The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the receipt not like income cannot be included in book profit for computation u/s 115JB of the Income Tax Act,1961 and the interest in power subsidy has to be excluded.
Sh. Ved Jain, Adv. &MsSupriya, CA appeared for the assessee and Sh. Hemant Gupta appeared for the revenue.
M/s. IndogulfCropsciences Ltd., the assessee is engaged in the business of manufacturing agrochemicals, pesticides etc. The assessee company is having a unit in Jammu & Kashmir on which deduction u/s 80IC has been claimed. During the assessment proceedings, AO gathered that the assessee has received an excise refund amounting to Rs. 6,76,32,413/- and an interest subsidy amounting to Rs. 32,77,053/- which have been claimed as capital receipts.
The assessee submitted that these incentives were given with the object to achieve the development of industries and the generation of employment in the specified areas of Jammu & Kashmir. It was submitted by the assessee that these incentives are capital receipts and the same has also been accepted by the Department in the assessment year 2013-14.
The AO held that the scheme of Section 115JB of the act does not permit for exclusion of capital receipts (excise refund and interest subsidy) as done by the assessee while computing the book profits for Section 115JB of the Act and accordingly recomputed the profit for Section 115JB of the Act at Rs. 12,20,88,089/-.
The respondent relied on the judgment of Karnataka High Court in B & B Infratech Ltd. vs. Income Tax Officerandhas observed that provisions of Section 115JB are a complete code in itself and the increase or reduction of income is permissible only to the extent provided under the explanation to the said section.
The capital receipts of the nature of excise duty refundand interests subsidy which without any doubt are receipts of capital nature. It was observed by the ITAT that since a receipt is not like income at all, it cannot be included in book profit for computation u/s 115JB andheld that interest in power subsidy under the scheme has to be excluded while computing book profits u/s 115JB.
In light of various precedents, the ITAT bench consists of Sh. Anil Chaturvedi, Accountant Member and Sh. Anubhav Sharma, Judicial Memberheld that the Appellant company has rightly reduced Capital Receipts of the nature of excise refund and interest subsidy for working out Book Profits. The appeal was allowed and the AO was directed to re-compute the income.
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