2023 (1) TMI 623 - AT - Income Tax

Tribunal Confirms MAT Provisions Inapplicable to State Financial Corporation; CPC Adjustments Invalid Without Notice.

The ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision that Section 115JB's MAT provisions do not apply to the assessee, a State ... MAT applicability u/s 115JB - Deemed company - “Rajasthan Financial Corporation” which is a Corporation registered under State financial Corporation Act, 1951 - HELD THAT:- We have gone through the definition of company as given in Section 2(17) which defines company and it includes Indian Company. We have also gone through the provision of section 2(26) which defines Indian company and thereby Section 2(26)(ia) includes a corporation established by or under a Central, State or Provisional Act as argued by the ld. DR. We have also considered the plea of the ld. DR that section 115 JB section it self is a code for charging tax for a company and considering the definition of company as given in section 2(17) and 2(26) assessee is subjected to this special tax on companies. As it is evident that section 115JB being a special provision and it a code itself defines the coverage of the assessee covered in sub-section 2 of section 115JB. This section neither deal with the company or Indian company it deals with the assessee being company and provision of the sub-section (2) very well defines it coverage. Thus, we consider the arguments of the ld. DR but considering the provision of section 11JB(2) and the decision of the jurisdictional high court in the case of the assessee we do not find any force whether the Honourable Jurisdictional High Court has considered the provision of section 2(17), 2(18) or 2(26) dealt with or not Here the charging section deals and considered only those companies which are registered under the Companies Act and not deemed company as per provision of section 2(17) or 2 (26). Therefore, we are of the considered view that even though revenue has revised its ground to substantiate its case in accordance with the definition of the company we do not agree with the contention of the ld. DR that the since that definition includes the corporation but provision of section 115JB deals only charge of tax of a company and it refers the section 129 of the Companies Act only. The charge of tax being a separate code and the section clearly cover the type of company under the tax net the same cannot be widened based on the definition given in the Act for the other purposes. To substantiate this view, we have also gone through the memorandum explaining the definitions of company as amended in 1971. The purpose of including the corporation under this definition as it is evident from the following extract is to give the benefit of a company and not to tax them as company. Appeal of the revenue is dismissed. Issues Involved:1. Applicability of Section 115JB of the Income Tax Act to the assessee.2. Whether the assessee qualifies as a 'company' under Section 2(17) and Section 2(26) of the Income Tax Act.3. Validity of the adjustments made by the CPC under Section 143(1) without prior intimation to the assessee.Issue-wise Detailed Analysis:1. Applicability of Section 115JB of the Income Tax Act to the Assessee:The primary contention revolves around whether the provisions of Section 115JB, which pertains to Minimum Alternate Tax (MAT), are applicable to the assessee, a State Financial Corporation. The CIT(A) ruled in favor of the assessee, holding that MAT provisions are not applicable, citing the Rajasthan High Court's decision in the assessee's own case for earlier assessment years. The High Court had concluded that the assessee does not fall under the definition of a 'company' as per Section 2(18) of the Income Tax Act, and hence Section 115JB does not apply.The Revenue argued that the CIT(A) erred by not considering the amended provisions of Section 115JB(2) effective from 01.04.2013, which expanded the scope to include companies preparing their profit and loss accounts as per the provisions of the Act governing such companies. The Revenue also highlighted that the High Court did not consider Section 2(17) and Section 2(26)(ia), which define a 'company' to include corporations established by a Central, State, or Provincial Act.However, the ITAT upheld the CIT(A)'s decision, emphasizing that Section 115JB(2) specifically refers to companies registered under the Companies Act and not to corporations like the assessee. The Tribunal noted that the provisions of Section 115JB are a special code applicable only to companies as defined under the Companies Act, and the assessee, being a State Financial Corporation, does not fall within this ambit.2. Whether the Assessee Qualifies as a 'Company' under Section 2(17) and Section 2(26) of the Income Tax Act:The Revenue contended that the assessee qualifies as a 'company' under Section 2(17) and Section 2(26)(ia) of the Income Tax Act, which includes corporations established by a Central, State, or Provincial Act. They argued that the High Court's decision was per incuriam as it did not consider these provisions.The ITAT, however, maintained that the definition of a 'company' under Section 2(17) and Section 2(26) is not relevant for the applicability of Section 115JB. The Tribunal reiterated that Section 115JB is a self-contained code that applies only to companies registered under the Companies Act. The Tribunal also referenced the legislative intent behind the definitions, which was to extend certain benefits to corporations rather than subject them to additional tax burdens under MAT provisions.3. Validity of the Adjustments Made by the CPC under Section 143(1) Without Prior Intimation to the Assessee:The assessee argued that the adjustments made by the CPC under Section 143(1) were invalid as they were done without prior intimation, which is contrary to the provisions of the Income Tax Act. The CIT(A) and ITAT both acknowledged this procedural lapse and held that such adjustments are void ab initio.The Tribunal noted that the CPC's action of applying MAT provisions without considering the specific exclusions applicable to the assessee and without prior intimation was not in accordance with the law. The ITAT emphasized the need for adherence to procedural fairness and the statutory requirements of the Income Tax Act.Conclusion:The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision that MAT provisions under Section 115JB are not applicable to the assessee, a State Financial Corporation. The Tribunal reiterated that the assessee does not qualify as a 'company' under the specific provisions of Section 115JB and that the adjustments made by the CPC were procedurally flawed. The appeal was dismissed, and the CIT(A)'s order was affirmed.