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M/s. CD Equifinance Pvt. Ltd. Versus D.C.I.T CIR – 7 (1) , Kolkata

2018 (2) TMI 868 - ITAT KOLKATA

Addition on account of the assessee’s share of loss in the partnership firm while computing the book profit u/s 115JB - MAT - assessee is a non-banking finance company which is engaged in the business of trading of investment in shares and securities as well as rendering financial consultancy services - Held that:- The decision in the case of Metro Exporters Ltd. (2006 (7) TMI 353 - ITAT MUMBAI) was rendered on a similar issue wherein it was held that the case of the assessee not being the case .....

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xempt income of the assessee must be made independently by applying clause (f) of Explanation (1) under section 115JB of the Act where the assessee has not claimed such expenditure to be nil. Respectfully following the said decision in the case of Jayshree Tea Industries Ltd. (2014 (11) TMI 1169 - CALCUTTA HIGH COURT) we set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for computing the amount of expenditure relatable to the exempted inc .....

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d. CIT(A) - 16, Kolkata dated 30.03.2016. 2. Ground No. 1 to 8 raised by the assessee in this appeal involve a common issue relating to the addition of ₹ 18,91,12,786/- made by the A.O. and confirmed by the Ld. CIT(A) on account of the assessee s share of loss in the partnership firm while computing the book profit under section 115JB of the Income Tax Act, 1961. 3. The assessee in the present case is a non-banking finance company which is engaged in the business of trading of investment i .....

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consideration was a partner in the partnership firm of M/s. C.D. Investments having share of profit of 97.50%. The said partnership had incurred a loss of ₹ 19,39,61,832/- for the year ended on 31.03.2012 and its share in the said loss amounting to ₹ 18,91,12,786/- was debited by the assessee company to its profit & loss for the year under consideration. While computing the book profit u/s 115JB of the Act, the amount of such loss however was not added back by the assessee compa .....

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eptable by the A.O. By relying on the decision of Hon ble Kolkata High Court in the case of Eastern Aviation & Industries Ltd. vs CIT 208 ITR 1023, he held that the general rule is that the income includes loss and by applying the said rule, he held that the share of its loss in the partnership firm amounting to ₹ 18,91,12,786/- was liable to be added back while computing the book profit of the assessee company under section 115JB of the Act as per clause (ii) of Explanation (1) to sec .....

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ship firm while computing the book profit under section 115JB was not sustainable. The Ld. CIT(A) however did not find merit in the said submission and proceeded to confirm the addition made by the A.O. on this issue for the following reasons given in paragraph no 6 of his impugned order: I have carefully examined the A/R s submissions and also the observations and findings recorded by the A.O. in the assessment order. I have also perused the judicial decisions cited both by the assessee as well .....

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it'. In my considered opinion the term 'income' as used in clause (ii) includes negative income or 'loss' as well. The assessee has however claimed that the provisions of Section 115JB are deeming in nature and therefore should be strictly construed. The A/R of the assessee submitted that the clause (ii) refers to "income" which is "credited" in P& L A/c which has to be "reduced" from the Net Profit. According to the assessee the clause (ii) .....

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the Income-tax Act, 1961 includes "loss". Even the Calcutta High Court in the case of Eastern Aviation & Industries Limited (208 ITR 103) held that the loss is 'negative income'. Accordingly the contention of the assessee that the term 'income' as employed in clause (ii) of Explanation to Section 115JB cannot be said to include 'loss' is untenable. I therefore hold that the AO had rightly added back the share of loss of ₹ 189,112,786/- from the partne .....

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term income includes loss was rendered in different context and not in the context of application of clause (ii) of Explanation (1) to Section 115JB of the Act, which is the bone of contention in the present case. Even the learned DR has not raised any contention to dispute this position. On the other hand, the decision of Mumbai Bench of this Tribunal in the case of Metro Exporters Ltd. (supra) cited on behalf of the assessee before the authorities below as well as before us was rendered on a s .....

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er: We have considered the rival submissions and have perused the orders of the Assessing Officer and the CIT(A). We find that the assessee has debited its share of loss from a registered firm to its profit and loss account and Assessing Officer has made the addition of the same to the net profit while computing the total income of the assessee as per provisions of section 115JA of the Act on the plea that share of profit of the assessee from a partnership firm is exempt from tax as per Chapter .....

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quot; of the assessee and the working of the "book profit" has to be made as per the provisions of Chapter XII-B of the Act. The proposition that the word "income" includes "loss" is not applicable while computing the "book profit" in accordance with the provision of Chapter XII-B of the Act. We find that the provision of sub-clause (f) to Explanation to section 115JA of the Act relates to the amounts of "Expenditure" relatable to any income to w .....

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a registered firm is a loss figure and therefore is debited to the profit and loss account of the assessee and cannot be credited to the profit and loss account of the assessee. In these facts of the case, we find that the CIT(A) has rightly observed that if any share of profit from the firm had been credited to profit and loss account the same would have to be reduced from the net profit for the purpose of computation of income under section 115JA by virtue of sub-clause (ii) to Explanation to .....

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the revenue is dismissed. 6. Although the decision of Metro Exporters Ltd. (supra) was rendered by the Tribunal in the context of the provisions of section 115JA, we find ourselves in agreement with the contention of the learned counsel for the assessee that the ratio of the same can be applied to decide the issue in the context of section 115JB, the provisions of which are analogous to the provisions of section 115JA. The Ld. CIT(DR), has also not raised any contention in this regard and simply .....

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relates to the addition of ₹ 75,75,430/- made by the A.O. and confirmed by the Ld. CIT(A) on account of expenditure disallowed under section 14A read with rule 8D while computing the book profit of the assessee company under section 115JB of the Act. 8. During the year under consideration, the assessee company had earned a dividend income of ₹ 9,01,03,832/- which was claimed to be exempt from tax under section 10(34) of the Act. In the computation of total income as per the normal pr .....

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. Ltd. vs DCIT (ITA No. 5688/Mum/2011), the Assessing Officer held that an amount disallowed under section 14A on account of expenditure incurred in relation to the exempt income was liable to be added back while computing the book profit of the assessee company under section 115JB of the Act. He accordingly made the addition of ₹ 75,75,430/- on account of disallowance under section 14A while computing the book profit of the assessee company. On appeal, the Ld. CIT(A) confirmed the said ad .....

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