Section 115J of the Income Tax Act
The decision most relied on for Section 115J is CIT v. Veekay Lal Investments Co. Pvt. Ltd. (249 ITR 597), cited in 99 of the 63 judgments on BharatTax that turn on this section.
Leading authorities on Section 115J
Book profits under Section 115JB must include income by way of capital gains, similar to how total income is calculated under Section 45.
The classification of a government subsidy as either a revenue or capital receipt depends on its object and purpose. If the subsidy is given to enable the assessee to set up a new unit or expand an existing one, it is a capital receipt; if it is to meet recurring expenses, it is a revenue receipt.
Interest under sections 234B and 234C is leviable for failure to pay advance tax, even when the income tax is ultimately computed under Minimum Alternate Tax (MAT) provisions, specifically sections 115JA or 115JB. This ruling clarified the law, overturning previous interpretations.
Compensation received for the cancellation of an agency agreement is a capital receipt if it impairs the assessee's trading structure or results in the loss of a source of income. However, if the contract is terminated in the ordinary course of business, the compensation may be considered a revenue receipt, with classification depending on the specific facts of each case.
Courts cannot substitute their own views for those of the Directorate of Enforcement when assessing whether actions were taken arbitrarily or without jurisdiction. The court must consider the substance of the matter, not just the form.
Exempt capital gains must be considered when computing book profits under Section 115JB. Book profits cannot be arbitrarily adjusted.
Adjustments to book profits under section 115JB of the Income Tax Act, 1961, are restricted to those explicitly provided in Explanation 1 to section 115JB(2). The Assessing Officer lacks the jurisdiction to make adjustments beyond those specified in the Explanation, even if related to depreciation or other disallowances.
Transfer pricing adjustments cannot be added back to book profits under section 115JB of the Income-tax Act, as they are not among the permissible adjustments listed in Explanation I to section 115JB(2). Exempt capital gains must be considered when computing book profits under section 115JB.
A binding precedent retains its authority even if it was poorly argued, inadequately considered, or fallaciously reasoned. New discoveries or argumentative novelties cannot compel reconsideration of a binding precedent.
In the context of Section 115J, capital gains are included for assessment. Unlike Sections 115JA and 115JB, Section 115J does not have specific provisions for adjustments to book profits.
