S. H. KAPADIA, J.

( 1 ) BEING aggrieved by the decision of the Tribunal, the Department has filed this appeal under section 260a of the Income Tax Act.

( 2 ) THE substantial question of law which arises for determination is as follows :- (A) Whether the income from capital gains should be included for the purposes of computing book profits under section 115j of the Income Tax Act?

( 3 ) THE above appeals raise common question of law. Hence, they are disposed of by this Judgment. For the sake of convenience, we are relying upon facts in Income Tax appeal No. 27 of 2000. FACTS :

( 4 ) THE assessee M/s Veekaylal Investments Co. Pvt. Ltd. , filed its return of income for the Assessment year 1989-90 declaring a net loss of rs. 29,120/ -. During the previous year relevant to the above assessment Year 1989-90, the assessee sold part of the land admeasuring 36,693 sq. yards to Manish Builders, Bacchubhai parekh and S. N. Apte and others. In the return of income, the assessee treated the income derived from the above property as long term capital gains and offered Rs. 2. 70 lacs for taxation. The assessee was carrying on business of investment. The AO came to the conclusion that the profits arising from transfer of above lands would have to be charged as capital gains under section 45 and not under section 28. It was further observed that as per profit and loss account for the period 31st March, 1989, the assessee earned a net profit of Rs. 12,76,119/ -. However, the assessee did not offer any income under section 115j of the income Tax Act on the ground that under section 115j, one has to take commercial profits and if any receipt had no commercial profit element, then such receipt would have to be excluded for the purposes of section 115j. That, commercial profits or book profits under section 115j would not include capital gains. The AO rejected the above contention. Being aggrieved, the assessee preferred an appeal before CIT (Appeals) who agreed with the view of the ao. Therefore, the assessee went in appeal to the Tribunal. The Tribunal took the view that under the Income Tax Act, capital gain is deemed to be income under section 45. That, the said section was a deeming provision. That, the said section applied only to the limited extent. That, what is deemed to be income under section 45 is not income for book profits and, therefore, the Tribunal held in favour of the assessee. In this connection, the Tribunal followed the judgment of the Special Bench, Calcutta, in the case of sutlej Cotton Mills Ltd. vs. Assistant Commissioner of income Tax reported in 199 ITR page 164 (Cal ). Being aggrieved, the Department has filed this appeal. ARGUMENTS :

( 5 ) MR. Desai, learned Senior Counsel appearing on behalf of the Department, contended that section 115j related to certain Companies. That, it forms part of Chapter 12b. That section 115j begins with non-obstante clause. He contended that the said section was introduced by Finance Act, 1987. That, by virtue of the said section, it is provided that in the case of a Company whose total income, as computed under the Act, is less than 30% of the book profits computed under that section then the total income chargeable to tax will be 30% of the book profits as computed. That, for the purposes of section 115j bookprofits will be the net profits as shown in the profit and loss account prepared in accordance with Schedule-VI to the Companies Act, 1956 after certain adjustments. Mr. Desai contended that section 115j (1) emphasises the expression total income. He contended that this expression covers capital gains which are deemed to be income in lieu of section 45 of the Income Tax Act. Mr. Desai invited our attention also to Parts II and III of schedule-VI of the Companies Act, 1956. He pointed out that clause 3 of part II indicates the items which will fall in the profit and loss account. He contended that reading the said items, it is clear that the assessee was required to disclose cre