Case Law Details
Brief of the Case
ITAT Kolkata held in the case of DCIT vs. M/s. Binani Industries Ltd. that it is not in dispute that the receipt representing forfeiture of share warrants is only a capital receipt & not chargeable to tax. However, the same has been duly credited in the profit and loss account as an extraordinary item. A capital receipt which is not chargeable to tax under any provisions of the Act would not be liable for book profits tax u/s 115JB. Further the assessee also has duly disclosed the fact of forfeiture of share warrants amounting to Rs. 12,65,75,000/- in its notes on accounts. The profit and loss account prepared in accordance with Schedule VI of Companies Act 1956, includes notes on accounts thereon and accordingly in order to determine the real profit of the assessee as laid down by the Hon’ble Apex Court in the case of Indo Rama Synthetics (I) Ltd vs CIT reported in (2011) 330 ITR 363 (SC), adjustment need to be made to the disclosures made in the notes on accounts forming part of the profit and loss account of the assessee and the profits arrived after such adjustment , should be considered for the purpose of computation of book profits u/s 115JB.,
Facts of the Case
The assessee filed its original return of income on 30.9.2009 disclosing total income at Rs Nil under normal provisions of the Act and declaring book profits u/s 115JB of the Act at Rs. 21,24,72,340/-. Later the assessee filed revised return of income on 31.3.2011 disclosing total income at Rs. Nil under normal provisions of the act and declaring book profits u/s 115JB of the Act at Rs. 33,90,47,340/-. In the said revised computation of book profits u/s 115JB of the Act, an extraordinary item of receipt to the tune of Rs. 12,65,75,000/- representing forfeiture of share warrants was included by the assessee. Later the assessee vide letter dated 27.12.2011 at assessment stage stated that the said extraordinary receipt of Rs. 12,65,75,000/- was erroneously included in the computation of book profits reported in the revised return and pleaded for exclusion of the same on the ground that it is capital receipt. The assessee also sought to disallow a sum of Rs. 1,37,12,550/- towards section 14A voluntarily under the normal provisions of the Act in the revised return filed by it on 31.3.2011.
However, the AO considered the book profits at Rs. 33,90,47,340/- as per the revised return of the assessee and proceeded with the assessment by relying on the decision of the Hon’ble Apex Court in the case of Apollo Tyres Ltd reported in 255 ITR 273 (SC) and also the provisions of section 115JB which stated that the profit and loss account (a) shall be made out so as clearly to disclose the result of the working of the company during the period covered by the account and (b) shall disclose every material feature, including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of an exceptional nature.
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