|CORAM:||Amit Shukla (JM), B. R. Baskaran (AM)|
|CATCH WORDS:||Book Profits, capital gains|
|DATE:||June 10, 2015 (Date of pronouncement)|
|DATE:||June 22, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 115JB: In computing the "book profits" the entire capital gains have to be included without computing the benefits of indexation|
During the year ending on 31.03.2009, the assessee company sold shares and thereby earned a surplus of Rs. 1,90,78,63,394 which was net of STT paid. This amount was credited to the Profit & loss account as on 31.03.2009. In the computation of book profit u/s. 115JB, the assessee had made a note stating that the Long term capital gain should be taken at Rs. 1,72,55,70,760, which is after indexation. The Tribunal had to consider whether while computing the book profit u/s. 115JB the income on account of Long term capital gain should include Rs. 1,90,39,06,630 i.e. net amount credited or the sum of Rs. 1,72,55,70,760 computed after indexation. HELD by the Tribunal:
For computing the profit and the taxability u/s. 115JB, it is mandatory for the assessee to compute profit as per Profit & loss account prepared under the relevant provisions of the Companies Act. The relevant Schedule under the Companies Act for the preparation of statement of Profit & loss account provides that in case of sale of investments, net gain/loss should be disclosed. The net gain/loss means sale minus purchase and other cost. The Companies Act does not speak about Long term/ Short term capital gain. From the harmonious reading of the relevant provision as discussed above, it is evident that firstly, the book profit shall be reduced by the amount of income to which provision of section 10 applies. However, income under the provisions contained in section 10(38) will not be reduced. Thus, the income arising from transfer of long term capital asset is to be included in the book profit. The book profits as contemplated in section 115JB means the net profit, which has been shown/credited in the profit & loss account as prepared under the relevant provisions of the Companies Act. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself. Thus, in our opinion, the net amount on account of sale of shares of Rs. 1,90,39,06,630 will alone be taken into account in computation of book profit and not the amount of Long term capital gain of Rs. 1,72,55,70,760 after indexation.