Section 115JA of the Income Tax Act
The decision most relied on for Section 115JA is ACG Associated Capsules (P) Ltd. v. CIT (343 ITR 89), cited in 144 of the 209 judgments on BharatTax that turn on this section.
Leading authorities on Section 115JA
For calculation of deduction under Section 80HHC, if total interest is netted off after adjusting interest paid and received, the 90% reduction specified in Explanation (baa) is not applicable.
Export incentives, such as DEPB (Duty Entitlement Pass Book) and advance license benefits, constitute income taxable on an accrual basis under Section 28 of the Income-tax Act. Profit arising on the transfer of DEPB is not eligible for deduction under Section 80HHC.
For computing book profits under Section 115JB, an Assessing Officer's power is limited to examining duly certified books and making adjustments only as per the Explanation. A provision for bad and doubtful debts, being a diminution in the value of an asset (receivable), does not constitute a 'provision for liability' under Clause (c) of the Explanation and therefore cannot be added back.
Book profits under Section 115JB must include income by way of capital gains, similar to how total income is calculated under Section 45.
Leave to appeal was granted by the Supreme Court in this case. The case concerns reassessment proceedings following a search.
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.
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.
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.
