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2015 (12) TMI 760 - ITAT BANGALORE

2015 (12) TMI 760 - ITAT BANGALORE - TMI - MAT - Computation of book profits u/s 115JB - AO sought to tax under MAT an amount being remission of liability of Bank - Held that:- In the case in hand, the assessee got remission of liability of ₹ 43 lakhs under one time settlement by the ING Vysya Bank which has been disclosed by the assessee in the P&L A/c. This disclosure, in the P&L A/c is strictly as per the requirement of Schedule VI of the Companies Act and further in conformity with the .....

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income or expenditure which is required to be disclosed in the P&L A/c prepared as per provisions of Schedule VI of the Companies Act but instead of disclosing the said item in the P&L A/c, it was disclosed in the Notes to the accounts, then such item of income or expenditure will be treated as part of the P&L A/c for the purpose of computing book profits u/s 115JB. Once P&L A/c is admittedly prepared as per Schedule VI of the Companies Act, then neither the AO has any power to tinker with it no .....

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anies Act, the same cannot be excluded for the purpose of computing book profits u/s 115JB.

See Apollo Tyres (2002 (5) TMI 5 - SUPREME Court) as well as CIT vs. HCL Comnet Systems & Services Ltd. (2008 (9) TMI 18 - SUPREME COURT). - Decided against assessee. - ITA No.726/Bang/2014 - Dated:- 7-10-2015 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER For The Appellant by: Shri T.Srinivasa, CA. For The Respondent by: Shri G.Ramesha, JCIT(DR) ORDER Per VIJAY .....

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e principal amount lent will be "capital receipt" and being statutorily excluded from the definition of "income" u/s. 2(24) of Income Tax Act, such capital receipt were outside the ambit of taxation under Indian Income Tax Act, 1961. 3) The learned CIT (A) has failed to appreciate that Sec. 115JB of the Income Tax Act was introduced mainly to restrict various exemption, concession and incentives and as a measure of equity so that a segment of corporate assessees having substa .....

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ut of transfer of equity on which securities transaction tax is applicable which are otherwise exempt from the levy of long term capital gains, shall be taken into account in computing the book profit and income tax payable under section 115JB. 5) The learned CIT(A) also ought to have appreciated from the above circular and proviso that if the understanding of the provisions of Section 115 JB were to include any type of receipts including the ones u/s 2(24), there was no need for the law makers .....

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CIT (A) failed to appreciate that while, book profits as computed under Part II and Part Ill of Schedule VI to Companies Act, 1956 and not amenable for re- computation / recasting in the normal course, but there is no total bar in either the assessee or AO making such exercise in case of any manifest errors of including receipt notional income which will not fall within the definition of "to disclose the working of the company during the financial year'. 8) The learned CIT(A) is also n .....

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s 115 JB , statute has prescribed a statutory report under Rule 40B ( Form No 29B) and the said report shall be read as part and parcel of the audited annual accounts for the purposes of determining the book profits. 10)The Learned CIT (A) has grossly erred in not following the binding decision of the jurisdictional Tribunal in the case of Syndicate Bank, Manipal Vs. CIT, wherein the Hon'ble ITAT, Bangalore was pleased to declare that notional income by way of interest on zero coupon bonds h .....

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following decisions which are directly on the issue of exclude receipts and directly on the issue under agitation: a) Hon'ble ITAT, Bangalore in the case of Syndicate Bank, Manipal Vs. Assessee b) Hon'ble ITAT, Mumbai in the case of DCIT Vs. Bombay Diamond Co. Ltd (2010) 33 DTR 59 (Mum) c) ITAT, Jaipur in the case of Shree Cement Ltd., Ajmer Vs. Department of Income Tax dated 09.09.2011 d) ITAT, Jaipur in the case of Shree Cement Ltd., Ajmer Vs. Department of Income Tax dated 27.01.2014 .....

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d appropriate in the facts and circumstances of the case. 3. Brief facts of the case are that the assessee filed its return of income on 25/3/2006 declaring nil income. A notice u/s 148 of the IT Act, 1961 [ the Act for short] was issued on 8/11/2006 whereby the AO sought to tax under MAT an amount of ₹ 43 lakhs being remission of liability of ING Vysya Bank Ltd. The assessee submitted before the AO that this remission of the liability was on account of principal amount of loan and therefo .....

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ipal loan amount in one time settlement cannot be considered as income for the purpose of book profits u/s 115JB. The CIT(A) did not accept the contention of the assessee and had held that book profits arrived at as per the provisos of Schedule VI of the Companies Act cannot be tinkered with in view of the judgment of the Hon ble Supreme Court in the case of Apollo Tyres (255 ITR 274). 5. Before us, learned AR of the assessee submitted that remission being capital receipt, cannot be considered a .....

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he Hon ble Andhra Pradesh High Court in the case of CIT vs. Nagarjuna Fertilizers & Chemicals Ltd. in ITTA No.100 of 2003 dated 23/9/2014 and submitted that when the assessee has the disclosed the fact of capital receipt in the notes to accounts, then said amount shall be excluded from the profit and loss account (P&L A/c) for the purpose of book profits u/s 115JB. The learned AR of the assessee has submitted that even if the said amount is shown by the assessee in the P&L A/c when t .....

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prepared as per the provisions of Schedule VI of the Companies Act. Therefore, the AO has no power to tinker with the P&L A/c prepared by the assessee as per Schedule VI of the Companies Act except the adjustment as permitted under the Explanation to sec.115JB. He has relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as relevant material on record. The amount of ₹ 43 lakhs pertains to remission of liability under one time settlement o .....

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I of the Companies Act to be part of P&L A/c, but the same was not disclosed in the P&L A/c and has been disclosed in the notes forming part of the accounts, then the said disclosure in the notes to the accounts would be treated as disclosure of that particular item of income or expenditure as the case may be, in the P&L A/c for the purpose of book profits u/s 115JB. In the case in hand, the assessee got remission of liability of ₹ 43 lakhs under one time settlement by the ING .....

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