PCIT-4 Vs Hespera Reality Pvt Ltd (Delhi High Court)
Delhi High Court held that proviso to section 10(38) of the Income Tax Act doesn’t mean that if gains are not included as book profits u/s. 115JB, the same are liable to be included as income for purpose of assessment of tax under normal provisions.
Facts- The Revenue had preferred the present appeal against the order dated 20.01.2020 passed by CIT(A) in respect of the assessment year (AY) 2015-16, whereby the CIT(A) had held that the respondent (assessee) was entitled to exemption of an amount of ₹2,47,52,73,951/- u/s. 10 (38) of the Act, which was denied by AO.
According to the Revenue, the said decision is erroneous as the Long Term Capital Gains, which the Assessee claimed were exempted u/s. 10(38) of the Act, were not included in the Assessee’s profit and loss account for the relevant period. Therefore, the said gains were excluded from the calculations of the book profits u/s. 115JB of the Act.
Conclusion- Held that the proviso to Section 10(38) of the Act was added by virtue of the Finance Act, 2006 to abundantly clarify that the income from capital gains on certain assets, which are excluded from the income under Section 10(38) of the Act, would nonetheless, be included in computing book profits for the purposes of Section 115JB of the Act. Proviso to Section 10(38) of the Act cannot be read in the reverse to mean that if the gains are not included as book profits under Section 115JB of the Act, the same are liable to be included as income for the purposes of assessment to tax under the normal provisions, notwithstanding that the gains are required to be excluded from income chargeable to tax under Section 10(38) of the Act.
