TMI Blog2020 (12) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the interest disallowance made by the AO u/s 14A read with Rule 8D(2)(ii), was rightly deleted by the ld. CIT(A). Disallowance u/s 14A read with Rule 8D(2)(ii) on account of interest was involved in assessee s own case for A.Y. 2010-11 as noted that there was sufficient own funds available with the assessee to make the investments and, therefore upheld the ld. CIT(A) s deleting the said interest disallowance. Identical view was expressed by this Tribunal to delete similar interest disallowance made in assessee s own case for A.Ys. 2011-12 2012-13 in the order dated [ 2018 (1) TMI 1614 - ITAT KOLKATA] . Therefore, we uphold the impugned order of the ld. CIT(A) deleting the disallowance made by the Assessing Officer on account of interest under section 14A read with Rule 8D(2)(ii). Disallowance on account of common administrative expenses under section 14A read with Rule 8D(2)(iii) -The same was restricted by the ld. CIT(A) to the extent of exempt dividend income actually earned by the assessee during the year under consideration by following, the decision of the Hon ble Delhi High Court in the case of Joint Investment Limited vs.- CIT [ 2015 (3) TMI 155 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scale down the profits which provision has been incorporated by sub-section (6) of section 80IE by virtue of which sub-section (5) and subsection (7) to (12) of section 80IA has been incorporated in to section 80IE. AO failed to show that there existed any arrangement between the assessee and its connected persons or other ineligible units, by which the transactions were so arranged as to produce more than the ordinary profits in the hands of the assessee. Since the AO was unable to show that there was any arrangement in terms of Section 80IA(10) of the Act, the AO could not have invoked the deeming provision and then estimated and scaled down the profits of the eligible unit of the assessee. Thus, the AO erred in estimating the profit of the eligible unit without satisfying the condition precedent as prescribed in section 80IE(6) read with section 80IA(10) of the Act. Inter-unit transactions were reported in Form 3CEB filed along with the return of income wherein the auditor had certified the same to be at arm s length. We note that the AO did not dispute the arm s length value of these goods transacted by the eligible unit with it depots. We also note that the AO also did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A), because he had decided to examine the facts of the case in depth and then adjudicate upon the matter on the basis of evidence and material, thus, gathered. We note that the ld. CIT(A) was empowered to do so under the provisions of section 250(4) of the Act. The result of such enquiry conducted by him could have either gone to further cement or enhance the case made out by the AO or help out the assessee against the findings of the AO. In the instant case, the results of the enquiries thus conducted supported the case of the assessee and not that of the Revenue. However, the fact remains that such material was gathered by the ld. CIT(A) on his own motion, and therefore there was no requirement, in law for him, to consult the AO on the same. Education Cess and the Secondary and Higher Education Cess incurred by the assessee is deductible while computing profits from business - We direct the AO to allow the deduction of the education cess in computing total income of the assessee company. Computation of book profit u/s 115JB - Subsidies received by the assessee for setting up new industries, by way of refund of VAT and excise dutyare liable to be excluded from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by deleting the addition of ₹ 31,29,000/- made by the Assessing Officer u/s. 14A read with Rule 8D of Income Tax Act Rules 1962. (2) The Ld. CIT(A)-23,Kolkata has erred in law by holding that adjustment u/s. 14A cannot be made while computing book profit u/s. 115JB by misinterpreting clause (f) to Explanation 1 of sub- section 115JB. (3) The Ld. CIT (A)-23, Kolkata has erred in law and facts by observing in the order that the Assessing Officer has failed to record his satisfaction without referring to the Books of account for disallowing u/s. 14A, while the Assessing Officer has recorded his dissatisfaction while disallowing an amount of ₹ 34, 29,000/-u/s. 14A read with Rule 8D in the assessment order. (4) The Ld. CIT(A)-23, Kolkata has erred in law and facts by not taking any cognizance to Circular No. 5 of CBDT of 2014 and also by not following the principle laid down the Hon ble Supreme Court in the case of Maxopp Investment Ltd. Relating to disallowance u/s 14A read with Rule 8D. 3. At the time of hearing, the ld. CIT, DR primarily relied upon the order of the AO. The ld. AR for the assessee, on the other hand, strongly supported the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the actual investment capable of yielding exempt income made by the assessee was sufficiently covered by the own funds of the assessee in the form of share capital and free reserves. In such a scenario, we note that the Hon ble Bombay High Court in the case of CIT Vs Reliance Utilities Power Limited (supra) has held that, what would be relevant to see in this context is the financial position of the assessee during the year under consideration as reflected in the relevant balance-sheet and if it is found that the assessee had sufficient interest-free funds of its own to meet its investment, then it could be presumed that the investments were made from the interest-free funds available with the assessee and not from the interest bearing borrowed funds so as to warrant disallowance under section 14A of the Act. This decision rendered in the case of Reliance Utilities Power Limited (supra) was subsequently followed with approval by the Hon ble Bombay High Court in the case of HDFC Bank Limited (supra) where it was held that, where both interest-free funds and interest bearing funds (mixed funds) are available to an assessee and the interest-free funds are more than the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of exempt dividend income actually earned by the assessee during the year under consideration. 8. With regard to disallowance u/s 14A of the Act read with Rule 8D while computing the book profits u/s 115JB of the Act, we note that there is no enabling provision in clause (f) of Explanation 1 to Section 115JB for making any adjustment in respect of expenditure disallowed as per Rule 8D. It is noted that clause (f) of the said Explanation 1 requires adjustment of the amount of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) section 11 or section 12 apply . The aforesaid expression is similar to the expression used in Section 14A(1) of the Act. Section 115JB however being a deeming provision, the clauses contained therein has to be strictly construed. Accordingly, it is only the provisions of Section 14A(1) that can be imported into clause (f) of Section 115JB of the Act. The scope of clause (f) cannot be enlarged in order to bring within its ambit the provisions of Sub-Section (2) (3) of Section 14A of the Act and therefore the disallowance made by applying Rule 8D cannot also be imported. The Special Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit in comparison to the overall profitability of the company. According to AO the submission made by the assessee on 30.12.2016 was not acceptable and he also refused to grant further time to the assessee to explain the same as the proceedings were getting time barred on the same date. The AO accordingly proceeded to complete the assessment on the said date i.e., 30-12-2016. According to AO, the profit of the eligible unit was 33.50% which was substantially higher than the profits of other businesses at 4.84%. In his opinion the assessee had manipulated its accounts and shifted the profits of non-eligible businesses to the eligible business. He accordingly proceeded to estimate the reasonable profitability of eligible Centply Unit at 19.17% by taking the average of the profits of the eligible units and other businesses. He accordingly determined the eligible deduction u/s 80IE at ₹ 30,05,49,368/- as opposed to the assessee s claim of ₹ 52,53,13,324/- and disallowed the balance sum of ₹ 22,47,63,955/- claimed as deduction u/s 80IE of the Act. Aggrieved by the said order of the AO, the assessee preferred an appeal before the ld. CIT(A). In his impugned order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had allowed the deduction, as claimed by the assessee u/s 80IE of the Act in the respective returns of income. Thereafter he invited our attention to a statement at Page 192 of paper book giving the comparative details of turnover and profits of the Centply Unit from AY 2010-11 to 2014-15, to show that the profitability of the eligible Unit had remained similar and that there was no substantial increase as alleged by the AO in the impugned assessment order. 13. The Ld. AR further pointed out that the assessment u/s 143(3) for AY 2013-14 was completed on the same date as that of AY 2014-15 viz., 30-12-2016, copy of which was placed at Page 268 to 283 of paper book. He drew our attention to an important fact that unlike the relevant AY 2014-15, the AO had referred the case of the assessee for AY 2013- 14 for transfer pricing scrutiny u/s 92CA to the TPO- I Kolkata. He then took us through the relevant enquiries made by the TPO in the course of proceedings u/s 92CA(2) wherein the TPO had inter alia examined the profitability of the Centply Unit. Upon verification of the inter-unit transactions conducted by the assessee, covered by Section 80IA(8) (10) of the Act, the TPO did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did the AO point out as to which transaction reported under Section 92BA of the Act was not at arm s length, nor for that matter he brought on record any defect in the books of accounts maintained by the assessee or the audited stand-alone accounts of the eligible unit or the report furnished in Form 10CCB by the auditor. He contended that it was also not a case where the AO had invoked Section 145(3) of the Act so as to resort to estimation of profits. He thus contended that the ld. CIT(A) had rightly held that without rejecting the book results in terms of the mandate set out in Section 145(3) of the Act, the AO could not have legally estimated the income of the eligible unit. 15. Further according to ld. AR, the AO was legally obliged to first point out as to whether he was of the view that the transactions conducted by the eligible unit with other non-eligible units in terms of Section 80IA(8) of the Act, were not at fair market value, or that there was any arrangement with AEs in terms of Section 80IA(10) of the Act which led to higher profits. Without pointing out any such arrangement, according to him the AO could not arbitrarily contend that the profits had been shifted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade u/s 80IE of the Act. 18. On a perusal of the material on record we find that the primary facts noted by the AO in the impugned order were factually erroneous. Admittedly the assessee is engaged in the business of manufacture and marketing of plywood block boards. However on perusal of the annual report, it is noted that the assessee also manufactures other allied products such as laminates, veneers pre-laminated particle boards. Besides the manufacturing, the assessee also undertakes trading of numerous products, such as plywood, block boards, MDF, phenols, furniture, agri-products and others on substantial scale. The assessee also operates two Container Freight Stations at Sonai JJP in the State of West Bengal. It is therefore observed that the assessee is engaged in diverse business activities involving manufacturing, trading and also rendering of services. As a consequence, the profitability of different product service segments would be different distinct. Similarly, the margins in the trading operations would not be comparable with the profits in manufacturing operations. We thus find merit in the ld. AR s contention that AO had prima facie erred in considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: (emphasis given by us) 21. In terms of the above provision, it is only where it appears to the AO that owing to the close connection between the assessee carrying on eligible business and any other closely connected person, the course of business is so arranged that the business transacted between them produces to the assessee more than the ordinary profits, which might be expected to arise in such eligible business; that he shall compute the amount of profits as may be reasonably deemed to have been derived therefrom. A bare reading of the relevant provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' is a cause , the higher profit is its 'effect'. Hence, what is relevant for invoking sub-section (10) of section 80 IE read with section 80IE(6) of the Act is the prevalence of a situation where the higher profit has resulted due to 'arrangement' between the assessee and its closely connected person and not where the higher profit resulted due to the assessee's effectively managing the business. In this regard, we find merit in the ld. AR s reliance on the judgment of the Hon'ble Bombay High Court in CIT v. Schmetz India (P.) Ltd. (supra) in which it has been held that merely because an assessee makes extra ordinary profit, it would not lead to the conclusion that the same was organized/arranged for the purpose of claiming higher deduction u/s 10A of the Act. The case of the assessee is further supported by the decisions of the coordinate Benches of this Tribunal in AT Kearney India (P.) Ltd. v. Addl. CIT (66 SOT 140) [ITAT Delhi] and Zavata India (P.) Ltd. v. ITO (141 ITD 456) (ITAT Hyd] 22. Now adverting to the facts of the present case, we find that the AO failed to show that there existed any arrangement between the assessee and its connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas in the unit at Karnal and Joka it averaged around ₹ 5500/- and ₹ 8000/- approx. [Page 174 of paper-book] respectively. Having regard to these factors, we thus agree with the findings of the ld. CIT(A) that the assessee had substantiated on facts that the eligible unit enjoyed benefit of subsidies and substantial savings in costs in comparison to Other Units which contributed to its higher profitability. The aforesaid facts therefore further support our conclusion that the mere higher profit earned by eligible unit cannot be the reason to conclude that the assessee transacted in such an 'arranged' manner so as to produce more profits to it. 24. At this juncture it would also be relevant to note the text of proviso to sub-sec. (10) of Sec. 80IAwhich provides for computing ordinary profits from transactions/arrangements with related persons, having regard to the arm's length price. This proviso reads as under:- Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were transferred by the eligible Assam Unit to its depots, which also showed that the goods were cleared by the eligible Assam Unit at market value . We therefore note that, even on merits, the inter-unit transactions conducted by the eligible unit covered u/s 80IA(8) (10), were at arm s length and did not yield any more than ordinary profits to attract the rigors of Section 80IA(10) of the Act and enable the AO to estimate the profits of the eligible unit. 27. Coming to the argument of the ld. CIT, DR that, the AO was legally empowered to estimate the profits, we find the same to be fundamentally flawed. It is indeed true that, the AO could have estimated the eligible profits qua the specified domestic transactions conducted by the eligible Assam Unit, but only if it had it been done in terms of the mandate set out in Chapter X of the Act. Section 92 of the Act provides that, any income from specified domestic transactions, as defined in Section 92BA of the Act, have to be computed at arm s length price. Further, Section 92C of the Act read with Rule 10B of the Rules sets out the specified methods in terms of which such arm s length value is to be computed. We thus not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was allowed to the assessee. From the comparative chart furnished at Page 192 of paper book, it is noted that the profit margins in the AYs 2011-12 2012-13 was 38.31% and 33.91% which was comparable with the relevant AY 2014-15 viz., 33.50%. Moreover, we find that the profitability of the eligible Assam Unit for the subsequent AY 2015-16 was 38% and the same was not doubted or held to be excessive by the AO s successor in the order passed u/s 143(3) of the Act dated 30.12.2017. As regards AY 2013-14, it is noted that the profitability for this year was 28.30%. In that year the AO had referred the inter-unit transactions of the eligible unit u/s 80IA(8) (10) of the Act for transfer pricing scrutiny. In the transfer pricing assessment, the TPO had made enquiries into the higher profitability of the eligible Assam Unit and upon examining the submissions made by the assessee, no transfer pricing adjustment in terms of Section 80IA(8) (10) of the Act was proposed by the TPO in his order dated 27.10.2016. It is noted that the transfer pricing order u/s 92CA(3) for the AY 2013-14 was available before the AO at the time of framing of assessment u/s 143(3) for AY 2014-15. Moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ld. CIT(A) allowed the appeal of the assessee. The ld. CIT(A) further took note of the fact that the profitability of the eligible Assam Unit was comparable with earlier years and therefore the AO could not have resorted to estimation of profits without first rejecting the books of accounts u/s 145(3) of the Act. We note that it was with a view to further verify the averments of the assessee and in exercise of his co-terminus powers that the ld. CIT(A)had issued enhancement notice u/s 251 of the Act and, thereafter made suo moto enquiries in exercise of the powers vested in him u/s 250(4) of the Act. Hence, it was a clear case of exercise of overriding power by ld. CIT(A) in terms of Rule 46A(4) and it was not a case where the assessee on his own volition had furnished additional evidence or fresh document, which would have been subjected to sub-rule (1) to (3) of Rule 46A of the Rules. In the instant case, the explanations regarding the factors influencing the higher profitability of the eligible Assam Unit had come on the record of the ld. CIT(A), because he had decided to examine the facts of the case in depth and then adjudicate upon the matter on the basis of evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR mentioned that this issue now stands covered by the judgement of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v. Jt. CIT (117 taxmann.com 96) Hon ble Rajasthan High Court in the case of Chambal Fertilizers Chemicals Ltd. v. JCIT (IT Appeal No.52/2018). The ld. AR submitted that this judgment has also been followed by the coordinate benches of this Tribunal in the cases of DCIT Vs Tega Industries Ltd (112 taxmann.com 259), Dy. CIT Vs ITC Infotech India Ltd (114 taxman.com 181) Reckitt Benckiser (I) Pvt Ltd Vs DCIT (117 taxmann.com 519), where similar issue is adjudicated in favour of the assessee. He therefore urged that the education cess of ₹ 39,47,371/- incurred during the year should be allowed as deduction while computing total income of the assessee. Per contra, the Ld. CIT, DR urged that this claim was not admissible in terms of the provisions of Section 40(a)(ii) of the Act. 35. We have heard both the parties and perused the facts which are available on record. We find that this issue is no longer res integra. We note that Coordinate Benches of this Tribunal in the following cases have held that education cess should be allowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Delhi) of 2012 Dated 27.02.2019] that the issue stands adjudicated in the Revenue's favour. We are informed that the hon'ble jurisdictional high court has restored the very issue back to the tribunal for fresh adjudication. We therefore follow hon'ble Rajasthan high court's decision (supra) to conclude that the both lower authorities have erred in disallowing educational cess amounting to ₹ 8,60,379/- u/s 40(a)(ii) of the Act. The assessee's sole substantive grievance as well main appeal ITA No.485/Kol/2019 are accepted therefore. (ii) DCIT Vs Tega Industries Ltd (112 taxmann.com 259) 23. Now we shall take Cross-objections filed by the assessee in C.O No.31 to 33/Kol/2019. The solitary grievance of the assessee in these Cross Objections are that the ld. Assessing Officer as well as ld. CIT(A) has erred in not allowing deduction of the amount of education cess debited in the books of accounts of the company. 24. These cross objections filed by the assessee is barred by limitation by 598 days. The Assessee has moved a petition requesting the Bench to condone the delay. We have heard both the parties on this preliminary issue. Having regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, we thus direct the AO to allow the deduction of the education cess in computing total income of the assessee company. Ground No. 1 of the cross objection therefore stands allowed. 37. Ground Nos. 2 3 of the Cross objections are as follows: (2) For that on the facts and in the circumstances of the case and in law, the incentive of ₹ 2,36,75,501 received by the company from the West Bengal State Government for setting-up a new industrial undertaking in the State of West Bengal by way of reimbursement of sales tax, was in the nature of pure capital receipt and therefore the amount of ₹ 2,36,75,501 credited in the Profit Loss Account deserves to be excluded and/or reduced while computing tax on book profit u/s 115JB of the Act. (3) For that on the facts and in the circumstances of the case and in law, the incentive of ₹ 13,82,79,547/- received by the company from the Central Government for setting-up a new industrial undertaking in the State of Assam by way of refund of Excise Duty, was in the nature of pure capital receipt and therefore the amount of ₹ 13,82,79,547 credited in the Profit Loss Account deserves to be excluded and/or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was also in receipt of subsidy in form of refund of sales tax/VAT from the State of West Bengal under the West Bengal Incentive Scheme, 2000 which was formulated expressly for the purpose of attracting private investment in the State of West Bengal in the specified areas which are industrially backward. To promote industrialization, the Government offered various incentives/ subsidies including 'Industrial Promotion Assistance' ( IPA ) in form of refund of 50% of sales tax paid for a period of fifteen years. The subsidy was therefore directed towards industrial development in the State. The assessee received an eligibility Certificate dated 07.07.2004 from the Government of West Bengal for setting up a new unit for manufacturing high pressure decorative laminates having capacity of 24 lacs sheets. The object and applicability of the West Bengal Incentive Scheme, 2000 is as follows:- NOTIFICATION No. 91-CH/H/4F-54/200 Whereas in pursuance of a National Policy the sales tax related incentives have been withdrawn from the 1st January 2000. And whereas the State Government have considered it necessary and expedient to extend new types of incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 591) and the decisions rendered by this Tribunal in the cases of DCIT vs Emami Biotech Ltd. in ITA No. 1915/KOL/2017 and SICPA India (P) Ltd. vs DCIT (80 taxmann.com 87). Per contra, the Ld. CIT, DR argued that since this claim was not made before the AO by filing revised return of income, it should not be admitted at this stage. 43. We have considered the rival submissions of both the parties. From the facts as already discussed in the foregoing, it can be safely inferred that the subsidies were granted to the assessee for setting up new units in the States of West Bengal and State of Assam. The Hon ble Supreme Court in the case of CIT Vs Chaphalkar Brothers (supra) has held that the subsidies granted under the State Industrial Scheme to accelerate industrial development and generate employment is capital in nature. The relevant extracts of the judgment are as follows: 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the purpose test . It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p new industry is not in the nature of income and therefore cannot be deemed as income for the purposes of computing book profit u/s 115JB of the Act. In the decided case the assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form of remission of interest and power / electricity duty payments etc. was capital receipt not liable to tax both under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the Revenue, the Hon ble High Court upheld the order of this Tribunal by observing as under: 26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under Section 115JB of the Income Tax Act, 1961 as contended by the revenue by relying on the decision in the case of Appollo Ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B (2) of the Act. 22. We have heard the submission of the learned counsel for the Assessee. As far as the excluding the subsidies in question from computation of book profit u/s 115JB of the Act is concerned, the provisions of Sec.115JB of the Act have to be looked at. Section 115JB of the Act provides that notwithstanding anything contained in any other provision of the Act, where in the case of an Assessee, being a company, the income- tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April,2001, is less than seven and one half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one half ten per cent. The Assessee being a company the provisions of Sec.115JB of the Act were applicable. Every assessee, being a company, shall, for the purposes of section 115JB of the Act, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 (SC), Special Bench ITAT in the case of Rain Commodities Ltd. v. Dy. CIT [2010] 40 SOT 265 (Hyd.) (SB), ITAT Luknow Bench in the case of ACIT v. L.H. Sugar Factory Ltd. and vice versa in ITA Nos. 417 , 418 339/LKW/2013 dated 9.2.2016 and decision of Mumbai ITAT in the case of Shivalik Venture (P.) Ltd. v. Dy. CIT [2015] 70 SOT 92/60 taxmann.com 314, came to the conclusions (i) the object of Minimum Alternate Tax (MAT) provisions incorporated in Sec.115JB of the Act was to bring out real profit of companies and the thrust was to find out real working results of company. (ii) Inclusion of receipt which are not in the nature of income in computation of book profits for MAT would defeat two fundamental principles, it would levy tax on receipt which was not in nature of income at all and secondly it would not result in arriving at real working results of company. Real working result could be arrived at only after excluding this receipt which had been credited to P L a/c and not otherwise. (iii) There was a disclosure of the factum of forfeiture of share warrants amounting to ₹ 12,65,75,000/- by the Assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of sec. 10 lists out various types of income, which do not form part of Total income. All those items of receipts shall otherwise fall under the definition of the term income as defined in sec. 2(24) of the Act, but they are not included in total income in view of the provisions of sec. 10 of the Act. Since they are considered as incomes not included in total income for some policy reasons, the legislature, in its wisdom, has decided not to subject them to tax u/s 115JB of the Act also, except otherwise specifically provided for. Clause (ii) of Explanation 1 to sec.115JB specifically provides that the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) is to be reduced from the Net profit, if they are credited to the Profit and Loss account. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of income , are excluded for the purpose of computing Book Profit , since the said receipts are exempted u/s 10 of the Act while computing total income. Thus, it is seen that the legislature seeks to maintain parity between the computation of total income and bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, if a claim which is available in law is not raised either inadvertently or an account of erroneous plea of complex legal position, such a relief cannot be shut up for all the times to come merely because it is raised for the first time in appellate proceedings in absence of a revised return filed before the Assessing Officer. 54. We further note that, on similar set of facts circumstances, identical contention was also raised by the Revenue before the Hon ble Calcutta High Court in the case of Pr.CIT Vs Ankit Metal and Power Ltd (supra). In the decided case also, the assessee had raised this plea for the first time before the Tribunal viz., the subsidy received under the State Industrial Scheme is capital in nature and therefore should be excluded from the book profit u/s 115JB of the Act. The Tribunal admitted this legal issue raised by the assessee and answered it in their favour. Before the Hon ble High Court, the Revenue raised the following question for their consideration. (ii) Whether on the facts and in the circumstances of the case the learned Tribunal erred in law in accepting the claim of deduction by the assessee towards 'Interest subsidy' and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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