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| The Tax Publishers2019 TaxPub(DT) 5856 (Del-Trib) INCOME TAX ACT, 1961
Section 271(1)(c)
Once an asset was held as an investment by company and reflected as an investment in balance sheet of company from year to year, then any gain on sale of such investment was not a link or to profit and gain of business carried on by respective company, and the same could not be adjusted for working out book profit of the company under section 115JB, therefore, penalty was liable to be deleted.
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Penalty under section 271(1)(c) - Validity - Capital gain on sale of shares - Capital gain added to back profit by AO
Assessee a NBFC deriving its income from investment in shares and mutual funds. During the financial year 2008-09, they have sold share of M/s. D and offered the same as long-term capital gain @ 10% of market transaction. They have filed their return of income declaring a book loss under section 115JB. AO computed the income of the assessee under section 115JB which was more than tax on regular income. In that process, AO held that capital gain on the sale of shares which was directed credited to the capital reserve account by assessee should have been entered in the Profit and Loss account and added the same to the income of the assessee under section 115JB. Thus AO initiated penalty proceedings under section 271(1)(c). Held: AO while computing the income under section 115J has only the power of examining whether books of accounts are certified by authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. In DCIT v. Arundhati Traders P. Ltd. [(2009) 27 SOT 305 (Mum) : 2009 TaxPub(DT) 1127 (Mum-Trib)] Tribunal held that once an asset was held as an investment by company and reflected as an investment in balance sheet of company from year to year, then any gain on sale of such investment was not a link or to profit and gain of business carried on by respective company, and the same could not be adjusted for working out book profit of company under section 115JB. It was only a difference of opinion between Revenue and assessee as to treatment given to capital gain either or not by routing it through profit and loss account. Therefore, penalty was liable to be deleted.
REFERRED : MAK Data (P) Ltd. v. CIT (2013) 358 ITR 593 (SC) : 2013 TaxPub(DT) 2358 (SC) Union of India v. Dharamendra Textile Processors (2007) 295 ITR 244 (SC) : 2007 TaxPub(DT) 1387 (SC) Apollo Tyres Ltd. v. CIT (2000) 255 ITR 273 (SC) : 2002 TaxPub(DT) 1371 (SC) M/s. Devsons Pvt. Ltd. v. CIT & Ors. (2010) 329 ITR 483 (Del) : 2010 TaxPub(DT) 2325 (Del-HC) CIT v. Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 (Del) : 2010 TaxPub(DT) 1957 (Del-HC) CIT v. Sain Processing and Weaving Mills (P) Ltd. (2010) 325 ITR 565(Del) : 2010 TaxPub(DT) 0280 (Del-HC) CIT v. Akshay Textiles Trading and Agencies (P) Ltd. (2008) 304 ITR 401 (Bom) : 2008 TaxPub(DT) 1145 (Bom-HC)
FAVOUR : In assessee's favour
A.Y. :
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