Subsidy/Incentive received are Capital Receipts, should be excluded from Book Profit u/s 115JB: ITAT grants relief to Birla Corporation [Read Order]

A Division Bench of the Income Tax Appellate Tribunal (ITAT), Kolkata Bench held that the Subsidy or incentive received are capital receipts, should be excluded from book profit under Section 115JB of the Income Tax Act, 1961. The assessee in the present appeal is Birla Corporation Limited.

The Department’s appeal is against the decision of the CIT(A) directing the AO to exclude the subsidy/incentive from book profit under section 115JB of the Income Tax Act. The AO rejected the assessee’s claim to exclude certain incentives in computing Book Profit u/s 115JB.

The AO held that the accounts were prepared in accordance with the provisions of Companies Act and these incentives were credited to Profit and Loss Account. Besides, the claim was not made through IT Return or Revised IT return and therefore fresh claim raised during the course of assessment proceedings was not accepted in view of decision of the Supreme Court in case of Goetze (India) Ltd.

On appeal, the CIT(A) granted relief to the assessee relying upon various decisions including the decision of the Tribunal in DCIT v. South Asian Petrochem.

The Counsel for the assessee, submitted that What can be taxed u/s 115JB of the Act is the “total income” which is income as defined in section 2(24) of the Act chargeable under section 4 and computed in the manner laid down in section 115JB. What is not “income” within the meaning of section 2(24) is outside the purview of the Act cannot form part of “total income” and cannot be subjected to tax either under the normal computation provisions or under section 115JB of the Act.

The Bench comprising Rajpal Yadav, Vice President and Dr Manish Borad, Accountant Member observed that “Since the issue stands squarely covered by the Jurisdictional High Court in the case of Ankit Metal and Power Limited, we fail to find any infirmity in the finding of the CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB of the Act.”

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