TMI Blog2005 (6) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the facts of the case and rival submissions. We have also considered the decision of Hon'ble Tribunal in the case of Chemplast Sanmar Ltd. [ 2004 (3) TMI 62 - ITAT CHENNAI] and Synthetic Industrial Chemicals Ltd [ 2004 (1) TMI 310 - ITAT COCHIN] . On combined reading of various sections, namely, 115JA, 115JAA, 208, 209, 234B 234C, the Hon'ble Tribunal came to the conclusion that MAT credit is akin to advance tax because it goes to reduce the liability of the assessee of the year and, accordingly, it reduces the liability of assessee by an equivalent amount from payment of advance tax. It has been mentioned by the Tribunal that MAT credit is not mentioned specifically in Explanation 1 to section 234B. Therefore, it can be said that the issue whether MAT credit is advance tax paid or not is a debatable issue and any independent conclusion can be arrived at only after detailed arguments on the harmonious construction of aforesaid sections. Even after that, it cannot be said that MAT credit is tax deducted at source, tax collected at source or advance tax paid. Therefore, we are of the opinion that the question of law on this issue requires considerable debate. If the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 1,24,139, being 30 per cent of the adjusted book profits of Rs. 4,13,796. The Assessing Officer was of the view that since gross total income of the assessee was a loss, it was not entitled to any deduction under section 80HHC from the book profits. However, the case of the assessee was, it was entitled to the aforesaid deduction on book profits computed in the manner laid down in sub-sections (3), (3A), (4) and (4A) of section 80HHC. The ld. CIT(A) considered various submissions made before him in this regard and came to the conclusion that the assessee was not entitled to any deduction under section 80HHC from the book profits. Aggrieved by this order, the assessee is in appeal before us. 4.1 The ld. Counsel pointed out that the provisions of section 115J as well as section 115JA were brought on the statute book in order to force the companies, which had book profits and declared the dividends, to pay tax. Such companies came to be known as zero-tax companies . The provisions of section 115JA were inserted by Finance (No. 2) Act, 1996 with effect from 1-4-1997. Before that similar provisions existed on the statute books in the form of section 115J regarding Special provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h B in the case of Starchik Specialties Ltd v. Dy. CIT [2004] 90 ITD 34. In particular, our attention was drawn to paragraph 9 of this order, which deals with the controversy at hand. We will revert to the circulars and the decision shortly. 4.2 As against the arguments of the ld. Counsel, the ld. D.R. relied on the orders of the Assessing Officer and the ld. CIT(A). It was pointed out that under sub-section (2) of section 115JA, the book profits ascertained in accordance with Parts II and III of Schedule VI of Companies Act, 1956, had to be increased and decreased as stated earlier. In doing so, one has to examine whether the assessee is at all entitled to any deduction under the clause (viii). He referred to the decision of Hon'ble Kerala High Court in the case of CIT v. Fertilizers and Chemicals Travancore Ltd. [2003] 261 ITR 484. On the basis of this decision, it was argued that the Assessing Officer has to examine first whether the assessee was at all entitled to deduction under section 80HHC. The deduction will have to be worked out in accordance with the provisions contained in that section. If the assessee is not entitled to any deduction under that section, no such ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits that are eligible for deduction under section 80HHC from the purview of MAT. It does not prescribe the method of computation of deduction under clause (viii). It also does not speak of export profits as per books. Therefore, we are of the view that both these circulars do not prima facie advance the case of the assessee. The ld. Counsel also relied on Circular No. 559 dated 4-5-1990, which deals with exclusion of export profits from the purview of section 115J. In this Circular, it is inter alia, pointed out that provisions of section 115J took away the 100 per cent exemption which was to be allowed in respect of export profits earned by the exporters and thus, watered down the encouragement which was to be provided to such foreign exchange earning activities. Since the intention was that 100 per cent of such profits should be exempt, it was decided that profits, which are exempt under section 80HHC should be excluded from the purview of the section 115J. It may be pointed out that clause (iii) was inserted under Explanation to section 115J by Direct Tax Laws (Amendment) Act, 1989 with effect from 1-4-1989. This clause reads that - the amounts as arrived at after-increasing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon'ble Kerala High Court, assessee was engaged in manufacture of goods, most of which were exported out of India. Because of substantial amount of depreciation and investment allowance, the assessee did not have taxable income and, therefore, the Assessing Officer made assessment under section 115J. The assessee claimed deduction of export profit in computation of book profits as provided in clause (iii) of section 115J on the basis of book profits. The Hon'ble Court pointed out that the Tribunal was correct in holding that book profits are to be taken into consideration for the purpose of this deduction. The Hon'ble Tribunal relied on this decision to hold that computation on the same basis has to be made under section 115JA also. It was further pointed out by Honourable Tribunal that both these sections levy MAT on zero tax companies. Taxes levied on the basis of book profits are subject to certain adjustments. These provisions come into operation when computation of income under normal provision is less than 30 per cent of the book profits. This requires - (i) determination of income under the normal provisions, and (ii) determination of book profits subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that Hon'ble Hyderabad 'B' Bench placed somewhat liberal interpretations on aforesaid clause (viii) of the section. None theless, the Hon'ble members clearly held that deduction under clause (viii) has to be computed with respect to the book profit. In spite of the difference in language of section 115J and section 115JA in the matter, pointed out earlier by us, we are of the view that judicial propriety demands that we follow the decision in the case of Starchik Specialities Ltd. In view thereof, it is held that deduction under section 115JA, Clause (viii) of the Explanation, is to be computed on the basis of book profits. 5.5 The result of aforesaid discussion is that ground No.1 of the appeal is dismissed as not pressed, and ground No. 2 of the appeal is allowed. Therefore, appeal Nos. 1268 to 1270/PN/04 are partly allowed. ITA No. 1273/PN/04 (Assessment Year 2001-02) 6. This appeal arises out of the order of CIT-III, Pune, passed on 2-6-2004, dismissing the appeal of the assessee, filed against the order of Dy. C.I.T., Circle 1, Solapur, under section 154 of the Income-tax Act on 19-3-2004. The only ground of appeal taken up is that the Learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax liability on an estimate basis and thereafter reduce the tax deducted or collected at source and make arrangements for paying the balance amount in specified instalments. It can also be seen that the benefit of MAT is available to the assessee for the purpose of carry forward and set off any subsequent years. The liability to pay advance tax is linked with the liability for payment of assessed tax. It is only when the payment of advance tax is lesser than the specified limit, the question of non-payment of advance tax and the question of deferment of advance tax arise. Therefore, it was held that the MAT credit carried forward available to the assessee goes to reduce the assessed tax and thereby as a consequence, also reduces the liability towards payment of advance tax. It was also pointed that even though MAT credit is not specifically mentioned in Explanation to section 234B, the credit has to be considered while quantifying the amount of advance tax payable by an assessee during the previous year. 9. As against the aforesaid argument of the ld. counsel of the assessee, the ld. DR pointed out that the instant appeal is not against the regular assessment order, but against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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