TMI Blog2017 (4) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... by : Shri Anuj Kisnadwala Department by : Shri Goli Srinivas Rao ORDER Per B. R. Baskaran ( AM ) The appeal filed by the assessee is directed against the order dated 7.04.2014 passed by learned. CIT(A)-37, Mumbai and it relates to the assessment year 2011-12. The assessee is aggrieved by the decision of Ld CIT(A) in upholding the inclusion of long term capital gain earned by a partnership firm, in which the assessee is the major partner, as part of book profit of the assessee computed u/s. 115JB of the Act. 2. The facts relating to the issue are set out in brief. The assessee is a private limited company covered by the provisions of section 115JB of the Act. The assessee along with three other partners formed a partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Learned Departmental Representative also accepted the submissions made by the learned AR. 4. Having heard the rival submissions, we noticed that the impugned issue is covered in favour of the assessee by the order passed by the Coordinate Bench in the case of Rahil Implex Pvt. Ltd. (supra). For the sake of convenience, we extract below the order passed by the Coordinate Bench in the case M/s. Rahil Impex Pvt. Ltd. (supra):- The appeal filed by the assessee is directed against the order dated 7-04- 2014 passed by ld CIT(A)-37, Mumbai and it relates to the assessment year 2011-12. The assessee is aggrieved by the decision of Ld CIT(A) in upholding that the long term capital gain earned by a partnership firm, in which the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip firm , so that it could escape from the taxation u/s 115JB of the Act, by availing exemption u/s 10(2A) of the Act. The AO took support of the decision of Hon ble Supreme Court rendered in the case of Mc Dowell (1985)(154 ITR 148) to discard the colourable device adopted by the assessee to escape from the provisions of sec. 115JB of the Act. Though the assessee contended that it has only done a legitimate tax planning by placing reliance on the decision rendered by Hon ble Supreme Court in the case of Vodafone International Holdings BV Vs. Union of India (17 Taxmann.com 202), yet the same did not find favour with the AO. Accordingly he included the long term capital gains earned by the partnership firm as income of the assessee while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Mcdowell Ltd (supra) has been explained by the Hon ble Apex Court in many of its subsequent decisions. The Ld A.R submitted that the Hon ble Supreme Court has held in the case of CIT Vs. Walfort Share and Stock Brokers P Ltd (2010)(326 ITR 1) that the better use of the provisions of the Act cannot be called abuse of law . In that case, the assessee had purchased mutual fund units just before the record date fixed for declaration of dividend, since the dividend income was exempt. After declaration of the dividend, the net asset value of the mutual fund units would go down and upon selling the units purchased, the assessee would incur loss. The dividend income was claimed as exempt and the loss was set off against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India v. Azadi Bachao Andolan (2003) 263 ITR 706 it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of this court in McDowell and Co Ltd s case (supra). Hence, in the cases arising before April 1, 2002, losses pertaining to exempted income cannot be disallowed . It can be seen that the Hon ble Supreme Court has distinguished the colourable device against the legitimate tax planning adopted by the assessee within four corners of the law. Hence, every tax planning cannot be considered to be a colourable device, if it is otherwise made within the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disturbed by the assessing officer. It is also well settled proposition that the provision of sec. 115JB is a code by itself and hence the book profit has to be computed strictly in accordance with the said provisions. Under the provisions of sec. 115JB the share of profit from a partnership firm, which is exempt u/s 10(2A), is required to be excluded from book profit. In this view of the matter also, the action of the tax authorities cannot be upheld. 9. We also notice that the partnership firm cited above has filed its return of income for the year under consideration on 30-07-2011. It is stated that the return of income has been accepted as it is by the department. 10. In view of the foregoing, we are of the view that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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