TMI Blog2020 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains. The difference between the sale consideration and indexed cost of acquisition represents the actual cost of the assessee, which is taxable as per Section 45 at the rates provided under Section 112 of the Act. There is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset in case, where the assessee is subjected to Section 115JB - In any case, since, the indexed cost of acquisition is subjected to tax under a specific provision viz., Section 112 of the Act, therefore, the provisions of Section 115JB of the Act, which is a general provision cannot be made applicable to the case of the assessee. For yet another reason, the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taxing the income other than actual / real income. In other words, a mere book keeping entry cannot be treated as income. Provisions of Section 115JB of the Act are not applicable as the assessee has not declared any dividend. It is also noteworthy that the Tribunal has failed to appreciate the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in law in holding that there is no nexus between the interest earned on fixed deposits and the interest paid to the creditors where the deposit is made out of surplus from restructuring process on the facts and circumstances of the case? (ii) Whether the interest paid to the creditors to the extent of ₹ 12,80,461/- is not an allowable expenditure on the facts and circumstances of the case? (iii) Whether the Tribunal was justified in law in holding that the provisions of Minimum Alternative Tax under the provisions of Section 115JB of the ct are applicable to the company on the facts and circumstance of the case? (iv) Whether the Tribunal was justified in law in holding that indexed cost of acquisition cannot be reduced for the purpose of computing book profits under Section 115JB of the Act on the facts and circumstances of the case? (v) Whether the Tribunal was justified in law in not following the decision of the co- ordinate Bench in respect of applicability of provisions of Alternative Minimum Tax on Companies on the facts and circumstances of the case? 3. I.T.A.No.32/2012 was admitted by a bench of this court by order dated 28.05.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles of diversion by overriding title. Accordingly, the Commissioner of Income Tax (Appeals) allowed the appeal of the assessee with regard to claim of deduction under Section 57 of the Act for an amount of ₹ 12,80,461/-. The revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal vide order dated 08.02.2011 inter alia held that there is no nexus between the interest, income and expenses and the appeal preferred by the revenue was allowed. 6. I.T.A.No.32/2012 pertains to Assessment year 2006-07. The assessee filed the return of income for the assessment year 2006-07 by declaring total income of ₹ 10,38,360/-. The Assessing Officer by an order dated 31.12.2008 determined the total income of the assessee at ₹ 60,22,614/- by making a disallowance of expenses against interest income of ₹ 49,84,256/- being interest paid to the financial institutions. The Commissioner of Income Tax (Appeals) by an order dated 26.08.2010 allowed the appeal preferred by the assessee. However, the Tribunal by an order dated 27.09.2011 by following its earlier order in case of the assessee for the Assessment year 2005-06 allowed the appeal filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect Taxes is binding on the authorities. It is also urged that the Tribunal ought to have followed the precedents including its own order and has failed to appreciate the decision of coordinate bench of this court in 'MSR SONS INVESTMENT LTD. in I.T.A.No.769/2000 decided on 14.09.2011. In support of aforesaid submissions, reliance has been placed on decisions in 'COMMISSIONER OF INCOME TAX VS. SHOORJI VALLABH DAS AND CO.', (1962) 46 ITR 144 (SC), 'SETH R. DALMIA VS. COMMISSIONER OF INCOME TAX', (1977) 110 ITR 644 (SC), 'COMMISSIONER OF INCOME TAX VS. RAJENDRA PRASAD MOODY', (1978) 115 ITR 519, order of the Income Tax Appellate Tribunal dated 20.05.2005 passed in 'MSR SONS INVESTMENTS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX', 'COMMISSIONER OF INCOME TAX VS. LAKSHMI MACHINE WORKS', (2007) 290 ITR 667 (SC), 'TOt gars COOPERATIVE SALE SOCIETY LTD. VS. INCOME TAX OFFICER', (2015) 231 TAXMANN 794 (KARNATAKA), 'VODAFONE SOUTH LTD. VS. COMMISSIONER OF INCOME TAX', (2015) 378 ITR 410, 'KARNATAKA INSTRADE CORPORATION LTD., VS. ASSISTANT COMMISSIONER OF INCOME TAX', (2015) 235 TAXMANN 374 (KARNATAKA), 'RAJESHWARI C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ES LTD. VS. COMMISSIONER OF INCOME-TAX', (2002) 122 TAXMAN 562 (SC), 'JOINT COMMISSIONER OF INCOME-TAX VS. ROLTA INDIA LTD.,', (2011) 330 ITR 470 (SC) and decision of this court in 'M/S YOKOGAWA INDIA LTD. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, ITA NO.87/2012 DATED 04.06.2020. 10. We have considered the submissions made by learned counsel on both the sides and have perused the record. The Supreme Court in SHOORJI VALLABH DAS AND CO. supra held that income tax is a levy on income and a mere book keeping entry cannot be income unless income has actually resulted. In LAKSHMI MACHINE WORKS supra, it was held that tax under the Act is on the income, profits and gains and it is not a tax on gross receipts. It has further been held that where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed and profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act. In SETH M DALMIA supra, the Supreme Court referred to with approval the decision of the Bombay High Court in 'COMMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled legal principles, we may advert to the factual matrix of the case. The Assessing Officer in its order dated 30.11.2007 has taken note of the fact that under a scheme of arrangement approved by this court, the assessee was utilized as a special purpose vehicle for the purpose of restructuring Kirloskar Electric Supply Company whereby surplus of non manufacturing and liquid asset including real estate at Bangalore, Pune etc. together with certain liabilities was transferred to the assessee. It has further been noticed that lenders and banks are shareholders of the assessee and hold 88% of the equity. It was also held that assessee has taken over the loans of erstwhile company and the interest payable to the term lenders is part and parcel of the loan, which is outstanding. From perusal of paragraph 3 5 of the order passed by the Commissioner of Income Tax (Appeals), it is evident that the Commissioner of Income Tax (Appeals) has taken note of the scheme and has held that the assessee was utilized as a special purpose vehicle for the purposes of distribution of surplus, if any, after clearance of debts of Kirloskar Electric Company. It has further been held that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. There is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset in case, where the assessee is subjected to Section 115JB of the Act. In any case, since, the indexed cost of acquisition is subjected to tax under a specific provision viz., Section 112 of the Act, therefore, the provisions of Section 115JB of the Act, which is a general provision cannot be made applicable to the case of the assessee. For yet another reason, the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taxing the income other than actual / real income. In other words, a mere book keeping entry cannot be treated as income. 14. It is pertinent to mention here that Central Board of Direct Taxes has issued a Circular No.762 dated 11.02.1998, the relevant extract of which reds as under: 46.1 In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that inspite of the fact companies have earned substantial book profits and have paid handsome dividends, no tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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