High Court upholds Income-tax Act provision targeting zero tax companies, dismisses claims on additional tax.

The High Court of Kerala upheld the constitutional validity of section 115J of the Income-tax Act, 1961, introduced by the Finance Act, 1987. The court found that the provision aimed to tax "prosperous zero tax companies" and limit deductions to ensure minimum tax payment, rather than tax hypothetical income. Additionally, the court rejected the petitioners' claims regarding the levy of additional tax and interest, emphasizing that the tax payable was not paid on time, leading to the dismissal of their claims.

---

---

Issues involved: Constitutional validity of u/s 115J of the Income-tax Act, 1961, legality of levy of additional tax u/s 143(1A), and charging of interest u/s 234B.

Constitutional Validity of Section 115J:
The petitioners challenged the constitutional validity of u/s 115J of the Income-tax Act, 1961, introduced by the Finance Act, 1987, as a special provision for taxing companies with total income less than 30% of their book profits. They argued that this provision deems an assessee's income as 30% of its book profits, even if actual income is lower, violating articles 14 and 19 of the Constitution. The court noted that the purpose of u/s 115J was to tax "prosperous zero tax companies" and limit deductions to ensure minimum tax payment, not tax hypothetical income. The court referenced decisions from Delhi and Andhra Pradesh High Courts to support the constitutionality of u/s 115J.

Levy of Additional Tax and Interest:
Regarding the levy of additional tax and interest, the court cited a previous decision where the liability to pay interest was deemed automatic, and rejected the contention that the additional tax or interest charged was illegal. The court emphasized that the tax payable was not paid on time, leading to the dismissal of the petitioners' claims.

In conclusion, the High Court of Kerala upheld the constitutional validity of u/s 115J of the Income-tax Act, 1961, and found no grounds to hold the additional tax or interest charged as illegal, dismissing the original petitioners' claims.

---