TMI Blog2012 (4) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) of Section 94 of the Act inserted with effect from 1.4.2002, Tribunal erred in deleting disallowance of loss of 47.23 crores (rounded off) for the purpose of computation of book profit under Section 115JB of the Act. Counsel pointed out that such loss was suffered by the assessee on account of dividend stripping. To control which activities sub-section (7) of Section 94 of the Act was added. - held that:- Such provision cannot be applied while computing book profit for the purpose of Section 115JB of the Act. Book profit under Section 115JB of the Act has to be worked out as per the provisions made in the section, giving effect to explanation contained therein. Appeal admitted. - Tax Appeal No. 290 of 2010 - - - Dated:- 2-2-2012 - Akil Kureshi and Ms. Sonia Gokani, JJ. Manish Bhatt for the Appellant. S.N. Soparkar and Mrs. Swati Soparkar for the Respondent. ORDER Akil Kureshi, J. Revenue is in appeal against the judgment of the Tribunal dated 4th September, 2009, raising following question of law for our consideration: "(1) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in restricting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res(rounded off) towards payments made to Meconcy company. From the record which we have perused with the assistance of learned counsel for the parties, it emerges that such payment was made for advising the assessee on profit improving measures. Assessing Officer noticed that assessee had claimed depreciation on such amount by treating it as capital expenditure in the books and still claimed it has revenue expenditure in the return of the income. Before the Assessing Officer, the assessee contended that such payments were made to Meconcy Co. who was engaged to take up project of profit improvement programme. Entire programme was divided into three parts consisting of three months each. Such activities helped the company in increasing sales, cost reduction and eventually would increase the profit and therefore, the expenditure was claimed as revenue expenditure. 3.1 Assessing Officer however, treated expenditure as capital primary on the ground that auditors of the company had treated it as capital expenditure and the assessee had not excluded the same from computation of book profit. He was also of the opinion that nature of expenditure showed that it was for earning endur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Section 115JB of the Act and considering sub-section (7) of Section 94 of the Act inserted with effect from 1.4.2002, Tribunal erred in deleting disallowance of loss of 47.23 crores (rounded off) for the purpose of computation of book profit under Section 115JB of the Act. Counsel pointed out that such loss was suffered by the assessee on account of dividend stripping. To control which activities sub-section (7) of Section 94 of the Act was added. Counsel also relied on clause (f) of explanation (1) of Section 115JB of the Act and clause (2) thereof to contend that Tribunal committed error. 6.1 Counsel for the assessee however, placed reliance on decision of the Apex Court in case of CIT v. Walfort Share Stock Brokers (P.) Ltd. [2010] 326 ITR 1/192 Taxman 211 (SC), to contend that Tribunal committed no error. 6.2 Section 115JB of the Act as is well known makes special provision for payment of tax by certain companies. Such section makes provision for minimum tax to be paid by the company as prescribed on the basis of book profit when it is found that its computation of income as per normal computation is below certain minimum percentage. For the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs down the cost. It will not increase the expenditure. Hence, expenditure, return on investment, return of investment and cost of acquisition are distinct concepts. Therefore, one needs to read the words "expenditure incurred" in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax. As stated above, the scheme of Sections 30 to 37 is that profits and gains must be computed subject to certain allowances for deductions/ expenditure. The charge is not on gross receipts, it is on profits and gains. Profits have to be computed after deducting losses and expenses incurred for business. A deduction for expenditure or loss which is not within the prohibition must be allowed if it is on the facts of the case a proper Debit Item to be charged against the Incomings of the business in ascertaining the true profits. A return of investment or a pay-back is not such a Debit Item as explained above, hence, it is not "expenditure incurred" in terms of Section 14A. Expenditure is a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied while computing book profit for the purpose of Section 115JB of the Act. Book profit under Section 115JB of the Act has to be worked out as per the provisions made in the section, giving effect to explanation contained therein. It is by now well settled that Section 115JB of the Act is a self contained Code. In case of Indo Rama Synthetics (I.) Ltd. v. CIT [2011] 330 ITR 363/196 Taxman 539/9 taxmann.com 25 (SC), Apex Court observed as under : "It is, thus, clear that what is "book profit" has been defined and explained in the above Explanation. Section 115JB is a self-contained code. It applies notwithstanding other provisions of the Act. There is no scope for any allowances or deductions under any other section from what is deemed to be total income of the company (assessee)." Like-wise in case of Ajanta Pharma Ltd. ( supra ), the Apex Court observed as under : "8. By the Finance Act, 2000, Section 115JB was inserted w.e.f. 1.4.2001 providing for levy of MAT on certain companies. Section 115JB, though structured differently, stood inserted to provide for payment of advance tax by MAT companies. Section 115JB is the successor section to Section 115JA. In essence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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