Computation of book profit u/s 115JB of the Income Tax Act

Last updated: 13 September 2021

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The Income Tax Appellate Tribunal (ITAT) Delhi has ruled in favour of the assessee, M/s B R Agrotech Ltd., concerning the computation of book profit under section 115JB of the Income Tax Act. The Tribunal found that the Assessing Officer erred in not considering Circular No. 68 dated 17-11-1971. The case involved the treatment of Excise Duty subsidy and Focus Product Scheme (FTS)/Focus Market Scheme (FMS) as capital receipts. The Tribunal allowed all appeals, stating that the schemes were intended to generate permanent employment in Jammu and Kashmir, thus qualifying as capital in nature.

Court :
ITAT Delhi

Brief :
The present appeals have been fi led by the assessee against the orders of ld. CIT(A)-2, New Delhi dated 24.04.2019.

Citation :
ITA No. 6244/Del/2019 : Asstt. Year : 2011-12

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘A’, NEW DELHI
Before Sh. Amit Shukla, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
(Through Video Conferencing)
ITA No. 6244/Del/2019 : Asstt. Year : 2011-12
ITA No. 6245/Del/2019 : Asstt. Year : 2012-13
ITA No. 6246/Del/2019 : Asstt. Year : 2013-14
ITA No. 6247/Del/2019 : Asstt. Year : 2014-15

M/s B R Agrotech Ltd.,
1505, Vikram Tower, Rajendra
Place, New Delhi-110008

ACIT,
Circle-4(1),
New Delhi

Assessee by : Sh. S. S. Nagar, Adv.
Revenue by : Ms. Alka Gautam, Sr. DR
Date of Hearing: 28.06.2021 Date of Pronouncement: 02.09.2021
ORDER

That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justif ied and grossly erred in non-considering the Circular No. 68 dated 17- 11-1971 wherein the issue raised in the appeal has been squarely covered.

2. The assessee f i led the return of income declaring total income of Rs.8,14,50,536/- under the normal provisions of the IT Act and book profit of Rs.14,67,75,360/- u/s 115JB of the Act.

3. Brief facts of the issue before us are that the assessee filed a rectification appl ication u/s 154 before the Assessing Officer seeking to consider the issue of Excise Duty subsidy and Focus Product Scheme (FTS)/Focus Market Scheme (FMS) as capital receipts. The Assessing Officer rejected the application on the grounds that al lowing of such claim wil l lead to lowering of total income and the claim of the assessee is not mistake apparent from the record.

4. A close reading the Of fice Memorandum and the amendment introduced thereto with para No. 3 appearing in the Central Excise Notif ication Nos. 56 and 57 of 11-11-2002, thus, makes it amply clear that the acceleration of development of industries in the State was contemplated with the object of generation of employment in the State of Jammu and Kashmir and the generation of employment, so contemplated, was not only casual or temporary; but was on the other hand, of permanent nature.

5. In the result, al l the appeals of the assessee are al lowed.
Order Pronounced in the Open Court on 02/09/2021.

Please find attached the enclosed file for the full judgement

FAQ :

The main issue was whether Excise Duty subsidy and Focus Product Scheme (FTS)/Focus Market Scheme (FMS) should be treated as capital receipts when calculating book profit under section 115JB of the Income Tax Act.

No, the Assessing Officer rejected the assessee's rectification application, stating that allowing the claim would lower the total income and that it was not a mistake apparent from the record.

The Tribunal ruled that the Excise Duty subsidy and FTS/FMS should be considered capital receipts.

The Tribunal noted that these schemes were introduced to accelerate industrial development and generate permanent employment in Jammu and Kashmir, indicating a capital nature.

The Tribunal considered Circular No. 68 dated 17-11-1971 to be relevant and that the Assessing Officer had erred in not considering it.

All the assessee's appeals were allowed by the ITAT Delhi.