The Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that the provisions relating to Book Profit not applicable when there is no income tax payable on the normal provisions of the Act.
The assessee, M/s. Batliboi Limited has been a public limited company engaged in the business of manufacturing machine tools, textile machines, Air conditioning & Refrigeration work , Casting & Job work for Air Conditioning and Humidification , Air Control Equipment and Trading in Engineering goods.
The issue raised in this case by the assessee is with regard to non-taxability of the receipt of Rs.4,27,43,000 from the welfare trusts by the assessee company while computing book profits under section 115JB of the Act, even though the same was credited by it in its profit and loss account.
The coram consisting of Pavan Kumar Gadale and M.Balaganesh noted that the receipt of Rs.4,27,43,000 by the assessee company received from the welfare trusts is a capital receipt not liable to income tax. Hence, a receipt which from its inception is not the income under section 2(24) of the Act cannot be taxed under section 115JB of the Act also. To put it differently, what cannot be taxed directly cannot be taxed indirectly.
Therefore, the Tribunal while allowing the appeal of the assessee held that the sum of Rs.4,27,43,000 to be a capital receipt and not liable to tax while computing books profits under section 115JB of the Act.
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