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TMI Blog2023 (7) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Supreme Court in the case of Apollo Tyres, reported in 255 ITR 273, has categorically stated that while arriving at the book profit, no adjustment, other than those permissible as per the explanation to the provisions of section 115J, shall be permitted so long as the Profit and loss account has been prepared in accordance with Schedule VI to the Companies Act and the same has been certified by the Statutory Auditors. The Learned CIT(A) has erred in ignoring the principle upheld by the Hon'ble Supreme Court. (3) The Learned CIT(A) failed to note that section 115JB is an independent code and computation of taxable book profit shall be made strictly applying the provisions of Explanation 1 to section 115JB(2), which contains the list of items by which the profit as shown in the Statement of Profit and Loss can be increased vide clauses (a) to (k) listed in Explanation 1. Further, the said Explanation 1 also contains the list of items which should be reduced in arriving at the book profit vide clauses (i) to (viii). (4) The Learned CIT(A) ought to have noted that your Appellant, only to be consistent with the stand taken by it in earlier assessment years, had offered to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come in accordance with law. When an assessee claims an expenditure which should not be allowed or when an assessee offers to tax an income which should not be taxed, it is the duty of the Assessing officer to apply the provisions of law in its letter and spirit, to ensure that the correct amount of income is brought to tax, irrespective of the claims made by the assessee. (11) The learned CIT(A) is incorrect in law to have not addressed a specific ground raised by your Appellant on non consideration by the Learned AO of a detailed Note I objection filed during the assessment proceedings on the subject of excluding the addition of Capital Loss to the Book profit and did not discuss in the order as to why she had not accepted the objection raised by the Appellant." As is evident, the sole issue that arises for our consideration is determination of Book-Profits u/s 115JB vis-à-vis loss suffered by the assessee on loss on investments. 2. Supporting the case of the assessee, Ld. AR submitted that the assessee incurred loss on sale of investments which was debited to Profit & Loss Account. However, keeping in view the consistent methodology being followed by the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present year, the assessee incurred capital loss and therefore, the same treatment should be given to losses. The assessee did not press the issue of adjustment of excise duty exemption u/s 115JB since the assessee had opted to settle the issue in earlier year under Vivad Se Vishwas Scheme, 2020. 5. However, rejecting assessee's submissions, Ld. CIT(A) upheld the stand of Ld. AO qua adjustment of loss on investments as under: - (iii) The grounds of appeal No. 10 and the supplementary grounds of appeal relate to Capital loss on sale of investments/loss on investments in Pricol Pune Limited which was offered to tax by appellant company being consistent with the stand taken in the earlier years. The Capital loss on sale of investments amounted to Rs. 38,77,00,065/- and loss on investment due to merger amounted to Rs. 16,28,28,712/-, the total being Rs. 55,05,28,777 It is observed from the computation of book profit for A.Y. 2016-17 that loss on sale of investment and loss on investment consequent to merger, amounting to Rs. 55.05 crore have been offered to tax by the assessee by adding back this amount to the profit for the year as per books of accounts. It is submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. in the assessment order dated 24.12.2019 for A.Y. 2016-17 on this ground. In the assessment order for A.Y. 2013- 14 and 2014-15, the Assessing Officer did not accept the stand taken by the assessee and made addition while computing book profit u/s 115JB of the I. T. Act. The addition made by the Assessing Officer were deleted by the CIT (A) in the both the years by holding that the Capital profits have to be excluded from the working of book profit u/s 115JB [Order of CIT (A) dated 01.10.2019 for A.Y. 2014-15 and 27.08.2019 for A.Y. 2013-14]. The Ld. CIT (A) also relied upon decision of Hon'ble Supreme Court in the case of NTPC Co. Ltd. Vs. CIT (1998) 229 ITR 38C(SC). I am in respectful agreement with the stand taken by the Ld. CIT(A) that Capital profit / loss should not be part of book profit u/s 115JB. As the Assessing Officer has made no addition on this grounds in A.Y. 2016-17 and thus agreeing with the stand of the assessee, hence no intervention is required at the appellate stage by the CIT(A), which is also in line with the stand taken by the Ld. CIT(A) in A.Y. 2013-14 & 2014- 15. The grounds of appeal of the assessee as mentioned above, are therefore dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the Book Profits to the extent of loss suffered and debited in the Profit & Loss Account. 7. We find that in Assessment Year 2013-14, the assessee earned profits on sale of investments for Rs. 51.14 Lacs and offered the same to tax u/s 115JB. The assessee also earned excise duty exemption for Rs. 14.65 Crores. Initially, the assessee offered the same to tax u/s 115JB. However, in the revised return, the assessee reduced the same from Book-Profits. During assessment proceedings, the assessee pleaded for exclusion of these two items which was rejected by Ld. AO. However, upon further appeal, Ld.CIT(A) adjudicated the issue of profit on sale of investments in assessee's favor and held that such profits, being capital receipts, are to be excluded from Book Profits u/s 115JB. Regarding excise duty exemption, it was held that no such gains were included in Profit & Loss Account which calls for exclusion. Accordingly, this claim was rejected. Apparently, the revenue could not prefer any further appeal against the same due to low tax effect. This issue of profit on sale of investments, thus, attained finality in assessee's favor in AY 2013-14 wherein such profits have been held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch computation in revised return of income. Therefore, it could not be said that the assessee has taken consistent stand in the matter of treatment of profit / loss on sale of investments. The rule of consistency would not apply to the facts of the present case. 11. In our considered opinion as well as per settled legal position, capital profits, which do not have component of income, are to be excluded while computing Book Profits u/s 115JB. On similar logic, the adjustment of loss could also not be allowed u/s 115JB. In other words, loss on sale of investment could not be reduced from Book Profits u/s 115JB. The Hon'ble High Court of Madras in CIT V/s Metal and Chromium Plater (P.) Ltd. (415 ITR 123) clearly held that in terms of provisions of sub-section (5) of Sec.115JB, the assessment was open for application of all other provisions contained in the Income tax Act except if specifically barred by that section itself. Therefore, when gains on sale of investments were to be excluded being capital receipts, naturally, the book profits are to be increased by similar losses incurred on sale of investments. Accordingly, we confirm the view taken by lower authorities, in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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