Case Law Details
Brief Facts:
The brief facts of the case are that the assessee company is engaged in the business of investments, leasing and broking business. The return of income was filed on 29.09.2009 declaring total income of Rs.24,10,290/- under the normal provisions of the Act. Since the tax liability as per the provisions of section 115JB was higher, therefore, taxes were paid as per book profit computed u/s. 115JB. As per the computation of book profit, the income was declared at Rs.21,63,16,156/-. While computing the tax liability u/s. 115JB, the assessee had shown capital gains on sale of shares of HDFC Bank in the month of March 2009, which was claimed as exempt from tax u/s. 10(38) under the normal provisions of the Act. In the computation of income and notes forming part of computation of income, the assessee had shown Long term capital gain claimed as exempt u/s. 10(38) at Rs.1,72,55,70,760/- which was computed in the following manner:
Statement of computation of Capital Gains:
Computation of Long term capital gain on sale of shares of HDFC bank (STT paid)
The purpose of the Legislature behind introduction of 1st proviso to section 10(38) was to brought tax u/s 115JB only those income (profit of capital gains) not routed through profit and loss account but directly credited to capital reserve account in Balance Sheet
Proviso Ist of section 10(38) is an exception of section 10(38) only and nothing overriding effect over the provisions of section 115JB computing book profit.
Income (long term capital gain) disclosed in ITR u/s 10(38) shall not be considered for computing book profit u/s 115JB but the income (profit on transfer of such assets) already taken in profit and loss account.
The provisions of section 115JB r.w.s. 10(38) does not require any further adjustment for computing book profit in a case where income arises from transfer of assets mentioned u/s 10(38) already considered in profit and loss account.
The views expressed by the Hon’ble Mumbai ITAT in their decision in the case of Dharmayug Investment Ltd vs ACIT, ITA No. 1284/Mum/2013 order dated 10.06.2015 are correct while dealing with the situation of application of provision of section 115JB r.w.s. 10(38) of the Act.
None of the prescribed adjustments mentioned in clauses (f) or (ii) of Explanation 1 of sub-section 2 of section 115JB permit to increase the book profits of the assessee by adding the amount disclosed in ITR.
Different views taken by Hon’ble ITAT Bangalore in the case of Karnataka State Industrial Infrastructure Development Corporation Ltd vs DCIT (2016) 76 Taxmann.com 360.