TMI Blog2015 (6) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... to consideration for computing the book profit. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself. Thus the net amount on account of sale of shares will alone be taken into account in computation of book profit and not the amount of Long term capital gain after indexation. - Decided against assessee. Non inclusion of securities transaction tax [STT] as a deduction in computing the book profit under Section 115JB - Held that:- Here we agree with the contention of the learned counsel, because the assessee in the Profit & loss account has credited the net gain after net off of STT of ₹ 25,65,015/-. Thus, the STT amount will not be included in the computation of book profit and only the net gain of ₹ 1,90,39,06,630/- shall alone be taken into account. - Decided in favour of assessee. - ITA No.1284/Mum/2013 - - - Dated:- 10-6-2015 - Shri B R Baskaran and Shri Amit Shukla, JJ. For The Appellant : Shri A R S Venkatraman For The Respondent : Shri Santosh Kumar ORDER Per Amit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 2,046,906,600 Less : Indexed Cost of Acquisition: 321,335,840 (COA i.e.142,999,970 * CII of year of sale i.e. 582)/CII of year of purchase i.e. 259) Long term capital gain exempt u/s. 10(38) 1,725,570,760 In the said notes, the assessee stated that the Long term capital gain to be included in the book profit should be ₹ 1,72,55,70,760/- on the following reason: It is our submission that the book profit u/s. 115JB of the Act is to be computed by reducing the surplus on sale of investments of ₹ 1,90,78,63,394/- and adding the long term capital gain of ₹ 172,55,80,760/- on sale of investments as computed in terms of section 45 to section 55 of the Act. This is line with the Proviso to section 10(38) of the Act which requires that Income by way of Long Term Capital Gain shall be taken into account in computing the book profit and the income tax payable u/s. 115JB of the Act. The AO held that the Long term capital gain after indexation and the deduction of STT paid cannot be accepted for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory of section 10(38) and corresponding amendment in section115JB. He submitted that proviso to section 10(38) makes it abundantly clear that the income by way of Long term capital gain is to be taken into account while computing the book profit and income tax payable u/s. 115JB. This proviso was inserted by the Finance Act 2006 w.e.f. 01.04.2007. Simultaneously, amendment was brought in section 115JB also in clause (ii) to Explanation (1) in section 115JB. Thus, what is contemplated under the relevant provision is the income by way of Long term capital gain and such Long term capital gain means gains computed u/s. 48 to section 55. The proviso to section 10 should be read as substantive part of the section because it qualifies generality of the main enactment and it has to be read and construed harmoniously with the main enactment. In support of this contention, he strongly relied upon the decision of Hon ble Supreme Court in the case of CIT vs. Indo Mercantile Bank Ltd. [36 ITR 1] and CCT vs. Ramkishan Shrikishan Jhaver Ors [66 ITR 664]. Thus, he submitted that Long term capital gain, which is to be included in computation of book profit should be after indexation as computed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1956. Thus, for computing the profit and the taxability u/s. 115JB, it is mandatory for the assessee to compute profit as per Profit loss account prepared under the relevant provisions of the Companies Act. The relevant Schedule under the Companies Act for the preparation of statement of Profit loss account provides that in case of sale of investments, net gain/loss should be disclosed. The net gain/loss means sale minus purchase and other cost. The Companies Act does not speak about Long term/ Short term capital gain. In accordance with the requirements of the Companies Act, the assessee has credited the net profit on sale of investment i.e. net gain on shares of HDFC Bank at ₹ 1,90,78,63,394/-,. Accordingly, this amount has been credited in the Profit loss account. Explanation to subsection (2) of section 115JB provides that, book profit means the net profit as shown in the Profit loss account (which has been prepared in accordance with the provisions of parts II III of Schedule 6 to the Companies Act, 1956) and as increased or reduced by certain adjustments as specified in the said explanation. By the Finance Act 2006, w.e.f. 01.04.2007, Clause (f) has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which is to be reduced or not, which inter alia means any such amount which is credited to the Profit loss account then only such amount credited in the Profit loss account shall alone be taken into consideration for computing the book profit. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself. Thus, in our opinion, the net amount on account of sale of shares of ₹ 1,90,39,06,630/- will alone be taken into account in computation of book profit and not the amount of Long term capital gain of ₹ 1,72,55,70,760/-after indexation. Thus, the assessee s ground on this score stands dismissed. 8. Coming to the 3rd ground, that the learned CIT(A) and the AO have erred in not allowing the STT of ₹ 25,65,015/- as deduction in computing the book profit u/s. 115JB. Here we agree with the contention of the learned counsel, because the assessee in the Profit loss account has credited the net gain after net off of STT of ₹ 25,65,015/-. Thus, the STT amount will not be included in the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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