Sec 115JB not contained any provision to allow deduction under sec 54EC

IN THE INCOME TAX APPELLATE TRIBUNAL

"B" Bench, Mumbai

Before Shri D. Manmohan, Vice President

and Shri B. Ramakotaiah, Accountant Member

MA No. 548/Mum/2011

(Arising out of ITA No. 1814/Mum/2010

(Assessment Year: 2006-07)

Bakhtawar Construction Co. P. Ltd.

Meher House, 1st Floor

15, Cawasji Patel Street, Fort

Mumbai 400001

PAN - AAACB 4942 P

Applicant

Vs.

Income Tax Officer - 2(1)(1)

Aayakar Bhavan, M.K. Road 

Mumbai 400020

Respondent

Applicant by: Shri Amogh M. Ghaisas

Respondent by: Shri A.K. Nayak

Date of Hearing: 01.06.2012

Date of Pronouncement: 20.06.2012

O R D E R

Per D. Manmohan, V.P.

This application is filed at the instance of the assessee company and it is directed against the order dated 25th October 2011 passed by the ITAT “B” Bench, Mumbai.

2. Admittedly, assessee declared long term capital gains by crediting the same in the books of account prepared in accordance with the provisions of part II & III of Schedule 6 of the Companies Act, 1956. Since part of the amount received was invested in NABARD, which are eligible for exemption under section 54EC of the Act, Assessee contended before the AO that assessee was not liable to pay tax on normal computation and the same has to be applied for the purpose of computing book profit i.e., even while computing the book profits under section 115JB of the Act the amount eligible for exemption under section 54EC of the Act should be reduced from the long term capital gains credited to the P & L Account for the purpose of arriving at the “book profit”.

3. The AO as well as the CIT(A) are of the opinion that there is no provision in section 115JB to allow deduction under section 54EC of the Act. Computation of book profit is provided under section 115JB, which is a separate code by itself, wherein the first step is to compute book profit by taking into consideration the profit declared in the P & L Account of the assessee prepared in accordance with the provisions of part II & III of Schedule 6 of Companies Act and thereafter permissible adjustments in the form of additions and deductions are provided. Any claim which did not form within the compass of permissible adjustments cannot be taken into consideration.

4. Before the CIT(A) the learned counsel for the assessee relied upon the decision of the Hon'ble Bombay High Court in the case of CIT vs. Ace Builders Pvt Ltd. [2006] 281 ITR 210 but the same was distinguished on the ground that it was not on the issue of exemption under section 54EC of the Act. It is also stressed that there is no provision in section 115JB to allow deduction under section 54EC in respect of capital gains.

5. Aggrieved, assessee contended that it is entitled to the benefit of exemption under section 54EC of the Act even while computing book profit chargeable to tax under section 115JB of the Act. Another facet of the argument, as raised in ground (b), is that the learned CIT(A) erred in holding that the decision of the Hon'ble Bombay High Court in the case of Ace Builders Pvt. Ltd. (Income Tax Appeal No. 1006 of 2000) is not applicable to the facts of the present case. As can be noticed from the aforementioned ground, it is only an extension of the main issue and it is not independent of the main issue. At the time of hearing the learned counsel fairly admitted that the decision of the Hon'ble Kerala High Court in the case of N.J. Jose & Co. P. Ltd. vs. ACIT [2010] 321 ITR 132 squarely applies to the facts of the case and there is no contrary decision of any other High Court on this issue.

6. In fact the Log Book of the Vice President (MZ) shows that the learned counsel fairly admitted that the issue stands covered against the assessee but it was contended that provision of section 54EC overrides section 115JB of the Act and going by the intentions of the Legislature, deposits made in NABARD are meant to benefit the assessee. Page No. 74 of the paper book (internal page No. 13 of the Ace Builders Pvt. Ltd. case) was referred to submit that section 50 carves out an exception in respect of depreciable assets and provides that where depreciation has been claimed and allowed on the asset, a different method of computation of capital gain is provided in the Act.

7. The Bench, while passing the order, however, did not reproduce ground (b) and followed the decision of the Hon'ble Kerala High Court to hold that the assessee is not entitled to deduction under section 54EC of the Act while computing the book profit under section 115JB of the Act.

8. Under these circumstances the assessee filed the present Miscellaneous Application stating that ground (b) in the memo of appeal was omitted to be considered by the Tribunal and hence there is a mistake apparent from record that needs to be rectified by refixing the case for hearing to consider ground No. 2. The learned counsel relied upon the decision of the Hon'ble Supreme Court in the case of JCIT vs. Rolta India Ltd. [2011] 330 ITR 470 in support of his contention that even on the tax determined, by application of sections 115J/115JA of the Act, all other provisions of the Act are stated to be applicable and thus the Apex Court noticed that interest under section under section 234B is payable; by applying the same analogy even for computation of book profits under section 115JB all other provisions of the Act can be said to be applicable.

9. On the other hand, the learned D.R. submitted that though the Bench, while disposing of the appeal, did not mention specifically with regard to ground (b), the fact is that substantial issue was dealt with by not giving much emphasis to the non-applicable decision. In the case of Ace Builders Pvt. Ltd. (supra) the Court was not dealing with the matter of permissible adjustments to be made under section 115JB of the Act, which was rightly highlighted by the learned CIT(A) and the said order having been upheld by the Appellate Tribunal, impugned order does not contain a mistake apparent from record and it has to be assumed that the second ground, which is argumentative in nature, was considered by the Tribunal impliedly. It is also submitted that the decision in the case of Rolta India Ltd. (supra) has no application to the facts of the case since the Apex Court was concerned with the methodology to be followed after computation of the taxable income and not with regard to computation scheme for arriving at the taxable income.

10. We have carefully considered the rival submissions and perused the record. At the outset it may be noticed that there was omission to reproduce ground (b) in the impugned order but the fact remains that substantial issue was dealt with by the Bench; Thus, omission to specifically mention the decision of the Hon'ble Bombay High Court, which was not directly applicable, does not give rise to a mistake apparent from record. In fact the observation of the Bench ‘that the learned counsel, very painstakingly argued the matter’, implies that the other facets of the learned counsel’s contentions were taken due note of. Merely because there is no specific mention about the non-applicability of the ratio of Ace Builders case, in our considered opinion, it does not give rise to a mistake apparent on record.

11. On a conspectus of the matter we are of the view that the impugned order does not suffer from any mistake apparent from record. We accordingly reject the Miscellaneous Application filed by the assessee.

Order pronounced in the open court on 20th June 2012.

                                                             Sd/-                Sd/-

                                               (B. Ramakotaiah)  (D. Manmohan)

                                            Accountant Member  Vice President

Mumbai, Dated: 20th June 2012

Copy to:

1. The Appellant

2. The Respondent

3. The CIT(A) – 4, Mumbai

4. The CIT– II, Mumbai City

5. The DR, “B“ Bench, ITAT, Mumbai

//True Copy//

By Order

Assistant Registrar

ITAT, Mumbai Benches, Mumbai

n.p.