Strict construction of tax law bars MAT on a State Financial Corporation unless the Income-tax Act clearly covers it.

A State Financial Corporation was held not to fall within the definition of "company" for the purpose of Minimum Alternate Tax under sections 115JA and 115JB read with section 2(18)(a) of the Income-tax Act merely because of section 43 of the State Financial Corporations Act. The Court stressed that a taxing provision must be construed strictly on the basis of the Income-tax Act itself, and a deeming fiction in another statute cannot extend MAT liability unless the Act clearly brings the entity within its terms. The issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether a State Financial Corporation can be treated as a company for the purpose of section 115JA / section 115JB read with section 2(18)(a) of the Income-tax Act and, consequently, be subjected to the Minimum Alternate Tax provisions.

Analysis: The statutory scheme of the Income-tax Act was examined against the provisions of the State Financial Corporations Act. The Court held that the assessee could not be brought within the ambit of the MAT provisions merely by relying on section 43 of the State Financial Corporations Act. In construing a taxing statute, the Court must look to the taxing enactment itself, and the deeming provisions were not shown to extend to the assessee in the manner suggested by the Revenue.

Conclusion: The issue was answered in favour of the assessee and against the department.

Ratio Decidendi: A taxing provision must be applied strictly on its own terms, and a State Financial Corporation cannot be subjected to sections 115JA or 115JB unless the Income-tax Act itself clearly brings it within the definition of company for that purpose.

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