ACIT, CENTRAL CIRCLE-1(2), CHENNAI vs. M/S TWENTY FIRST CENTURY MANAGEMENT SERVICES PRIVATE LIMITED, CHENNAI

This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-18, Chennai dated 13.12.2022. The assessment was framed by the DCIT, Central Circle 1(2), Chennai for the assessment year 2018-19 u/s.154 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order of dated 13.12.2022.

The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the addition made by the AO of comprehensive income while computing book profit u/s.115JB of the Act and adding an amount of Rs.4,67,02,000/-. For this, Revenue has raised following ground No.2:-

Brief facts are that the assessee is a public limited company engaged in capital market operations by investment in derivatives and shares and trading in shares and securities. The assessee for the relevant assessment year 2018-19 filed its return of income on 08.10.2018 and return was processed u/s.143(1) of the Act on 20.03.2020 by making adjustment in the book profit for an amount of Rs.4,67,02,000/-. The CIT(A) in his order has reproduced the relevant adjustment made by the CPC u/s.143(1) of the Act as under:- a. The amount entered in Schedule SI is inconsistent with the corresponding amounts entered in Schedule CG/Schedule OS and hence, the variance was Rs.88,66,762

Before us, the ld.Senior DR relied on the 143(1) processing and also rectification order of the AO passed u/s.154 of the Act. On the other hand, the ld.counsel for the assessee relied on the order of the CIT(A).

We have heard rival contentions and gone through facts and circumstances of the case. We noted from the computation of income filed before us that the variance in deemed total income to the book profit is below the line of profit before tax and this, as explained by the ld.counsel for the assessee before us now that the has revalued the investment and there is an increase in value of investments which is reported in the accounts only and this is purely notional or uncertain income because assessee has not earned any income on this account. We noted that the assessee also relied on the CBDT Circular No.24/2017 dated 25.07.2017 vide F.No.133/23/2015-TPL and subsequent issue of FAQ titled clarifications on computation of book profit for the purpose of levy of Minimum Alternate Tax (MAT) u/s.115JB of the Act for Ind AS compliant companies. Wherein revaluation surplus of assets is to be computed in accordance with Indian Accounting Standards 16 and Indian Accounting Standards 38 and gains or loss in equity instruments designated at fair value through other comprehensive income in accordance with the Indian Accounting Standards 109 but this will not be included while computing book profit u/s.115JB of the Act because proviso clearly bar from applying clause ‘a’ or ‘b’ in regard to comprehensive income. The relevant proviso provides as under:- “Provided that nothing contained in clause (a) or clause (b) shall apply to the amount credited or debited to other comprehensive income under the head "Items that will not be re-classified to profit or loss" in respect of i. revaluation surplus for assets in accordance with the Indian Accounting Standards 16 and Indian Accounting Standards 38; or ii. gains or losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with the Indian Accounting Standards 109:”

In the result, the appeal filed by the Revenue is dismissed.