The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that capital profits, which do not have component of income, are to be excluded while computing Book Profits under section 115JB.
The assessee being resident corporate assessee filed original return of income declaring ‘Nil’ income under normal provisions and Book-Profits under section 115JB for Rs.60.93 Lacs. However, in the revised return filed on 04.10.2017 and 22.03.2018, the book-profits were revised to Rs.38.39 Crores and Rs.29.83 Crores respectively.
The Assessing Officer (AO) framed the assessment under Section 143(3) and re-computed Book-Profits under Section 115JB after adding back claim of excise duty exemption.
The assessee preferred further appeal before CIT(A) and filed supplementary grounds of appeal. It was submitted that the assessee incurred loss on sale of investments for Rs.38.77 Crores. Another loss of Rs.16.28 Crores was suffered on surrender / cancellation of investment in M/s Pricol Pune Limited. The total loss thus suffered was Rs.55.05 Crores.
The assessee submitted that the said loss was offered to tax under section 115JB but the same should be excluded from book-profits considering consistent view taken by the department in earlier years.
In earlier years, the assessee took the stand that capital profit from sale of investments / capital assets should not be brought to tax under section.115JB and therefore, the same should be excluded from book profits. However, the department did not agree with the assessee and proceeded to assess capital profits to tax under section.115JB.
In the present year, the assessee incurred capital loss and therefore, the same treatment should be given to losses. The assessee did not press the issue of adjustment of excise duty under section 115JB since the assessee had opted to settle the issue in earlier year under Vivad Se Vishwas Scheme, 2020.
However, rejecting assessee’s submissions, CIT(A) upheld the stand of AO qua adjustment of loss on investments. Aggrieved, the assessee appealed before the tribunal.
After hearing both the parties, the tribunal noted that the assessee initially offered the profits on sale under section 115JB, however, it withdrew all such claims in the revised return of income. In AYs 2013-14, this issue of profit on sale of investments has been settled in assessee’s favor.
In A.Y. 2014-15 also, substantial claim has been accepted wherein such profits have been excluded under section 115JB. Therefore, to contend that the loss should be excluded under section 115JB in this year, considering consistent stand taken by revenue in earlier years, is bereft of any merits. The assessee, though initially offered the profits under section 115JB, however, later on withdrew such computation in revised return of income.
Therefore, it could not be said that the assessee has taken consistent stand in the matter of treatment of profit / loss on sale of investments. The rule of consistency would not apply to the facts of the present case.
The two member bench consisting of Mahavir Singh (Judicial member) and Manoj Kumar Aggarwal (Accountant member) held that capital profits, which do not have component of income, are to be excluded while computing Book Profits under section 115JB. On similar logic, the adjustment of loss could also not be allowed under section 115JB. In other words, loss on sale of investment could not be reduced from Book Profits under section 115JB. Thus the appeal was dismissed.
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