TMI Blog2011 (7) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be an amount equal to thirty per cent of such book profit and in such a case, such assessee shall prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 - it is absurd to suggest that the profit on sale of fixed assets amounting to ₹ 6,02,91,024 did not form part of the book profit under section 115JA - Decided in favour of the revenue - IT APPEAL NO. 1 OF 2004 - - - Dated:- 13-7-2011 - BHASKAR BHATTACHARYA AND SAMBUDDHA CHAKRABARTI, JJ. J.P. Khaitan and Sanjoy Bhowmick for the Appellant. P.N. Bhowmick for the Respondent. JUDGMENT Bhaskar Bhattacharya, J. This appeal under section 260A of the Income-tax ( Act ), 1961 is at the instance of an assessee and is directed against order dated 28-8-2003 passed by the Income-tax Appellate Tribunal, C Bench, Kolkata in Income-tax (Appeals) being ITA No. 1153 (Cal.) of 2001 for the assessment year 1997-98 dismissing the appeal filed by the assessee. 2. Being dissatisfied, the assessee has come up with the present appeal. 3. The facts giving rise to filing of this appeal may be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted the customs duty benefit which would have accrued to the appellant on the import of raw materials in future. The said amount was worked out with reference to the duty-free import entitlement on the basis of the exports made by the appellant during the financial years 1993-94 to 1996-97 on the assumption that the appellant would actually receive the import licence and utilise the same within the validity period. (h) The quantum of customs duty benefit was taken at 22 per cent of the import entitlement on the assumption that the customs duty rate would be 22 per cent at the time of import which the appellant would not have to pay. The appellant did not sell any license at all and the sum of ₹ 228.34 lakh was a notional figure and was not income accrued to the appellant during the previous year relevant to the assessment year. (i) The appellant during the previous year ending on March 31, 1997 deposited fixed asset at a profit of ₹ 6,02,91,024. The said amount was reflected in the appellant's profit and loss as forming part of the miscellaneous income along with the notional export benefits receivable of ₹ 228.34 lakh. (j) In its return for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax (Appeals). 4. Against the decision of the Tribunal, the assessee has come up with the present appeal. 5. A Division Bench of this Court at the time of admission of this appeal formulated the following substantial questions of law for determination in this appeal: (i) Whether the Tribunal was justified in law in holding that rent and repairs and maintenance referable to guest house allowable under section 30 of the Income-tax Act, 1961 were to be disallowed under section 37(4)?(sic). (ii) Whether the Tribunal mis-directed (sic) itself in law in holding that the notional figure of ₹ 228.34 lakhs (sic) in respect of duty free import entitlement accrued as income during the financial year ended March 31, 1997 relating to the assessment year 1997-98?(sic). (iii) Whether the Tribunal was justified in law in holding that the profit on sale of fixed assets amounting to ₹ 6,02,91,024 formed part of the book profit under section 115JA of the Income-tax Act, 1961? (sic). (iv) Whether the provisions relating to payment of advance tax are applicable in a case where the total income is deemed to be 30 per cent of the book profit under section 115JA a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the termination of his management or the modification of the terms and conditions relating thereto; (b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto; (c) any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto; (d) any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business; (iii) income derived by a trade, professional or similar association from specific services performed for its members; (iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947); (iiib) cash assistance (by whatever name c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation.-- For the purposes of this clause,-- (i) 'agreement' includes any arrangement or understanding or action in concert,-- (A) whether or not such arrangement, understanding or action is formal or in writing; or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings; (ii) 'service' means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging. (vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.--For the purposes of this clause, the expression Keyman insurance policy shall have the meaning assigned to it in clause (10-D) of section 10; (vii) any sum, whether received or receivable, in cash or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant with the following specific note cannot be chargeable to tax: Export Benefit Receivable. Benefit arising on duty-free import entitlement against export made by the company hitherto accounted for on receipt basis has with effect from the current financial year, been accounted for on accrual basis. As a result, profits for the year are higher by ₹ 228.34 lakhs which include under Miscellaneous income in schedule 15. 12. It is now a settled law that if a particular income shown in the account of profit and loss is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is outside the purview of tax laws; a particular income is either liable to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income (Ref: CIT v. M.R. P. Firm Muar AIR 1965 SC 1216. 13. Therefore, the Tribunal below committed a substantial error of law in treating the amount of ₹ 228.34 lakh as chargeable to Income-tax notwithstanding the fact that the same did not come within the purview of section 28(iiia) of the Act when the license had not been sold and no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts carried to any reserves by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by,-- (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 3[but ending before the 1st day of April, 2001] shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for deduction under section 80-HHE, computed under sub-section (3) of that section. (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32-A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74-A. (4) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. 16. A plain reading of the aforesaid provisions makes it abundantly clear that where in the case of an assessee, being a company, the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after the 1-4-1997 but before the 1-4-2000 is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit and in such a case, such assessee shall prepare its prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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