MOUNTPARK CREATIVCE P.LTD,MUMBAI vs. ITO 1(2)(3), MUMBAI

ORDER

PER N.K. PRADHAN, AM

read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the learned in computing "Book Profit" at Rs.73,32,838/-under Section 115JB of the I.T. Act, Mountpart Creative 1961 vide order dated 17.01.2014 passed under Section 143(3) of the I.T Act, 1961 as against Rs.23,32,838/- computed by your appellant. 1.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) further erred in holding that amount of capital gain in respect whereof benefit of reinvestment under Section 54EC of the I.T. Act is available by the appellant cannot be reduced from the "Book Profit" and that the benefit is only available for section 10(38) and not for exemption in series of Section 54 and Section 54EC has no application in computation of “Book Profit” under section 115JB of the Act for exclusion of exempted capital gains. 1.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that there is nothing in Chapter XII-B providing for disallowance of eligible exemption Under Section 54EC of the Act on capital gains in the course of assessment based on "Book Profit" and that what is deemed to be income under Section 45 of the Act cannot be income for the purpose of Section 115JB of the Act for the simple reason that "Book Profit" cannot include deemed income.

3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2011-12 on 18.09.2011 declaring total income of Rs.22,72,700/- under the regular provisions and book profit at Rs.23,32,838/- u/s 115JB. While calculating the book profit of Rs.23,32,838/- u/s 115JB, the assessee had claimed deduction of Rs.50,00,000/- u/s 54EC. The Assessing Officer (AO) completed the assessment u/s 143(3) on 22.01.2014 computing the book profit u/s 115JB at Rs.73,32,838/-. In the assessment order, the AO held that the assessee was not entitled to exclusion of Rs.50,00,000/- (exempt u/s 54EC for Long Term Capital Gains), while computing the book profit u/s 115JB of the Act.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A), having discussed the order of the Tribunal in M/s Technicarts (P) Ltd. v. ITO (2011) 46 SOT 294 (Mum.), Growth Avenue Securities Pvt. Ltd. v. DCIT (2010) 128 TTJ 426 (Del), Rain Commodities 41 DTR 449 (Hyderabad) and the judgment of the Hon’ble Bombay High Court in Veekay Lal Investment Pvt. Ltd. 249 ITR 597 (Bom), relied on the ratio laid down in the above decisions and confirmed the order of the AO that the assessee is not entitled to claim deduction u/s 54EC, while calculating book profit u/s 115JB of the Act.

5. Before us, the Ld. counsel of the assessee submits that the issue in the instant case has been decided by the Hon’ble Madras High Court in the case of CIT v. Metal & Chromium Plater (P.) Ltd. (2016) 76 taxmann.com 229 (Mad.). 6. On the other hand, the Ld. DR relies on the decision in Veekay Lal Investment Co. Pvt. Ltd. (supra) and supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In Veekaylal Investment Co. (supra), relied on by the Ld. DR, the Hon’ble High Court held that if for computing the total income under the normal provisions, the capital gains computed u/s 45 has to be taken into account, it was not understood how in computing the book profits u/s 115J, the assessee could exclude capital gains. The facts in the instant case are different as delineated above.