2019 (10) TMI 772 - AT - Income Tax

Appeal dismissed on MAT levy but interest charges allowed; assessee not exempt; Supreme Court ruling applied.

The appeal was dismissed concerning the levy of Minimum Alternative Tax (MAT) under section 115JB of the Income Tax Act, as the assessee did not qualify ... Levy of Minimum Alternative Tax (MAT) u/s 115JB - profits eligible for deduction u/s 80IB(10) - assessee is neither the units in SEZ not a Developers of SEZ - HELD THAT:- 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. In view of the above we do not find any merit in the contention of the Ld. Counsel for the assessee that sub-section (6) is to be interpreted independently, thus making the assessee eligible for exemption from payment of MAT also, since it is a developer of housing projects, and dismiss all arguments made by the Ld. Counsel for the assessee in 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”. The alternate contention of the assessee that profits eligible for deduction under section 80IB(10) of the Act were to be reduced for arriving at the book profits of the assessee were also dismissed relying on the decision of the Hon'ble Uttarakhand High Court in the case of SIDCUL Industrial Association Vs State of Uttarakhand [2010 (11) TMI 671 - UTTARKHAND HIGH COURT] Interest leviable u/s 234B and 234C - HELD THAT:- Apex Court in CIT Vs Kwality Biscuits Ltd. [1999 (11) TMI 48 - KARNATAKA HIGH COURT] has unambiguously held that interest under sections 234B and 234C of the Income-tax Act, 1961 cannot be levied on a company whose income is computed u/s 115J. Accordingly, in the face of the clear legal position as settled in the aforesaid decision, there cannot be any ambiguity. Issues Involved:1. Levy of Minimum Alternative Tax (MAT) under section 115JB of the Income Tax Act.2. Charging of interest under sections 234B and 234C of the Income Tax Act.Comprehensive, Issue-Wise Detailed Analysis:1. Levy of Minimum Alternative Tax (MAT) under section 115JB of the Income Tax ActThe primary issue in the appeal was whether the assessee was liable to pay Minimum Alternative Tax (MAT) under section 115JB of the Income Tax Act. The assessee contended that as per sub-section (6) of section 115JB, the provisions of MAT were not applicable to it. The Assessing Officer (AO) had calculated tax under section 115JB at Rs. 2,92,01,760 on an income of Rs. 8,02,43,860. The CIT(A) upheld the AO's decision, relying on previous ITAT decisions for assessment years 2008-09 and 2009-10, which had similarly ruled against the assessee.The ITAT examined the provisions of sub-section (6) of section 115JB, which were inserted by the Special Economic Zones Act, 2005. The sub-section exempts income from any business carried on by an entrepreneur or a developer in a Unit or Special Economic Zone from MAT. The assessee argued that it was a developer and thus qualified for this exemption. However, the CIT(A) and ITAT noted that the exemption applied only to units or developers within Special Economic Zones (SEZ) as defined under the SEZ Act, 2005. The assessee did not fall within this definition as it was not situated in a SEZ.The ITAT further referenced the decision in Surana Steels Pvt. Ltd. Vs DCIT 237 ITR 777 (S.C), which held that provisions incorporated from another Act must be interpreted in the context of that Act. The ITAT concluded that the exemption under sub-section (6) of section 115JB was intended only for SEZ units or developers, and not for any other entities. Therefore, the assessee was liable to pay MAT.2. Charging of Interest under sections 234B and 234C of the Income Tax ActThe assessee raised an additional ground, arguing that interest under sections 234B and 234C should not be charged as per the Supreme Court's decision in Kwality Biscuits Ltd. 284 ITR 434. The Supreme Court had held that interest under these sections is not leviable on a company whose income is computed under section 115J, as the computation can only be done at the end of the financial year.The CIT-DR did not object to the admission of this additional ground. The ITAT, relying on the Supreme Court's decision, agreed with the assessee that interest under sections 234B and 234C could not be charged. Thus, this additional ground was decided in favor of the assessee.Conclusion- The appeal regarding the levy of MAT under section 115JB was dismissed, upholding the AO's and CIT(A)'s decisions that the assessee did not qualify for the exemption under sub-section (6) of section 115JB.- The additional ground regarding the charging of interest under sections 234B and 234C was allowed in favor of the assessee, based on the Supreme Court's ruling in Kwality Biscuits Ltd.Final OrderThe appeal of the assessee was dismissed concerning the levy of MAT, but the additional ground regarding interest under sections 234B and 234C was allowed. The order was pronounced in the Open Court on 14th Aug., 2019.