MAT relief under section 115JB ends when net worth turns positive; book-profit adjustment claims require fresh factual adjudication.

Section 115JB was treated as a self-contained MAT code, and relief linked to a BIFR rehabilitation scheme and SICA directions was confined only up to the assessment year in which the company's net worth became positive. On that basis, the claimed exemption from MAT was rejected. The article also notes that objections concerning reduction of book profit for loan-waiver credits, restructuring entries, and the lower of unabsorbed depreciation or business loss were not properly examined and needed factual verification. Those book-profit adjustment claims, including the rectification aspect under section 154, therefore required fresh adjudication by a speaking order.

---

---

Issues: (i) Whether the assessee was entitled to exemption from liability under section 115JB of the Income-tax Act, 1961 on the strength of the BIFR rehabilitation scheme and SICA directions. (ii) Whether the claim for reduction of book profit on account of credits arising from loan waiver and restructuring account, including the lower of unabsorbed depreciation or business loss, required fresh adjudication. (iii) Whether the order passed under section 154 of the Income-tax Act, 1961 suffered from an apparent mistake in not adjudicating the assessee's book-profit adjustment claims.

Issue (i): Whether the assessee was entitled to exemption from liability under section 115JB of the Income-tax Act, 1961 on the strength of the BIFR rehabilitation scheme and SICA directions.

Analysis: The computation under section 115JB was treated as a self-contained code and the statutory reduction in Explanation 1(vii) was held to operate only up to the assessment year relevant to the year in which the company's net worth became positive. Since the assessee's net worth had already turned positive, and the competent income-tax authority had restricted the MAT relief accordingly, the scheme under SICA did not extend the MAT exemption beyond that stage.

Conclusion: The claim for exemption from MAT under section 115JB was rejected, and the dismissal of the appeals on this issue was against the assessee.

Issue (ii): Whether the claim for reduction of book profit on account of credits arising from loan waiver and restructuring account, including the lower of unabsorbed depreciation or business loss, required fresh adjudication.

Analysis: The specific objections regarding exclusion of credits arising from waiver of loans and the effect of restructuring entries on the computation of book profit were not examined in a reasoned manner by the lower authorities. The statutory claim under Explanation 1(iii) to section 115JB(2) also required factual verification with reference to the books and the earlier computation pattern.

Conclusion: The matter was remitted to the first appellate authority for fresh adjudication by a speaking order, in favour of the assessee to that extent.

Issue (iii): Whether the order passed under section 154 of the Income-tax Act, 1961 suffered from an apparent mistake in not adjudicating the assessee's book-profit adjustment claims.

Analysis: The rectification order was consequential to the unresolved adjustment issues and the Tribunal found that the omitted claims required consideration on merits along with the related book-profit computation questions.

Conclusion: The challenge to the rectification-related disposal succeeded only to the extent of remand, while no substantive MAT exemption was granted.

Final Conclusion: The MAT exemption claim failed, but the dispute on book-profit adjustments was sent back for fresh consideration, resulting in a mixed outcome with substantive relief only on the remand aspect.

Ratio Decidendi: Relief under section 115JB in a sick-company context cannot continue beyond the point where the company's net worth becomes positive, and unadjudicated book-profit adjustment claims must be decided through a speaking order after proper factual examination.

---