ICDS Limited, Manipal V. CIT, Mangalore

ITA 1278/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60762 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-06-2012
• Assessment Year: misc
• Appeal Filed On: 15-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K AMBASTHA II TAT
• Keywords: Capital asset; Business income; Deemed to accrue or arise in india; Question of law; Fair market value; Capital receipt
• Section: 143(3); 263

Judgement Text

PAGE 1 OF 12 ITA NO.1278/ BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1278/BANG/2011 (ASST. YEAR 1989 -90) M/S ICDS LTD., SYNDICATE HOUSE, MANIPAL. PA NO.AAACI4355H VS THE COMMISSIONER OF INCOME TAX, CENTRAL REVENUES BUILDING, ATTAVAR, MANGALURU-575001. (APPELLANT) (RESPONDENT) DATE OF HEARING 18.06.2012 DATE OF PRONOUNCEMENT 4.07.2012 APPELLANT BY : SHRI S K AMBASTHA, CIT(DR-I), ITAT RESPONDENT BY : SMT. SHEETAL, ADVOCATE O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE COMPANY IS DIRECTED A GAINST THE ORDER OF THE JURISDICTIONAL CIT, MANGALURU DATED 22 .11.2011, IN GIVING EFFECT TO THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COU RT IN ITRC NO.45 OF 1999 DATED 7.4.2011. THE RELEVANT ASSESSMENT YEAR IS 198 9-90. 2. THE ASSESSEE COMPANY HAD, IN ITS GROUNDS OF APP EAL RAISED SIX GROUNDS IN AN ILLUSTRATIVE AND NARRATIVE MANNER. GROUND NOS. I, V & VI ARE GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS C ALLED FOR, HENCE, THE SAME ARE DISMISSED. THE REMAINING GROUNDS, RELATE TO TWO ISSUES, NAMELY, PAGE 2 OF 12 ITA NO.1278/ BANG/2011 2 1. THAT THE LEARNED CIT HAD ERRED IN LAW BY TAKING I NTO ACCOUNT THE WHOLE AREA OF LAND I.E., 1,19,524 SFT I N STEAD OF 94570 SFT TO ARRIVE AT THE FAIR VALUE OF RS.10,38,02,000/- WHICH PERTAINS TO 94570 SFT OF LA ND; & 2. THAT WHILE GIVING EFFECT THE DIRECTION OF THE HO NBLE HIGH COURT (SUPRA), THE CIT HAD ERRED IN DIRECTING THE AO TO TREAT THE AMOUNT TRANSFERRED DIRECTLY TO THE CAPITAL RESERVE BEING THE PROFIT ON SALE OF LAND, T O THE BOOK PROFIT AND TAX THE SAME U/S115J OF THE ACT. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS :- THE ASSESSEE IS A COMPANY [THE ASSESSEE IN SHOR T]. IT IS MAINLY ENGAGED IN THE BUSINESS OF LEASE FINANCING AND ACCE PTING DEPOSITS FROM THE PUBLIC. THE ASSESSEE HAD PURCHASED AN IMMOVABLE PR OPERTY IN A COURT AUCTION IN THE FINANCIAL YEAR 1973-74 TO DEVELOP THE SUBJECT PROPERTY AND CONSTRUCT COMMERCIAL/OFFICE COMPLEX. ACCORDINGLY, A STRUCTURE WAS BUILT UNDER THE NAME AND STYLE OF MANIPAL CENTRE. ACCO RDING TO THE ASSESSEE, THE SUBJECT PROPERTY HAD BEEN DISCLOSED AS CAPITAL ASSETS IN ITS BOOKS OF ACCOUNT. DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE, THE BOARD OF DIRECTORS IN ITS MEETING ON 3 1.8.1987 HAD RESOLVED TO CONVERT A PART OF THE SUBJECT PROPERTY INTO STOCK-IN -TRADE I.E., OUT OF THE TOTAL AREA OF 1,19,524 SFT, A PORTION OF 94570 SFT FOR FAIR MARKET VALUE (FMV) OF RS.10.38 CRORES WAS CONVERTED INTO STOCK-I N-TRADE AND THEREAFTER DISPOSED OFF. IT WAS THE CASE OF THE ASSESSEE THAT THERE WAS A LONG TERM CAPITAL GAIN [LTCG] AROSE IN LIEU OF AMENDMENT TO S . 2 (47) OF THE ACT W.E.F 1.4.1985. PAGE 3 OF 12 ITA NO.1278/ BANG/2011 3 3.1 THE RETURN OF INCOME WAS FURNISHED FOR THE AY UNDER DISPUTE BY DISCLOSING THE INCOME COMPUTED AS PER THE NORMAL PROVISIONS OF THE ACT, AGGREGATING TO RS.8,66,806/- AND ALSO DECLARING A B OOK PROFIT OF RS.4,46,40,852/- IN TERMS OF P & L ACCOUNT IN ACCOR DANCE WITH PARTS 2 & 3 OF SCHEDULE VI OF THE COMPANIES ACT 1956. ACCORDIN GLY, THE ASSESSEE HAD PAID RS.1.39 CRORES BEING THIRTY PER CENT OF BOOK P ROFIT AS COMPUTED U/S 115J OF THE ACT. IN THE ORIGINAL RETURN OF INCOME , THE ASSESSEE DID NOT CONSIDER CAPITAL GAINS FOR DETERMINING THE BOOK PRO FITS COMPUTED UNDER SECTION 115J, SINCE ACCORDING TO THE ASSESSEE, IT W AS A CAPITAL RECEIPT DIRECTLY CREDITED TO CAPITAL RESERVE DISCLOSED IN THE BALANCE SHEET. 3.2 AFTER SCRUTINY OF THE RETURN OF INCOME, AN ASS ESSMENT U/S 143(3) OF THE ACT WAS CONCLUDED ON 28.2.1992. SUBS EQUENTLY, THE JURISDICTIONAL CIT HAD, ON VERIFICATION OF ASSESSME NT RECORDS, INITIATED PROCEEDINGS U/S 263 OF THE ACT AND AFTER DUE CONSID ERATION OF THE ASSESSEES VERSIONS AND FOR THE REASONS RECORDED TH EREIN, DIRECTED THE AO TO CONSIDER THE (I) APPLICABILITY OF S 115J OF THE ACT; AND (II) TO CONSIDER AS TO WHETHER THE PROFIT ARISING ON SALE OF LANDS WAS TAXABLE AS BUSINESS INCOME IN VIEW OF ARTICLE 7 OF MEMORANDUM OF ASSOC IATION. ACCORDINGLY, THE AO HAD REVISED THE ASSESSMENT ORDER VIDE ORDER DATE D 24/12/1993 U/S 143(3) R. W. S. 263 OF THE ACT. 4. AGAINST THE ORDER UNDER SECTION 143 RWS 263, T HE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WHO AFTER CONSIDERI NG THE ASSESSEES CONTENTIONS NEGATED ITS REQUEST. HOWEVER, ON AN A PPEAL, THE EARLIER BENCH OF THE TRIBUNAL IN ITS ORDER DATED 26.4.1995 (ITA N O.17/BANG/94, 91 & PAGE 4 OF 12 ITA NO.1278/ BANG/2011 4 267/BANG/1995) HAD ALLOWED THE APPEAL OF THE ASSESS EE AND HELD THAT THE IMPUGNED ORDER OF THE CIT U/S 263 AND SUBSEQUENT FR AMING OF THE ASSESSMENT ORDER WAS INVALID. ON A REFERENCE BY THE REVENUE, THE HONBLE JURISDICTIONAL HIGH COURT HAD, VIDE ITS JUDGEMENT I N ITRC NO.45 OF 1999 DATED 24.8.2006, RULED THUS: 5..THE ORDER OF THE COMMISSIONER APPEALS AS W ELL AS THE TRIBUNAL ARE SET-ASIDE AND THE MATTER IS REM ITTED BACK FOR RE-DECISION TO THE COMMISSIONER-APPEALS. THE QUESTION OF LAW IS NOT ANSWERED IN THE LIGHT OF THE REMAND ORDER [COURTESY: P 72 OF PB AR]. SUBSEQUENTLY, THE HONBLE HIGH COURT IN ITS ORDER UN DER MISC. CIVIL NO.2419/2011 DATED: 7.4.2011 HAD OBSERVED AS UNDER: IN PARA 5 OF THE ORDER, WHILE SETTING ASIDE THE OR DER PASSED BY THE COMMISSIONER AND THE TRIBUNAL, THE MAT TER HAS BEEN REMITTED BACK TO THE COMMISSIONER-APPEALS. IN FACT, THE ORDER PASSED BY THE COMMISSIONER IS BY VIRT UE OF THE REVISIONAL JURISDICTION AND, THEREFORE, THE REMAND OUGHT TO BE MADE TO THE COMMISSIONER AND NOT TO THE COMMISSIONER APPEALS. THEREFORE, THE WORD APPEALS FOUND IN LINES-2, 5 AND 8 OF PARAGRAPH-5 IS AN UNIN TENDED MISTAKE. IT IS FOR CORRECTION OF THE SAID MISTAKE, THIS APPLICATION IS FILED. APPLICATION IS NOT OPPOSED. THEREFORE, THE WORD A PPEALS FOUND AFTER THE WORD COMMISSIONER IN LINES 2, 5 A ND 8 OF PARAGRAPH-5 SHALL BE DELETED. [REFERENCE: P 74 OF PB AR]. 5. SUBSEQUENT TO THE HONBLE COURT JUDEMENT AND A LSO AFTER DUE CONSIDERATION OF THE ASSESSEES REBUTTAL AS RECORDE D IN HIS IMPUGNED ORDER DATED 22.11.2011 (UNDER DISPUTE), THE LEARNED CIT H AD DIRECTED THE AO TO PAGE 5 OF 12 ITA NO.1278/ BANG/2011 5 INCLUDE PROFIT ON SALE OF LAND TO THE BOOK PROFITS FOR PURPOSES OF S.115J AND COMPUTE THE MAT PAYABLE THEREON. FURTHER, THE CIT, WHILE RE- WORKING THE INCOME TO BE TAXABLE UNDER THE HEAD IN COME FROM CAPITAL GAINS AND INCOME FROM BUSINESS HAD TAKEN INTO ACCOUNT THE WHOLE AREA OF LAND I.E., 119524 SFT IN STEAD OF 94570 SFT TO ARRIVE AT THE F MV OF THE LAND CONVERTED INTO STOCK-IN-TRADE. 6. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEAL. DURING THE COURSE OF HEARING, THE ELABORATE SUBMISS IONS MADE BY THE LEARNED A R ARE, FOR APPRECIATION OF FACTS, SUMMARIZED AS U NDER: (I) THAT THE CIT HAD ERRED IN GIVING DIRECTIONS TO THE AO TO RE-WORK THE INCOME TO BE TAXABLE UNDER THE HEAD CAPITAL GAINS AND INCOME FROM BUSINESS WHEN THE SAID ISSUE HAD ALREADY BEEN MADE IN THE ORIGINAL ASSESSME NT BY THE AO AND THE HONBLE HIGH COURT HAD CLEARLY DIRECTED THE CIT ONLY TO DECIDE THE QUESTION OF LAW FRAMED BY IT; (II) THAT THE CIT HAD FURTHER ERRED IN LAW BY TAKING INTO ACCOUNT THE WHOLE AREA OF LAND I.E., 119524 SFT I NSTEAD OF 94570 SFT TO ARRIVE AT THE FMV AT RS.10.38 CRORE S WHICH PERTAINS TO 94570 SFT OF LAND; (III) THAT WHILE GIVING EFFECT TO THE ORDER OF THE HONBLE COURT, THE CIT HAD ERRED IN GIVING DIRECTIONS TO T HE AO TO TREAT THE AMOUNT TRANSFERRED DIRECTLY TO THE CAP ITAL RESERVE BEING THE PROFIT ON SALE OF LAND TO THE BO OK PROFIT AND TAX THE SAME U/S 115J OF THE ACT; (IV) THAT THE CIT HAD ALSO ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE PREPARED THE P & L ACCOUNT I N ACCORDANCE WITH PART II & III OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956 WHICH WAS ALSO SUPPORTED BY THE PAGE 6 OF 12 ITA NO.1278/ BANG/2011 6 COMPENDIUM ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA (ICAI) (V) THAT THE CIT HAD GROSSLY ERRED IN RELYING ON THE FOLLOWING DECISIONS WHICH, ACCORDING TO THE ASSESSE E, ARE DISTINGUISHABLE; (A) DCIT V. BOMBAY DIAMOND CO. LTD. (2009) 33 DTR 59; (B) N.J. JOSE & CO V. ACIT (2008) 321 ITR 132 (KER) ; & (C)CIT V. VEEKAYLAL INVESTMENTS CO. PVT. LTD (2001) 249 ITR 597 (BOM) (VI) THAT THE CIT HAD FAILED TO RELY ON THE FOLLOWIN G DECISIONS WHICH ARE SQUARELY APPLICABLE TO THE ASSES SEES CASE: APOLLO TYRES LTD V. CIT (2002) 255 ITR 273 (SC); CIT V. VIJAYASHREE FIN. & INV. CO. P. LTD (2008) 216 CTR 191 (CHENNAI); AMICHAND INV. P. LTD V. DCIT (2008) 304 ITR 97 (GUJ ); NATIONAL HYDROELECTRIC POWER CORPN. LTD V. CIT CIV IL APPEAL NO.6 OF 2010 DT.5.1.2010 (SLP NO.4378 OF 2 007 (SC); CIT V. M/S.HCL COMNET SYSTEMS & SERVICES LTD 305 ITR 409 (SC); HIND SYNTEX LTD V. CIT 331 ITR 36; RAJ SPINNING & WEAVING MILLS V. DCIT 281 ITR 177. 6.1 TO STRENGTHEN HER ARGUMENTS, THE LEARNED A R HAD FURNISHED A PAPER BOOK CONTAINING 1 230 PAGES WHICH CONSIST O F, INTER ALIA, COPIES OF (I) CORRESPONDENCE WITH AUTHORITIES BELOW AND ORDER PAS SED U/S 263 OF THE ACT; (II) ORDERS OF THE HONBLE HIGH COURT; (III) WRITTE N SUBMISSIONS FILED BEFORE THE AUTHORITIES BELOW; (IV) FINANCIAL STATEMENTS ET C., PAGE 7 OF 12 ITA NO.1278/ BANG/2011 7 7. ON THE OTHER HAND, THE LEARNED D R SUBMITTED T HAT WHILE GIVING EFFECT TO THE ORDER OF THE HONBLE JURISDICTIONAL H IGH COURT (SUPRA), THE LEARNED CIT HAD, AFTER DUE CONSIDERATION OF THE CON TENTIONS RAISED BY THE ASSESSEE, DEALT WITH THE ISSUES JUDICIOUSLY AND RE CORDED ELABORATE FINDINGS WHICH, ACCORDING TO LEARNED D R, REQUIRES NO INTERF ERENCE OF THIS BENCH. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE RELEVANT MATERIALS AVAILABLE IN THE CASE RECORDS AN D ALSO VARIOUS CASE LAWS ON WHICH THE ASSESSEE HAD PLACED ITS STRONG RELIANCE. ON A CAREFUL PERUSAL OF THE IMPUGNED ORDER OF THE CIT UNDER DISPUTE, IT HAS BEEN OBSERVED THAT THE CIT HAD, DULY CONSIDERED THE ASSESSEES CONTENTIONS AND RECORDED HIS FINDINGS, THE RELEVANT PORTIONS OF WHICH ARE EXTRAC TED AS UNDER: 64. MATERIAL ON RECORD SHOWS THAT THE TOTAL AREA O F LAND PURCHASED BY THE ASSESSEE IN COURT AUCTION WAS 1,19, 524 SFT OF WHICH THE EXTENT OF LAND CONVERTED INTO STOC K-IN- TRADE WAS 94,570 SFT. SCHEDULE G TO THE COMPANYS BALANCE SHEET AS AT 31.3.1989 SHOWS THAT FMV AND CO A FOR 1,19,524 SFT OF LAND WERE RS.1038.02 LAKHS AND RS.13.40 LAKHS RESPECTIVELY. FROM THESE FIGURES, CORRESPONDING VALUES OF FMV AND COA FOR THE PART OF LAND SOLD IN THE RELEVANT PREVIOUS YEAR (49,204 SFT) CAN BE WORKED OUT ON A PROPORTIONATE BASIS AS FOLLOWS: FMV = (49204/119524) X 1038.02 = RS. 427.32 LAKH; AND COA = (49204/119524) X 13.40 = RS.5.52 LAKH (INDEXE D COST = 36.42 LAKH, AS PER ANNEXURE XI TO ASSESSME NT ORDER U/S 143(3) RWS 263 DATED 24.12.1993). 65. ON THE BASIS OF THE ABOVE FIGURES, PROFIT OF R S.4.91 CRORE EARNED ON SALE OF LAND MAY BE BIFURCATED INTO CAPITAL GAINS AND BUSINESS INCOME AS FOLLOWS: PAGE 8 OF 12 ITA NO.1278/ BANG/2011 8 CAPITAL GAINS = FMV COA (INDEXED)= 427.32 36.42 = RS.390.90 LAKH; AND BUSINESS INCOME= ASC FMV = 527.19 427.32= RS.99 .87 LAKH. THESE FIGURES ARE, HOWEVER, SUBJECT TO VERIFICATION BY THE ASSESSING OFFICER. 8.1 FROM THE ABOVE FINDINGS OF THE CIT, ONE CAN S AFELY ASSUME THAT THE ISSUE HAD NOT REACHED ITS FINALITY AS, ACCORDING TO THE CIT, THE MATERIAL ON RECORD SHOWS THAT THE TOTAL AREA OF LAND PURCHAS ED BY THE ASSESSEE IN COURT AUCTION WAS 1,19,524 SFT, OF WHICH THE EXTENT OF LAND CONVERTED INTO STOCK-IN-TRADE WAS 94,570 SFT. SCHEDULE G TO THE COMPANYS BALANCE SH EET AS AT 31.3.1989 SHOWS THAT FMV AND COA FOR 1,19,524 SFT OF LAND WERE RS.1038.02 LAKHS AND RS.13.40 LAKHS RESPECTIVELY . ACCORDINGLY, THE AO HAS BEEN DIRECTED BY THE LEARNED CIT TO VERIFY THE FIGURE S AND TO TAKE APPROPRIATE ACTION. 8.2 TAKING INTO ACCOUNT OF THE FACTS AND CIRCUMST ANCE OF THE ISSUE DISCUSSED SUPRA, WE ARE OF THE FIRM VIEW THAT THE A SSESSEE SHOULD HAVE NO GRIEVANCE TO AGITATE AT THIS STAGE. OBVIOUSLY, IF T HE ASSESSEE WERE TO BE GRIEVED BY THE FINDINGS OF THE AO WHILE IMPLEMENTING THE DIRECTIONS OF THE CIT (SUPRA), THEN THE ASSESSEE SHALL BE AT LIBERTY T O TAKE APPROPRIATE PROCEEDINGS. IN ESSENCE, GROUND II(B) OF THE ASSESS EE IS DISMISSED AS THE APPREHENSION OF THE ASSESSEE, IS PREMATURE. 9. WITH REGARD TO THE CITS DIRECTION TO THE AO T O TREAT THE AMOUNT TRANSFERRED DIRECTLY TO THE CAPITAL RESERVE B EING THE PROFIT ON SALE OF LAND TO THE BOOK PROFIT AND TAX THE SAME U/S 115J OF THE ACT, THE LEARNED A R HAD PLACED STRONG RELIANCE ON VARIOUS JUDICIAR Y, CHIEFLY, THE RULINGS OF (I) PAGE 9 OF 12 ITA NO.1278/ BANG/2011 9 THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. VIJAYASHREE FINANCE & INVESTMENT CO. (P) LTD REPORTED IN (2008) 216 CTR ( MAD) 191; AND (II) THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AMICHAND INVESTMENT P. LTD V. DCIT (2008) 304 ITR 97 (GUJ). 9.1 WITH DUE RESPECTS, WE HAVE PERUSED THE RULING OF THE HONBLE MADRAS HIGH COURT IN THE CASE CITED SUPRA WHEREIN T HE HONBLE COURT HELD THAT 5. THE APEX COURT IN THE ABOVE CITED DECISION [APPO LLO TYRES LTD V. CIT (2002) 255 ITR 273 (SC)] HAS HELD THAT THE AO, WHIL E COMPUTING THE INCOME UNDER S. 115J OF THE ACT HAS ONLY THE POWER OF EXAMI NING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER TH E COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH T HE COMPANIES ACT. THE AO, THEREFORE, HAS THE LIMITED POWER OF MAKING INCR EASE AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION . TO PUT IT DIFFERENTLY, THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE P & L ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO S.115J OF THE ACT. 9.2 DECISIVELY, THE HONBLE GUJARAT HIGH COURT HAD , IN THE CASE OF AMICHAND INVESTMENT (P) LTD REFERRED ABOVE, RULED T HUS: SEC. 115J MORE PARTICULARLY, THE EXPLANATION PERMIT S INCREASES OF THE AMOUNTS SPECIFIED IN CLS. (A) TO ( F) PROVIDED ANY SUCH AMOUNT IS DEBITED TO THE P & L ACC OUNT. CLAUSE (A) WHICH RELATES TO THE AMOUNT OF INCOME-TA X PAID OR PAYABLE CAN BE ADDED TO THE NET PROFIT AS SHOWN I N THE P & L ACCOUNT PROVIDED TO SUCH AN AMOUNT OF INCOME- TAX PAID OR PAYABLE IS DEBITED TO THE P & L ACCOUNT. ADMITTEDLY, IN THE PRESENT CASE, THERE IS NO DEBIT T O THE PAGE 10 OF 12 ITA NO.1278 /BANG/2011 10 P & L ACCOUNT AS FOUND BY THE TRIBUNAL AND THE DEBI T IS TO THE DIVIDEND ACCOUNT. THUS, ON A PLAIN READING OF THE LANGUAGE EMPLOYED BY THE STATUTE, THE EXERCISE UNDERTAKEN BY THE REVENUE CANNOT BE PERMITTED. IT I S TRUE, AS CONTENDED BY THE COUNSEL FOR THE REVENUE TH AT SUCH SITUATION OPERATES INEQUITABLY IN THE FACTS OF THE PRESENT CASE. HOWEVER, IT IS NOT OPEN TO THE COURT TO ADD WORDS TO THE STATUTE MERELY BECAUSE IN A GIVEN CASE THE PROVISION OPERATES TO THE DISADVANTAGE OF ONE SIDE. THE COURT CAN ONLY INTERPRET THE LANGUAGE OF THE STATUTE WITHOUT ADDING TO OR SUBTRACTING ANY WORDS FROM THE PROVISION. THE ONLY EXCEPTION TO THIS RULE OF INTERPRETATION IS WHERE THE LIBERAL INTERPRETATION DOES NOT YIELD ANY RESULT, OR IN OTHER WORDS RESULT IN ABS URDITY. THAT IS NOT THE POSITION IN THE PRESENT CASE. THE LEGISLATURE HAS TAKEN A CONSCIOUS DECISION TO BRING TO TAX A NOTIONAL INCOME BY DEEMING THE SAME TO BE AN INCOM E CHARGEABLE TO TAX AT THE PRESCRIBED RATE UNDER S. 1 15J. THE OPENING PORTION OF S.115J(1) OPENS WITH A NON OBSTANTE CLAUSE WHICH PROVIDES FOR A SELF CONTAINE D CODE WITHOUT HAVING REGARD TO ANYTHING CONTAINED IN ANY OT HER PROVISIONS OF THE I.T ACT. ONCE THIS IS THE POSITI ON, IT IS NOT POSSIBLE TO ACCEPT THE STAND OF THE REVENUE THA T A PARTICULAR INCOME OR PART THEREOF ESCAPES ASSESSMEN T IN THE PROCESS. THE OBJECT OF INCORPORATING S. 115J I N THE STATUTE WAS TO ENSURE THAT COMPANIES WHICH OTHERWIS E DO NOT PAY TAX AT THE PRESCRIBED PERCENTAGE ON A DEEMED INCOME. IN THESE CIRCUMSTANCES, REVENUE CANNOT BE PERMITTED, ON ONE HAND TO INVOKE PROVISIONS OF S. 1 15J AND YET ON THE OTHER HAND RESORT TO OTHER PROVISIONS OF THE ACT SIMULTANEOUSLY. 9.3 HOWEVER, THE HONBLE HIGH COURT OF KERALA HAD , IN THE CASE OF N.J.JOSE & CO (P) LTD V. ACIT & ANR. REPORTED IN (2 010) 321 ITR 0132 (KER)/ (2008) 217 CTR (KER) 479, TAKEN A DIVERGENT VIEW WHILE RULING ON A SIMILAR ISSUE THAT: PAGE 11 OF 12 ITA NO.1278 /BANG/2011 11 ASSESSMENT UNDER CHAPTER XIIB ON BOOK PROFIT IS A SELF CONTAINED CODE. THE SCHEME THERE-UNDER IS TO ADOPT THE P & L ACCOUNT OF THE ASSESSEE PREPARED IN ACCORDANC E WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT 1956, AND TO TREAT THE NET PROFIT SHOWN THEREIN AS BOOK PROFIT. THE PERMISSIBLE ADJUSTMENTS IN THE FORM OF ADDITIONS AND DEDUCTIONS ARE PROVIDED UNDER EXPLANATION TO S. 115J (1A). NO MOR E DEDUCTIONS, REBATES OR ALLOWANCES OTHER THAN WHAT I S STATED IN THE SAID EXPLANATION ARE AVAILABLE FOR TH E COMPUTATION OF BOOK PROFIT. IN FACT, IT IS VERY CLE AR FROM THE NON OBSTANTE CLAUSE IN S. 115J(1) THAT THE ASSE SSMENT UNDER S. 115J OVERRIDES OTHER PROVISIONS OF THE ACT . WHILE DEDUCTIONS, REBATES AND ALLOWANCES ARE AVAIL ABLE IN THE COMPUTATION OF INCOME FOR NORMAL ASSESSMENT, ADDITION, DEDUCTION AND ADJUSTMENTS EXCEP0T TO THE EXTENT COVERED BY THE EXPLANATION TO S. 115J(1A) ARE NOT AVAILABLE IN THE COMPUTATION OF BOOK PROFIT. IN OT HER WORDS, ONCE THE AO FINDS THAT TOTAL INCOME AS COMPU TED UNDER THE PROVISIONS OF THE ACT IS LESS THAN 30 PER CENT OF THE BOOK PROFIT, HE HAS TO GIVE UP NORMAL ASSESS MENT AND HAS TO OPT FOR THE ASSESSMENT UNDER S. 115J WHI CH DOES NOT PROVIDE FOR ANY DEDUCTION IN TERMS OF S.54E . THE ASSESSEE HAS NO CASE THAT THE LONG TERM CAPITAL GAIN IS NOT PROFIT INCLUDIBLE IN THE P & L ACCOUNT PREPA RED IN TERMS OF SCH. VI OF COMPANIES ACT. SINCE THERE IS NO PROVISION IN CHAPTER XII-B FOR DEDUCTION OF CAPITAL GAINS IN THE COMPUTATION OF BOOK PROFIT, THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION CLAIMED. SO LONG AS LONG TERM CAPITAL GAIN IS PART OF PROFIT INCLUDED IN THE P & L ACCOUNT PREPARED UNDER CHAPTER VI OF THE COMPANIES ACT, IT CANNOT BE EXCLUDED UNLESS SO PROVIDED UNDER EXPLANA TION TO S. 115J (1A). IN THE ABSENCE OF ANY PROVISION F OR EXCLUSION OF CAPITAL GAIN IN THE COMPUTATION OF BOO K PROFIT UNDER THE ABOVE PROVISION, ASSESSEE IS NOT E NTITLED TO THE EXCLUSION CLAIMED.. PAGE 12 OF 12 ITA NO.1278 /BANG/2011 12 9.4 AT THIS JUNCTURE, WE RECALL THE RULING OF THE HONBLE APEX COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD REPORTED IN (1973) 88 ITR 0192 (SC), WHEREIN THE HONBLE SUPREME COURT HE LD THAT WHEN TWO REASONABLE CONSTRUCTIONS IS POSSIBLE, ONE THAT IS F AVOURABLE TO THE ASSESSEE IS TO BE PREFERRED. 9.5 IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AND VARIOUS JUDICIARY HAVE RULED IN FAVOU R OF THE ASSESSEE AS QUOTED ABOVE AND ALSO THE RATIO LAID DOWN BY THE HON BLE APX COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD (SUPRA), WE A RE OF THE CONSIDERED VIEW THAT THE SALE OF LAND CARRIED TO CAPITAL RESERVE CA NNOT BE ADDED TO BOOK PROFITS UNDER SECTION 115J OF THE ACT. THEREFORE, I N CONSONANCE WITH THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE ARE OF THE FIRM VIEW THAT THE CIT HAD EXCEEDED HIS JURISDICTION WHILE DIRECTI NG THE ASSESSING OFFICER TO GO BEHIND THE NET PROFIT SHOWN IN THE P & L ACCO UNT EXCEPT TO THE EXTENT PROVIDED FOR IN EXPLANATION TO S. 115J OF THE ACT. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTL Y ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DAY OF JULY, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. T HE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.