Exclusion of Joint Venture Income from Minimum Alternate Tax (MAT) under Income Tax Act

The Tribunal held that the income from the Joint Venture (AOP) should be excluded from the computation of "book profits" under section 115JB of the Income Tax Act. It ruled in favor of the assessee, stating that the share of income from the AOP, not taxable under normal provisions, should not be subject to Minimum Alternate Tax (MAT) liability. The Tribunal directed the Assessing Officer to exclude the AOP income while calculating book profits, allowing the appeal of the assessee. The decision was pronounced on 22nd May 2019.

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Issues Involved:
1. Whether the income from the Joint Venture (AOP) should be excluded from the total income for the computation of "book profits" under section 115JB of the Income Tax Act.
2. Applicability of the amendment brought by Finance Act, 2015, in clause (iic) under Explanation 1 to section 115JB, and whether it should be applied retrospectively.

Issue-wise Detailed Analysis:

1. Exclusion of Income from Joint Venture (AOP) for Computation of Book Profits under Section 115JB:

The primary issue was whether the income from the Joint Venture (AOP) should be excluded from the total income for the computation of "book profits" under section 115JB of the Income Tax Act. The assessee argued that the income from the AOP, which was already assessed in the hands of the Joint Venture, should not be included in its book profits for MAT purposes. The CIT(A) had dismissed the appeal, holding that there was no provision under section 115JB to deduct the profit earned from the Joint Venture included in the profit and loss account while determining book profit. The Tribunal noted that the share of income from the AOP was not taxable under the normal provisions of the Income Tax Act, in accordance with section 86, and thus should not be taxed under MAT liability. This was supported by the decision in Goldgerg Finance Pvt. Ltd. v. ACIT, where it was held that income not taxable under normal provisions should not be taxed under MAT.

2. Applicability and Retrospective Nature of the Amendment by Finance Act, 2015:

The assessee contended that the amendment brought by the Finance Act, 2015, which inserted clause (iic) under Explanation 1 to section 115JB, should be applied retrospectively as it was curative in nature. The amendment provided that the share of income from an AOP, on which no tax is payable under section 86, should be excluded while computing book profits for MAT purposes. The Tribunal agreed with this view, noting that the amendment was intended to rationalize the provisions and provide similar treatment to AOP members as was already available to partners of firms. The Tribunal cited the explanatory notes to the Finance Act, 2015, and relevant Supreme Court judgments, concluding that the amendment was remedial and should be applied retrospectively to avoid unintended consequences and ensure parity among different classes of assessees.

Conclusion:

The Tribunal held that the share of income from the AOP, which was not taxable under normal provisions, should not be taxed under MAT. It directed the Assessing Officer to exclude the income received from the AOP while computing book profits under section 115JB. The appeal of the assessee was allowed, and the order was pronounced in the open court on 22nd May 2019.

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