TMI Blog2019 (5) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... pose and intention to bring the amendment is to remove the mischief or hardship of the assessee on MAT in respect of the income being share in the association of persons or body of individuals which is otherwise not subject to income tax in accordance with the provisions of Section 86 of the Act. As decided in M/S GOLDGERG FINANCE PVT. LTD. VERSUS ACIT- CIRCLE 3, THANE [ 2017 (2) TMI 643 - ITAT MUMBAI] the mischief which has been sought to be remedied is that the share income of the member of the AOP which was not taxable in terms of section 86 was getting taxed under MAT while computing the book profit. This was also never the purpose of section 115JB to tax any income or receipts which is otherwise not taxable under the Act. If the intention of legislature was always that income which is not taxable under the normal provisions of the Act should not be brought to tax under MAT also, then it has to be interpreted that such a benefit has to be given to all and where the income is otherwise not taxable under the Act cannot be brought to be taxed under MAT. Therefore, any remedy brought by an amendment to remove the disparity and curb the mischief has to be reckoned as curative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 115JB of the Act. The relevant finding of the Assessing Officer are as under: I have carefully considered the submission of the assessee and find the same not acceptable in view of the following reasons: 1) In the instant case the share of profit from the joint venture company represent the share of profit from AOP. As per section 10(2 A), only the share of profits from a firm governed by the partnership Act is excluded from computation of total income. In computing the book profit also the share of profits from the firm would have excluded in view of explanation (ii) to sec. 115JB. But the share of profits from AOP which may be exempt from taxation in the hands of the members by the virtue of section 86, cannot be excluded while the computing the book profits of the members of AOP, under any of the explanation under sec. 115JB of the Act. 2) Here, it is pertinent to mention that the AOP and Partnership Firm are very much distinguishable in nature. 3) Further, the ITAT Bench, Hyderabad in the case of ACIT Circle Hyderabad V/s Seenaiah Co. Projects Ltd Hyderabad has held that the adjustments have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 123 (Mumbai - Trib.) .. .. .. ( vi) It may be mentioned that in a number of judicial pronouncements, the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 (SC), has been distinguished. In these judgements, it has been observed that the object of Minimum Alternate Tax (MAT) provisions incorporated in Sec.ll5JB of the Act was to bring out real profit of companies and the thrust was to find out real working results of company. It was further observed that inclusion of receipt which are not in the nature of income in computation of book profits for MAT would defeat two fundamental principles, it would levy tax on receipt which was not in nature of income at all and secondly it would not result in arriving at real working results of company. Real working result could be arrived at only after excluding this receipt which had been credited to P L a/c and not otherwise. The reliance is placed on the cases of JSW Steel Ltd. Vs ACIT [2017] 82 taxmann.com 210 (Mumbai - Trib.); Sicpa India (P.) Ltd. Vs DCIT [2017] 80 taxmann.com 87 (Kolkata - Trib.), Dy. CIT v. Binani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force in any part of India], whether the net result of the computation of the total income of such association or body is a profit or a loss, his share (whether a net profit or net loss) shall be computed as follows, namely :- ( a) any interest, salary, bonus, commission or remuneration by whatever name called, paid to any member in respect of the previous year shall be deducted from the total income of the association or body and the balance ascertained and apportioned among the members in the proportions in which they are entitled to share in the income of the association or body ; ( b) where the amount apportioned to a member under clause (a) is a profit, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be added to that amount, and the result shall be treated as the member's share in the income of the association or body ; ( c) where the amount apportioned to a member under clause (a) is a loss, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare in the income of association of persons or body or individuals computed in the manner provided in Section 67A subject to the condition that the total income of such association or body or person is not exempt from income tax. However, such share of member shall be included while computing the total income for the purpose of average marginal tax. The share of a partner in the total income of the firm is exempt as per provisions of Section 10(2A) of the Act and consequently is excluded from the total income of the partner and therefore, the said share shall be excluded while computing the book profit U/s 115JB of the Act as envisaged in clause (ii) of explanation (1) to the said Section. So far as second proviso to Section 86 of the Act is concerned, it refers to the association of persons or body of individuals whose total income is exempt from income tax and therefore, in our view, the reference in second proviso to Section 86 is made to the association of persons or body of individuals whose total income is exempt U/s 10 of the Act and not otherwise. Once the share in the joint venture which is treated as share in the association of persons is not hit by the second proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: ( iic ) the amount of income, being the share of the assessee in the income of an association of persons or body of individuals, on which no income tax is payable in accordance with the provisions of section 86 if any, such amount is credited to the profit and loss account; or The rationale behind this section has been explained in the Explanatory notes to the Finance Act, 2015 in the following manner:- Rationalising the provisions of section 115JB The existing provisions contained in section 115JB of the Act provide that in the case of a company, if the tax payable on the total income as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after 1st day of April, 2012, is less than eighteen and one-half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be eighteen and one-half percent of book profit. This tax is termed as minimum alternate tax (MAT). Explanation below subsection (2) of section 115JB provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excluded while computing the MAT liability of the member u/s 115JB. It was further provided that expenditure if any debited to the P L account corresponding to such income which is to be excluded from the MAT liability shall be added back to the book profit for the purpose of computation of MAT. The intention of the legislature which can be gauged by the Explanatory notes to the amending Act, was to provide similar remedy which was applicable to the partners whose share income from the profit of the firm was not liable for MAT. If a provision has been brought to extend the benefit to certain class of assessees which was earlier applicable to other class of assessees on a similar circumstances and is remedial in nature, then, the same has to be reckoned as retrospective. It is quite a trite proposition that explanatory Act which is curative in nature or any remedial statute is brought in the statute either to remedy unintended consequence or to provide benefit which is applicable to particular class of assessee and is extended to other class of assessee, then, on reasonable interpretation it should be declared as retrospective in operation. In our opinion, if an amendment in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P.) Ltd. (supra). This Court, in Allied Motors (P.) Ltd. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court in Allied Motors (P.) Ltd. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003 not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute envisaged that if the income of the assessee is not taxable, that is, in case of partner the share income from the partnership firm, then it cannot be taxed as book profit under MAT liability. Similarly, in second case also, that is, in case of member of an AOP where no income-tax is payable on the share of a member of an AOP in certain situations in terms of section 86, should also not be brought to tax under MAT liability. The legislature by this amendment has thus removed this imparity between two classes of assessees so that mischief or prejudice caused to other class of assessees should be removed. The mischief which has been sought to be remedied is that the share income of the member of the AOP which was not taxable in terms of section 86 was getting taxed under MAT while computing the book profit. This was also never the purpose of section 115JB to tax any income or receipts which is otherwise not taxable under the Act. If the intention of legislature was always that income which is not taxable under the normal provisions of the Act should not be brought to tax under MAT also, then it has to be interpreted that such a benefit has to be given to all and where the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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