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TMI Blog2024 (8) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Brief facts of the case are that the assessee-company has filed its return of income electronically on 22.03.2016 declaring total income of Rs. 60,37,050/-. The case of the assessee was selected for scrutiny assessment and notices under sections 143(2) and 142(1) were issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that the assessee has sold flats No.1402B and 1402C. It did not credit its profit & loss account by the gain from the sale of capital asset (flats). The ld. Assessing Officer confronted the assessee to explain as to why the gain from sale of flats should not be considered for the calculation of book profit. The assessee vide its written submission dated 10.10.2017 explained that those flats were held as a capital asset and the income from the same was not income from regular operation and in the normal computation of income, the capital gain has been offered to tax after taking the indexation cost. The assessee also submitted that the gains from the sale of these two flats were credited as a capital reserve account in the audited accounts of the company and the fact is duly reflected in the note-sheet to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered is whether exclusion of the Capital receipt is in line with the principal as laid down by Hon'ble Apex court in the case of Apollo Tyres. The ruling of Delhi ITAT in the case of Growth Avenue Securities Pvt. Ltd. -vs- DCIT (ITA No. 3912/Del/2005) on the issue of inclusion of Capital Gain in Book Profit while computing MAT under the provision of the Indian Tax Law, where Capital Gain are not chargeable to tax under the normal provision of the Indian Tax Law may be considered. The ITAT held that any adjustment outside the scope of MAT computation mechanism, under the Indian Tax Law (ITL) is not permissible and since the exclusion of Capital Gains is not specifically provided therein, a tax payer is not entitled to such an adjustment while computing Book Profit for the purpose of MAT. The Financial statement of the assessee is made to clearly disclose the result of the working of the company during the period covered by the accounts. Here, the P&L Account do not reflect it to result of the working of the company for the year, and it cannot be said that the P&L Account was prepared as per schedule VI, part-II & III of the Company's Act and it would necessitate corrective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee itself as well as requirement of part-II & III of Schedule VI of Company's Act, 1956. It was held that assessing officer had rightly brought profit on sale of shares through taxation under MAT provision of Sec. 115JB. The Book profit u/s 115JB is the Profit as per P&L Account prepared in accordance with Companies Act subject to some addition and deletion as prescribed in the explanation 1 to subsection (2) of section 115JB. The Companies Act does not permit any indexation of cost and the prescribed adjustments of section 115JB does not include such adjustment. So, the indexation of cost for acquisition and improvement of the asset as claimed by the assessee is ignored. From the above it is clear that: (1) When the P&L Account is not prepared as per the relevant provision of the Companies Act, the assessing officer has the right to make adjustment of profit so as to fit the provision of the Companies Act (2) The Capital Gain from the sale of fixed asset is an integral part of the P&L Account prepared as per Companies Act. (3) There is no provision of taking indexed cost of acquisition or indexed cost of improvement while preparing the P&L Account as per companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Best Trading and Agencies Limited is concerned, that aspect is not being adjudicated by the Tribunal specifically in the given facts. It was just tested on the point whether action under section 263 is justifiable or not. The judgment of the Hon'ble Bombay High Court in the case of Bhagwan Industries Limited is concerned, we are of the view that this judgment is totally silent either on the construction of the interpretation of the provision or due consideration of the fact as to how it is applicable on this aspect. The total finding of the Hon'ble High Court is being reproduced as under:- "2. The learned counsel for the Respondent supports the Order. 3. Tribunal while passing the impugned Order observed that while computing the book profit under Section 115JB of the Income-Tax Act, the Assessing Officer added the sum of Rs. 2,84,84,000/- in the book profit. The Commissioner of Income- Tax (Appeals) deleted the addition. The Tribunal referring to the Judgment of the Apex Court in a case of Apollo Tyres Ltd. v. C.I.T. reported in 255 ITR 273 and Judgment of this Court in case of Akshay Textiles Trading and Agencies Pvt.Ltd., reported in 304 ITR 401 has observed as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB of the Act operates in different fields. We completely agree with the finding of the Hon'ble Court that section 45 read with section 112 of the Act, which is part of the Income Tax Act deals with the calculation of long-term capital gain and capital asset held for more than three years and the assessee is eligible for indexed cost benefit even if it is subjected to section 115JB of the Act. However, in the instant case, since the issue is only relating to computation of book profit under section 115JB of the Act and not the computation of income under section 45 of the Act, therefore, the judgment of the Hon'ble Karnataka High Court in the case of Best Trading and Agencies Limited (supra) will not be of any help to the assessee. Therefore, since the issue before us is only that whether the assessee is eligible to calculate book profit by including net gains from sale of capital assets, after claiming indexed cost of acquisition and the book profit is to be calculated in accordance with Part-II and Part- III of Schedule VI of Companies Act and subject to the adjustments provided under section 115JB of the Act and in absence of any specific clause under section 115JB of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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