Whether inclusion of LTCG taxed at 12.5% in adjusted total income under Section 115JC (AMT) nullifies the benefit of concessional capital gains rate

[Fahiyaz Ahmmed]

Under the amended LTCG regime (Finance Act, 2024), an assessee may opt to pay 12.5% LTCG without indexation (or 20% with indexation for pre-23/07/2024 properties). However, the LTCG amount is still included in total income / adjusted total income for Section 115JC (AMT) purposes. Due to this inclusion, AMT at 18.5% may become payable, effectively nullifying the benefit of the 12.5% option. This results in an indirect higher tax burden on LTCG despite a special concessional rate being provided by law. Is there any Supreme Court or High Court ruling addressing this interaction between LTCG at special rates and AMT under Section 115JC? Have courts provided any remedy or exclusion to preserve the benefit of the concessional LTCG rate? If not, are there analogous MAT/AMT judgments on capital gains that can be relied upon?

[YAGAY and SUN]

Our inputs on your query: -

At present, there appears to be no direct Supreme Court or High Court ruling specifically dealing with the interaction between concessional LTCG taxation under amended Section 112/112A regime (12.5% without indexation post Finance Act, 2024) and AMT under Section 115JC. The statutory framework of Section 115JC is, however, quite clear. AMT is levied on "adjusted total income" and operates through a non obstante clause. Once adjusted total income is computed as per Section 115JC/115JD, the prescribed AMT rate applies irrespective of whether certain components of income are otherwise taxable at concessional/special rates under normal provisions.

Courts, in analogous MAT jurisprudence under Sections 115J/115JA/115JB, have generally held that MAT/AMT is a self-contained overriding code and special-rate provisions do not automatically override MAT unless expressly excluded by statute. The leading Supreme Court ruling in JCIT v. Rolta India Ltd - 2011 (1) TMI 5 - Supreme Court. affirmed the overriding and independent nature of MAT provisions.

Similarly, courts have consistently held that where legislature intended exclusion from MAT/AMT, it expressly provided so. In absence of specific carve-out for LTCG taxable at concessional rates, judicial forums are generally reluctant to read implied exclusions.

That said, the issue is not entirely free from argument. A possible constitutional/statutory interpretation argument can be built that:

1. Special concessional LTCG regime represents a specific charging mechanism intended to cap tax burden.
2. Applying AMT mechanically may frustrate legislative intent behind concessional LTCG taxation.
3. Harmonious construction may require that special-rate capital gains retain their character even within AMT computation.

Some support may be drawn by analogy from decisions involving rebate/special-rate interaction (e.g., recent Section 87A-STCG/LTCG litigation), where tribunals emphasized absence of express exclusion language. However, those rulings are context-specific and not directly on MAT/AMT.

Presently, therefore:

1. No binding precedent excludes concessional LTCG from adjusted total income for Section 115JC.
2. AMT may legally apply even where LTCG itself is taxable at 12.5%.
3. Relief presently lies only through AMT credit mechanism under Section 115JD in subsequent years.
4. Any exclusion argument would presently be litigation-driven and based on purposive interpretation rather than settled law.

[Fahiyaz Ahmmed]

THANK YOU, SIR, FOR YOUR GUIDANCE

AI Summary

Alternative Minimum Tax on concessional long-term capital gains may still apply despite the special capital gains rate.
Concessional long-term capital gains taxation under the amended capital gains regime may still be included in adjusted total income for Alternative Minimum Tax under Section 115JC, so the special rate does not by itself prevent AMT from applying. No direct Supreme Court or High Court ruling is identified on this specific interaction. Analogous MAT and AMT jurisprudence is said to treat such provisions as self-contained and overriding, with exclusions recognized only where expressly provided by statute.