of the Act would remain exempted as per the provisions of sub-section (4). The operation of non obstante clause is now limited only to determine the book profits and the book profits so determined has to be taxed taking into consideration the other provisions of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Members of this constitution. Relying on the provisions of sub-section (4) of section 115JA, the Tribunal has observed that section 115J is distinguishable from the present section. Relevant portion of the same is reproduced hereunder : "From the above we find that the judgment in the case of Kwality Biscuits ( supra ) is based on this consideration that the provisions of section 115J are to be applied for computation of income for the purpose of this section and not for other sections. But in the present case, we find that we are dealing with section 115JA and it is specified in sub-section (4) of this section that save otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. There was no similar provision in section 115J and therefore, this judgment cannot be made applicable to the present case. This observation of Their Lordships. When deeming fiction is brought under the statute it is to be carried for its logical conclusion but without creating further deeming fiction so as to include other provisions of the Act which are not specifically made application . 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