2019 (5) TMI 529 - AT - Income Tax

Tribunal Upholds Exclusion of AOP Share in Book Profit Calculation

The ACIT, Circle-2, Jaipur Versus M/s. Om Metal Infraproject Ltd.

The ACIT, Circle-2, Jaipur Versus M/s. Om Metal Infraproject Ltd. - TMI Issues Involved:1. Deletion of addition made to book profit under Section 115JB for calculation of MAT.2. Deletion of addition made to book profit under Section 115JB which was the share of profit from JV firm OMIL-JSC-JV.Issue-wise Detailed Analysis:1. Deletion of Addition Made to Book Profit under Section 115JB for Calculation of MAT:The revenue's appeals questioned the deletion of an addition of Rs. 53,26,040/- to the book profit under Section 115JB for the calculation of Minimum Alternate Tax (MAT). The core issue was whether the share of profit from a Joint Venture (JV) should be excluded from the computation of book profit under Section 115JB.The Tribunal noted that the CIT(A) had deleted the addition made by the Assessing Officer (AO) by following a prior decision of the Tribunal in the assessee’s own case for the assessment year 2014-15. The AO had rejected the assessee's contention that the share of profit from AOP/Joint Venture should be excluded from the computation of book profit under Section 115JB. The AO argued that only the share of profits from a firm governed by the Partnership Act is excluded from the computation of total income as per Section 10(2A). However, the share of profits from an AOP, although exempt from taxation under Section 86, cannot be excluded while computing the book profits under Section 115JB.The CIT(A) countered this by referencing judicial pronouncements that emphasized the objective of MAT provisions to reflect the real profit of companies. It was observed that including receipts not in the nature of income in the computation of book profits would defeat this purpose. The CIT(A) directed the AO to exclude the share of profit from the AOP while computing book profit under Section 115JB, aligning with the Tribunal’s earlier decisions and the provisions of Section 86, which states that no income tax is payable by the assessee on their share in the income of an AOP.2. Deletion of Addition Made to Book Profit under Section 115JB which was the Share of Profit from JV Firm OMIL-JSC-JV:The Tribunal further elaborated on the provisions of Sections 66, 67A, and 86 of the Act. These sections collectively stipulate that while the share of profit in an AOP is not liable to income tax, it should be included in the total income of the assessee for determining the average marginal rate of tax. The second proviso to Section 86 clarifies that if no income tax is chargeable on the total income of the AOP, the share of a member should be taxed as part of their total income.The Tribunal also referenced the amendment introduced by the Finance Act, 2015, which inserted clause (iic) in Explanation 1 below subsection (2) of Section 115JB, effective from 01.04.2016. This amendment was intended to exclude the share of the assessee in the income of an AOP from the computation of book profit for MAT purposes. The Tribunal, citing the case of M/s Goldgerg Finance Pvt. Ltd. Vs ACIT, held that this amendment was remedial and curative in nature, intended to remove the disparity between partners of a firm and members of an AOP regarding MAT liability.The Tribunal concluded that the CIT(A) was justified in excluding the share of profit from the AOP while computing book profit under Section 115JB. However, the AO was instructed to verify whether the income of the joint venture assessed as an AOP was exempt from income tax and then apply the provisions of Section 67A accordingly.Conclusion:The appeals of the revenue were dismissed, and the Tribunal upheld the CIT(A)'s decision to exclude the share of profit from the AOP while computing book profit under Section 115JB, provided the AO verifies the exemption status of the joint venture's income. The judgment emphasized the remedial nature of the amendment to Section 115JB and the need for consistency in applying judicial precedents.