TMI Blog2011 (6) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... to rectify the assessment to make it in compliance with statutory provisions which exhaustively deals with the scheme of book profit assessment - Decided against Assessee. - IT APPEAL NoS. 15, 31, 37 AND 43 of 2010 - - - Dated:- 27-6-2011 - C. N. Ramachandran Nair and Bhabani Prasad Ray, JJ. Jose Joseph for the Appellant. P. Raghunath and Premjit Nagendran for the Respondent. JUDGMENT Ramachandran Nair, J. Revenue has filed these appeals challenging the order of the Income Tax Appellate Tribunal allowing the appeals filed by the respondent-assessee for the assessment years 1997-98 to 2000-2001. Assessee, a plantation company engaged in rubber cultivation and deriving agricultural income is also liable to pay tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer accordingly completed the assessment on book profit without excluding income derived on sale of old and unyielding rubber trees credited by the assessee in the Profit and Loss Account prepared in accordance with the provisions of the Companies Act. The assessee having failed to succeed in first appeals on merit, filed second appeals before the Tribunal. Before the Tribunal the department opposed assessee's appeals by contending that the computation of book profit stands covered by decision of the Honourable Supreme Court in Apollo Tyres Ltd. v. CIT [2002] reported in 255 ITR 273/122 Taxman 562 wherein the Supreme Court held that Profit and Loss Account prepared in accordance with the provisions of Part II and Part III of Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeds of old and unyielding rubber trees as income. The Honourable Supreme Court has settled the procedure for book profit assessment in the decision in Apollo Tyres Ltd.'s case (supra) by holding that additions and deductions permissible from the Profit and Loss Account prepared under the Companies Act for the purpose of determining book profit are those specifically stated in Explanation to Section 115JA(2) of the Act. We notice that the Tribunal has considered the decision of this Court in CIT v. Rajagiri Rubber Produce Co. Ltd. [1991] 189 ITR 182/[1992] 62 Taxman 227 wherein this court held that there can be no capital gain on sale of old and unyielding rubber trees and this view taken by this court is confirmed by Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section II5JA of the Act which is the provision relevant for all the assessment years involved in this case and additions and deductions to arrive at the book profit has to be made strictly in accordance with the Explanation to Section 115JA(2) of the Act. The only question, therefore, to be considered is whether the sale proceeds of old and unyielding rubber trees credited by the assessee in the Profit and Loss Account prepared under the provisions of the Companies Act above referred is an item covered by clause (ii) of Explanation to Section 115JA(2) of the Act. For easy reference we extract hereunder the relevant provisions of the Act: "115JA. Deemed income relating to certain companies. (1) Notwithstanding anything contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee the Tribunal has followed the decision of the Bombay High Court in CIT v. Akshay Textiles Trading Agencies (P.) Ltd. [2008] 167 Taxman 324 Bombay High Court held that capital gains cannot be considered as part of book profit for the purpose of assessment under Section 115JA of the Act. However, the clear finding of the Tribunal is that sale proceeds of old and unyielding rubber trees is "agricultural income" which to our mind is very strange and unacceptable because assessee itself has no case that sale proceeds of old and unyielding rubber trees is agricultural income because if such a claim is advanced, assessee which is regularly exigible to agricultural income tax will have to pay agricultural income tax which asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Chapter III of the Income Tax Act only are excludable from Profit and Loss Account in computing the book profit. Though Section 10(1) in Chapter III excludes agricultural income, going by the above decisions of the Honourable Supreme Court we are unable to uphold the finding of the Tribunal that sale proceeds of old and unyielding rubber trees is also agricultural income which position assessee itself does not canvass because if the assessee take such a position, assessee should have paid huge amount of agricultural income tax which would be more than the tax payable on book profit under the Central Act. Capital gain is assessable under Chapter IV of the Income Tax Act and is not an item falling under Chapter III to permit exclusion und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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