TMI Blog2021 (7) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of allowability of assessee s claim for deduction on account of unrealized gain on mutual fund while computing book profit u/s 115JB in accordance with law and after giving the assessee-company a reasonable opportunity of being heard. CIT thus has left this issue to be decided by the AO on merit in accordance with law after giving the assessee-company a reasonable opportunity of being heard and the assessee, therefore, is at liberty to support and substantiate its claim on this issue on merit before the AO by relying on the relevant judicial pronouncements. We uphold the impugned order passed by the Ld. Pr. CIT u/s 263 and dismiss this appeal of the assessee. - I.T.A. No. 402/Kol/2020 - - - Dated:- 9-7-2021 - Shri P.M. Jagtap, Hon ble Vice President (KZ) And Shri A. T. Varkey, Hon ble Judicial Member] For the Assessee : Shri A.K. Tibrewal, FCA For the Revenue : Shri Manish Kanojia, CIT, DR ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ) This appeal filed by the assessee is directed against the order of Ld. Pr. CIT, Central - 1, Kolkata dated 28.02.2020 passed u/s 263 of the Income Tax Act, 1961. 2. The assessee in the present case is a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble book profits, the items which could have been deducted against book profits, are clearly mentioned at cl. (i) to (viii) of Explanation 1 below Sec. 115JB of the Act. It is noticed by me that the deduction on account of unrealized gain on mutual fund , is not covered under any of the clause (i) to (viii) of said Explanation 1. Therefore, the amount so deducted of ₹ 4,23,84,000/- under the head unrealized gain on mutual fund , is not found to be an eligible item of deduction, for the purpose of computing chargeable Book Profits u/s 115JB of Income Tax Act. In view of above facts, I am of the view that at the time of computing chargeable book profits while finalizing scrutiny assessment on 29.12.2017, which was modified on 03.07.2018, the assessing officer has wrongly allowed the claim on account of unrealized gain on mutual fund , by wrong application of provision of law, without making any enquiry whatsoever, on the issue of allowability of claim of unrealized gain on mutual fund against book profits. Accordingly, the order dt. 29.12.2017 (modified on 03.07.2018) is found to be an erroneous order by undersigned in so far as the same is prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alued at carrying cost on the date of the balance sheet and not chargeable to tax in the year under consideration both under normal provisions as well as under section 115JB of the Act. v. It was also stated that provisions for notional gain resulting from any change in carrying amount of the units are allowable as deductions while computing book profits under section 115JB of the Act. For this proposition the reliance was placed by the ld. AR on explanation (iie)(B) which states as under: if any amount referred to in clauses (a) to (i) is debited to the [statement of profit and loss] or if any amount referred to in clause (i) is not credited to the [statement of profit and loss] and as reduced by i. the amount withdrawn ii. .. . iii. the amount representing iv. notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of section 47 or; v. notional gain resulting from any change in carrying amount of said units; or vi. .. In view of the above rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2015-16 has been look into. It is noticed that while finalising the scrutiny assessment, AO has simply accepted the returned income, without necessary application of mind and without raising any enquiry whatsoever on the assessee, on the aspect of allowability of deduction for unrealized gain on mutual fund , for the purpose of computation of taxable book profits u/s 115JB of Income Tax Act. Once there was no enquiry made on the subject matter under consideration by AO then there was no occasion to file any reply by assessee-company on the issue of allowability of claim of unrealized gain on mutual fund , which is the subject matter before me. Therefore submission of Ld. AR that said details were explained before AO during course of assessment proceeding is not found to be correct on fact as neither any evidence to that effect is available on assessment record nor Ld. AR could produce before me anything in that regard when opportunity for same was allowed to him during 263 proceedings. ii. The second issue raised by the Ld. AR is that necessary details were explained in note 34 of the audited financial result of assessee-company. It was only a notional provision, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the units on which the assessee has realized the gain. Therefore, after examining facts of assessee s case, I am of the considered view that benefit of explanation (iie) of explanation 1, is not at all applicable to assessee s case as in present matter of the assessee, the units were of Birla Sun Life fixed term plan (Corporate series) and not the units of the nature of explanation (iie) for which deduction could have been allowed to assessee company. Accordingly, based on said factual position, it emerges to me that the reliance placed on explanation (iie) for the purpose of argument that deduction could be allowed to the assessee-company for computation of 115JB of the Act, is without any merit and same does not go to held assessee case. iv. The fourth argument taken by Ld. AR is that it is a settled law that if AO has taken a possible view then it cannot be said that the view taken by him is erroneous hence the order of AO cannot be set aside in proposed revision. Here in assessee s case the facts are quite clear and distinguishable. The AO has taken a view of allowing the claim of ₹ 4,23,84,000/- under the head unrealized gain on mutual fund for the purpose of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me due. He submitted that although this unrealized gain was credited in the profit and loss account of the assessee-company for the year under consideration, the same did not constitute the income of the assessee-company for the year under consideration as it had not become due to the assessee-company. He pointed out that this position was clearly indicated by the assessee-company in Note No. 34 to the financial statements and it was accepted by the AO while determining the total income of the assessee as per the normal provisions of the Act where the deduction claimed by the assessee was duly allowed by the AO. He contended that the amount in question representing unrealized gain on mutual fund thus did not constitute the income of the assessee for the year consideration and there was no question of including the same in the book profit computed u/s 115JB of the Act. In support of this contention, the learned counsel for the assessee relied on the following judicial pronouncements: i. Pr. Commissioner of Income Tax vs Ankit Metal Power Ltd., ITA No. 155 of 2018 dated 09.07.2019 of Calcutta High Court. ii. Tata Metaliks Ltd. vs ITO, Ward 3(2), ITA Nos. 439 478/Kol/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Ld. Pr. CIT to point out that the AO has been directed by the Ld. Pr. CIT to examine the issues relating to the assessee s claim for deduction on account of unrealized gain on mutual fund while computing the book profit u/s 115JB of the Act thoroughly and decide the same by applying proper provision of law as contained in 115JB after giving the assessee-company a reasonable opportunity of being heard. 9. We have considered the rival submissions of both the sides and also perused the relevant material available on record. As rightly contended by the Ld. CIT DR, it was found by the Ld. Pr. CIT on verification of the assessment record that the claim of the assessee for deduction on account of unrealized gain on mutual fund was allowed by the Assessing Officer in the assessment completed u/s 143(3) without making any enquiry whatsoever and this error was specifically pointed out by him in the notice issued u/s 263 to the assessee. In reply to the said notice, written submissions were filed by the assessee-company offering its explanation in the matter and after considering the same as well as examining the relevant assessment records, it was found by the Ld. Pr. CIT that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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