TMI Blog2019 (6) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard. We, therefore, hold that the assessee is not eligible for exemption from payment of MAT as per the provisions of section 115JB(6), since, admittedly, it does not qualify as a business or services rendered by an entrepreneur or developer in a unit or SEZ as per definition of the said terms in the SEZ Act. We find that the Ld. Counsel for the assessee for this purpose has relied heavily on the provisions of section 115JB(5) , pointing out that as per the said sub-section, all other provisions of the Act would apply to the assessee and, therefore, the provisions of section 80IB (10) would also apply to it requiring it to be deducted /reduced for arriving at the taxable book profits. We do not find any merit in this contention of the Ld. Counsel for the assessee also. Deduction under section 80IB(10) is provided against the gross total income of an assessee, while section 115JB levies taxes on the book profits . Both the sections clearly operate in different spheres. Therefore sub-section (5) of section 115JB cannot be interpreted so as to provide deduction under section 80IB(10) from the book profits of the assessee. The Hon ble High Court of Uttarakhand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of this common consolidated order. 4. For the sake of convenience, we shall be dealing with the facts in the case of ITA No. 422/CHD/2016 relating to assessment year 2008-09 and our decision rendered therein would apply mutatis-mutandis to the rest of the appeals. 5. The brief facts relating to the case are that the assessee is a Private Limited company dealing in the business of development of housing project units. It filed its return of income for the impugned assessment year i.e. A.Y 2008-09 on 04.03.2009 declaring income of ₹ 2, 20, 013/-. The Assessing Officer (AO) framed assessment u/s 153A read with Section 143(3) of the Act and assessed the total income at ₹ 12, 74, 720/- and the tax payable under MAT was determined at ₹ 96, 28, 336/-. The Tax computed under MAT being higher than that under the normal provisions, the same was determined as payable by the assessee. Aggrieved by the levy of tax under MAT, the assessee filed appeal before the Ld.CIT(A), contending that it was exempt from paying tax under MAT, as per section 115JB(6) of the Act. The Ld.CIT(A) , dismissed the contention of the assessee and upheld the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per company but the claim of the assessee company was disallowed the AO. Hence this appeal. That during the assessment proceedings the assessee company claimed thai the provisions of section 115JB are not applicable to the assessee company as the income of the assessee company is from the business carried as a developer. The claim of the assessee company is inaccordance with the provisions of section 115JB(6) of the Act reproduced here as under:- Section 115JB(6): The provisions of this section shall not apply to the income accrued or arising on or after the Is' day of April, 2005 from any business carried on or services rendered by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. The provisions has been bifurcated into three parts. Each part is explained as under : business carried on, or services rendered an entrepreneur or a Developer a Unit or Special Economic Zone. In all the three parts a word or has been used which shows that the provisions are applicable even to the assessee having fulfilled one part of the above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misplaced as it is quite apparent that the exception are in respect of concern entrepreneur or developer as defined under the SEZ Act) situated in a Unit or Special Economic Zone, (also defined under the SEZ Act) as the case may be. The assessee is not situated in a Unit or Specific Economic Zone (which are defined under SEZ Act, 2005). Therefore, the case of the assess does not fall under u/s 115JB(6). The interpretation given on behalf of the assessee defies the logic of enacting the amended provisions of section 115JB. The exception cannot be as large as the main provision so such so to nullify the legislative intent of imposing tax on specified companies u/s 115JB. In the circumstances, there is no merit in AR's claim on the issue. Hence the action of the A.O. in charging the MAT in this case is sustained. Accordingly, this ground of appeal is dismissed. The ld. DR contended that the meaning of the terms used in the section has to be taken from the SEZ Act, 2005, from where it was inserted and accordingly the provision of Section 115JB(6) provided an exemption from payment of MAT to only entrepreneurs and developers as defined under the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IB of the Act and pointed out that the same was also misplaced since the said Section did not use any such term for housing project Developers but on the contrary, it was pointed out that the word used was an undertaking developing and building housing projects . The ld. DR contended that it was the ld. counsel for the assessee who had given his own interpretation and used the term developer for the purpose of Section 80IB and borrowed it for the purpose of Section 115JB(6) of the Act, which was totally misplaced. The ld. Counsel for the assessee at this juncture rebutted the contentions of the ld. DR stating that the reliance placed by the ld. DR on the Finance Act, 2011 in isolation was misplaced. 15. The next contention raised by the ld. counsel for the assessee was an alternate argument that even if it was required to pay taxes under MAT, since it was eligible for deduction u/s 80IB(10) of the Act the said deduction was also to be made from the Profits of the assessee while working out/calculating the book profits on which taxes were to be paid u/s 115JB of the Act. The ld. counsel for the assessee in this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Act, - ( i ) the accounting policies; ( ii ) the accounting standards adopted for preparing such accounts including profit and loss account; ( iii ) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation [1] .-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 subsection (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 [, other than a reserve specified under section 33AC]; or ( c ) the amount or amounts set aside to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account. Explanation.-For the purposes of this clause, - ( a) the loss shall not include depreciation; ( b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] ( iv ) the amount of profits eligible for deduction under section 80HHC , computed under clause (a) or clause (b) or clause (c ) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or ( v ) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or ( vi ) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or ( vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.] [( 6) The provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be.] 18. Before us, the Ld. Counsel for the assessee has referred and relied upon sub-section (6) of section 115JB of the Act, claiming that it is exempt from payment of MAT as per the said sub-section, since it is carrying on the business as a Developer in a unit. 19. The ld. D.R., on the other hand, has contended that subsection (6) exempts only the incomes of units in SEZ or Developers of SEZ and not any other entity and the assessee being neither, is not exempt from the payment of MAT. 20. We are in agreement with the contention of the ld. D.R. The reasons are as follows. Sub-section (6) to section 115JB of the Act was inserted by the Special Economic Zone Act, 2005 (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld defeat the object with which it was brought on statute and would be against all the established rules of interpretation of statutes. The Hon ble apex court in the case of Surana Steels vs DCIT, reported in 237 ITR 777(SC), has held that when a single section of an Act of Parliament is introduced into another Act, it must be read in the sense it bore in the original Act from which it was taken, and consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section means. Dealing with the interpretation of the term loss used in clause (iv) of the explanation to section 115J, the Hon ble Court held that in the said clause the provisions of section 205 of the companies Act stood bodily lifted and incorporated and therefore it has to be read in the sense it bore in the original Act. The Hon ble apex court held as under: 6.Sec. 115J, Expln. cl. (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th Edn., 1999)- Incorporation of an earlier Act into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Economic Zone Act, 2005 and Special Economic Zone Rules could be invoked to decide the benefits admissible to the assessee under the Income Tax Act, in the case of ITO, Ward 4(3), Ahmedabad vs. Forever Precious Jewellery Diamonds Ltd. in ITA No.2329/A/2008 and ITA No.1142/A/2010, dt 30-09-16 (speaking through one of us i.e. the ld. Judicial Member). The issue in the said case related to claim of exemption of profits of units located in SEZ s u/s 10AA of the Act, which section was also introduced by the SEZ Act, 2005. The claim of the assessee had been denied by the AO on finding that the assessee was not carrying out any manufacturing activity but was in fact outsourcing it to third parties. The ITAT, in the said case, noted that the SEZ Act, 2005, was the main Act providing certain incentives to Special Economic Zone units and through this Act corresponding amendments were made in the relevant provisions of the various related Acts which also included the Income Tax Act. Thereafter, referring to section 27 of the Special Economic Zone Act read along with section 57, it was held that to avail the benefits under the Income Tax Act, the provisions of the Special Economic Zone Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. The provisions of the Income-tax Act, 1961, as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the authorised operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule. 51. (1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. So a perusal of the relevant provisions reveal beyond doubt that to get the income tax benefits under the Act there must be some manufacture or production of a thing or providing of services by a unit situated in SEZ and having approval of the competent authority in this respect. The manufacturing activity or services activity should be provided by the unit situated in the SEZ. The location of the unit in the SEZ and the required approvals of the competent authority to carry out the operations are very much necessary. Hence as per the provisions of section 10AA of the Income Tax Act 1961, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Services Centre, whether established before or established after commencement of this Act; ( za) Special Economic Zone means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (7) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone; 26. Reading section 115JB(6) of the Act with the definition provided of the terms used in the SEZ Act as above, we find that the exemption from the payment of MAT is provided only to the units set up in a SEZ or Offshore banking unit or in an International Finance Service Centre in relation to the business or tradable services as eligible under the SEZ Act by the persons, who have been granted Letter of Approvals under the said Act. 27. Therefore, for all purposes, the benefit of exemption from MAT is provided only for business, as specified, carried on by the persons who have got approvals under the SEZ Act and which are carried on in SEZ or units therein. 28. In view of the above we do not find any merit in the contention of the Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assesses, the incomes exempt from tax under section 10 of the Act, as also profits eligible for deduction u/s 80HHC, 80HHE 80HHF of the Act, under clause (ii), (iv), (v), (vi) of the Explanation. Deduction u/s 80IB or for that matter any other section under chapter VI-A of the Act is not allowed adjustment. With the adjustments to the profits so specifically provided for, adjustments by way of a general clause, as contended by the Ld. Counsel for the assessee, cannot be read into the section. The same would only result in making the provision otiose and ineffective since MAT is sought to be levied only in respect of companies which by availing various concessions given in chapter VI A of the Act, which includes section 80IB, are liable to show either Nil taxable income or much reduced taxable income. 32. Moreover the deduction under section 80IB(10) of the Act is provided against the gross total income of an assessee, while section 115JB of the Act levies taxes on the book profits . Both the sections clearly operate in different spheres. Therefore sub-section (5) of section 115JB of the Act, cannot be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature exempted an assessee from paying income-tax, the matter would have been different. But that has not been done. The legislature allowed a deduction. If, after such deduction, income-tax payable is less than what has been mentioned in s. 115JB, by reason of the plain words used in s. 115JB, an assessee, being a company, is liable to pay such tax as mentioned in s. 115JB. In the circumstances, I am of the view that if by virtue of s. 80-IC, no income-tax is payable by an assessee, being a company, it would be liable to pay income-tax to the extent as mentioned in s. 115JB and that was and still is the very object of inserting s. 115JB in the Act. Further the Hon ble High Court of Karnataka also reiterated the above proposition with respect to allowability of deduction u/s 80IB for the purposes of paying tax under MAT in the case of Sakhla Polymers (P) Ltd. Vs Income Tax Officer reported in 257 CTR 185 holding as under:- Section 115JB is in the nature of a special provision, a charging provision, and creating liability in respect of an assessee which is a company and whose taxes as determined on the returns filed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as charged under Section 4 of the Act. 31. While this is not in any way denied to an assessee, Section 115JB is a special charging section for regulating tax liability of companies in general and made applicable in particular and is confined to the assessee companies whose tax liability, when computed in the normal manner falls short of the liability as computed under this provision. Therefore, we are of the view that there is absolutely no question of Section 80-IB having any bearing or effect or control over the provisions of Section 115JB of the Act. It is to be noticed that Section 80-IB concession is in respect of those assessees who qualify for that and Section 115JB levy is confined to companies and such companies which are roped in within the scope of this section. It is because of this position, we are of the view that there is no occasion for the interpretation or examination of the principles of promissory estoppel or doctrine of legitimate expectation. The benefit under Section 80-IB is not denied, it works as it is. It is only because the assessee happens to be a company to which the provisions of Section 115JB is also attracted, levy as indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh there is no need for interpreting the provision and examination can only be m the context of understanding the scope of Section 115JB of the Act, nevertheless, if it is sought to be interpreted as contended by Sri Shankar in the backdrop of Section 80-IB of the Act, the principle of harmonious construction of a statute will have to be kept in mind. It is a well settled principle that no provision of an enactment should be so interpreted or understood as to render otiose or ineffective any other provision of the same enactment. Therefore, Section 80-IB cannot be interpreted so as to render the provision of Section 115JB of the Act nugatory or otiose or ineffective or does not achieve the purpose for which it is enacted. 35. Section 115JB, in fact, in no way either denies the benefit given under Section 80-IB or reduces the same. While the appellant-assessee can claim the benefit under Section 80-IB of the Act and it is not denied per se to the appellant-assessee, in the given ca.se, the provisions of Section 115JB may be attracted or may not be attracted, depending upon the nature or legal composition of the assessee. 36. In fact, the minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee before us and, therefore, we hold that the assessee was liable to pay tax on its profits as per provisions of section 115JB of the Act. We, therefore, uphold the order of the Ld. CIT(A) and dismiss the appeal filed by the assessee. In effect, the appeal of the assessee in ITA No.422/CHD/2016 is dismissed. Since it was common ground that the issue involved in all the appeals of the assessee was identical, our decision rendered above in assessee s appeal in ITA No. 422/CHD/2016, will apply to the appeals of the assessee in ITA no 423, 780/CHD/2016 and ITA No.781/CHD/2016, following which we dismiss all the appeals of the assessee. We now take up the appeal of the Revenue in ITA No.765/CHD/2016. ITA 765/CHD/2016 ( A.Y. 2012-13) 34. The present appeal has been filed by the Revenue against the order dated 18.03.2016 of CIT (Appeals)-5 Ludhiana pertaining to 2012-13 assessment year. 35. At the time of hearing, the Ld. AR has stated that tax effect involved in the present case is less than ₹ 20 lacs. The Ld. DR on going through the material available on record has also fairl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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