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Issues: (i) whether the assessee was entitled to exemption from minimum alternate tax under section 115JB of the Income-tax Act, 1961 on the strength of the BIFR rehabilitation scheme and the SICA regime; (ii) whether the computation of book profit under section 115JB could be reduced by the amounts credited on waiver of loans and by the lower of unabsorbed depreciation or business loss, and whether the appellate order required rectification for non-adjudication of those claims.
Issue (i): whether the assessee was entitled to exemption from minimum alternate tax under section 115JB of the Income-tax Act, 1961 on the strength of the BIFR rehabilitation scheme and the SICA regime.
Analysis: The book profit mechanism under section 115JB operates as a self-contained computation code. The relief under Explanation 1(vii) is available only up to the assessment year in which the company's net worth becomes positive. The assessee's net worth had turned positive, and the authorities had already considered the relief position under the rehabilitation scheme. The benefit under section 115JB could not be extended beyond the statutory limit merely because the BIFR scheme contemplated a longer period of relief.
Conclusion: The claim for exemption from MAT was rejected and the issue was decided against the assessee.
Issue (ii): whether the computation of book profit under section 115JB could be reduced by the amounts credited on waiver of loans and by the lower of unabsorbed depreciation or business loss, and whether the appellate order required rectification for non-adjudication of those claims.
Analysis: The specific claims relating to credit entries from loan waiver and restructuring adjustments were not examined on merits by the lower authorities. The statutory computation under Explanation 1(iii) to section 115JB permits reduction of the lower of brought-forward loss or unabsorbed depreciation as per books, and the assessee's comparable treatment in an earlier year gave the contention some force. Since the factual and legal matrix had not been properly addressed, the matter required fresh adjudication by the first appellate authority by a speaking order.
Conclusion: The issue was restored for fresh consideration and was decided in favour of the assessee for statistical purposes.
Final Conclusion: The challenge to MAT exemption failed, but the separate book-profit adjustment claims were sent back for reconsideration, so the appeals were disposed of with only limited relief to the assessee.
Ratio Decidendi: Relief under section 115JB for a sick company cannot continue beyond the point at which net worth becomes positive, while unresolved book-profit adjustment claims under the statutory computation scheme must be independently adjudicated on their merits.
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