TMI Blog2015 (9) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... first day of April, 1997. Pointing out the object behind Section 115JA, it was contended by Mr.J.Narayanasamy, learned standing counsel that by a jugglery of the accounting methods, the assessee cannot always make it a "zero tax" company even while making profits or at least showing profits to certain stakeholders. We appreciate the concern. But the law relating to income tax being what it is, we do not think that the Court is entitled to go in for a purposive interpretation when the plain language of the taxing statute is clear. Explanation (i) is very clear in its purport. The assessee may fall within the ambit of the mischief sought to be undone by Section 115JA. But so long as the express language is in its favour, the mischief or no mischief cannot be cured. - Decided in favour of assessee. - Tax Case (Appeal) No. 933 of 2005 - - - Dated:- 25-8-2015 - V. Ramasubramanian And T. Mathivanan, JJ. For the Petitioner : Mr R. Vijayaraghavan for Mr P J Rishikesh For the Respondent : Mr J. Narayanasamy JUDGMENT (Judgment of the Court was delivered by V. Ramasubramanian, J.) This appeal by the assessee under Section 260A of the Income Tax Act, 1961, was admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steels Wires Ltd., v. Deputy Commissioner of Income Tax, (2004) 271 ITR 260 (P H). Therefore, the assessee is before us. 8. As contended by the learned counsel for the assessee, Chapter XII-B was inserted by the Finance Act, 1987 with effect from 1.4.1988. Section 115JA was inserted by the Finance Act, 1996 with effect from 1.4.1997. The question that actually arises for consideration is as to whether the reserves created or the provisions made by an assessee in a previous year which has no relevance to the assessment year commencing on or after the first day of April, 1997 could be reduced or not. It is not necessary to extract Section 115JA in entirety. It will be sufficient to extract the Explanation under sub-section (2) of Section 115JA, which reads as follows:- Explanation.--For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by-- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves by whatever name called; or (c) the amount or amounts set aside to provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, as computed under the Act in respect of any accounting year, was less than thirty percent of its book profit, as defined in the Explanation, the total income of the company, chargeable to tax, shall be deemed to be an amount equal to thirty per cent of such book profit. The whole purpose of section 115J of the Act, therefore, was to take care of the phenomenon of prosperous zero tax companies not paying taxes though they continued to earn profits and declare dividends. Therefore, a minimum alternate tax was sought to be imposed on zero tax companies. Section 115J of the Act imposes tax on a deemed income. Section 115J of the Act is a special provision relating only to certain companies. The said section does not make any distinction between public and private limited companies. In our view, section 115J of the Act legislatively only incorporates the provisions of Parts II and III of Schedule VI to the 1956 Act. Such incorporation is by a deeming fiction. Hence, we need to read section 115J(1A) of the Act in the strict sense. If we so read, it is clear that, by legislative incorporation, only Parts II and III of Schedule VI to the 1956 Act have been incorporated legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsure that by adopting different methods of preparing profit and loss account, the companies do not keep the income tax department at bay even while making profits. 11. Keeping the above in mind, let us now come back to Section 115JA. Under sub-section (1) of Section 115JA, if the total income of an assessee which is a company in respect of any previous year relevant to the assessment year commencing on or after the first day of April, 1997 but before the first day of April, 2001 is less than 30 per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent of such book profit. Sub-section (2) of Section 115JA made it obligatory for every company to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. But in the second proviso to sub-section (2), the legislature also took note of the fact that it is possible for a company to adopt the method and rates of calculation of depreciation differently and hence an Explanation was inserted to sub-section (2). 12. The question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in that case with the scope of the proviso to Explanation (i) to Section 115J, was dealing in that case with a factual scenario that was completely different. The Punjab and Haryana High Court had noted in that case that the assessee had created reserves in the previous year relevant to the assessment year 1990-91, which had commenced after 1st April, 1988. The Punjab and Haryana High Court specifically noted that this was an undisputed fact. As we have pointed out earlier, Section 115J was introduced with effect from 1.4.1988 and Explanation (i) to Section 115J which is similar to Explanation (i) to Section 115JA (with which we are concerned in this case) also contained the same expression, namely, previous year relevant to the assessment year. This factual distinction was lost sight of by the Tribunal. If this had been taken into account, the Tribunal would have actually found that the decision in Sterling Steels could be taken advantage of by the assessee in this case. Therefore the question that arises is as to whether the proviso to Explanation (i) would get attracted in this case at all or not. 15. We have already extracted the Explanation under sub-section (2) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the amounts specified in clauses (a) to (f), if such amounts had been debited to the profit and loss account. The second step was to reduce the amount so arrived at, by the amounts specified in clauses (i) to (vii) under the Explanation to Section 115JB. Paragraphs 15 to 17 of the decision of the Supreme Court in Indo Rama Synthetics read as follows:- 15. The first step for arriving at the book profit is that the net profit as shown in the P L a/c for the relevant previous year prepared under s.115JB(2) has tobe increased by the amount(s) in cls.(a) to (f) if such amount(s) is debited to the P L a/c. Clause (b) refers to amount(s) carried to any reserves by whatever name called. As stated above, such increase needs to be made only if any amount referred to in cls.(a) to (f) is debited to P L a/c. 16. The second step for arriving at the book profit is that the net profit as shown in the P L a/c for the relevant previous year prepared under s.115JB(2) and as increased by any amount, as stated above, has to be reduced by the amount(s) in cls.(i) to (vii). 17. For the purposes of deciding this case it may be noted that we are concerned with cl.(i) which inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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