TaxTMI 
TaxTMI 
2010 (12) TMI 23
X X X X Extracts X X X X
X X X X Extracts X X X X
....1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 but before the 1st day of April, 2001 (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (2) Every assessee, being a company, shall, for the purposes of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956(1 of 1956): Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....undertaking from the business of generation or generation and distribution of power; or (v) the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in sub-section (4) and sub- section (5) of section 80-IB, for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the profits and gains under sub-section (4) or sub-section (5) of section 80- IB; or (vi) the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility as defined as defined in the Explanation to sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes eq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uted in accordance with the provisions of this Act other than section 115JA or section 115JB, as the case may be. (5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA or section 115JB, as the case may be for that assessment year. (6) Where as a result of an order under sub-section (1) or sub-section (3) of section 143, section 144, section 147, section 154, section 155, sub-section (4) of section 245D, section 250, section 254, section 260, section 262, section 263 or section 264, the amount of tax payable under this Act is reduced or increased, as the case may be, the amount of tax credit allowed under this section shall also be increased or reduced accordingly." 5. As per provisions of Section 115JA, a company is liable to pay tax on 30% of book profits, if the income computed under normal provisions of the Act is less than 30% of the book profits. Thus, the assessee is required to compute income chargeable to tax on two alternative basis - (i) income computed under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the amount of set off is limited to the tax payable on the income computed under the normal provisions of the Act less the tax payable on book profits for that year. [Refer Section 115JAA(4) and Section 115JAA(5)]. The tax credit to be allowed is the function of the tax payable on book profits and the tax payable on income computed under the normal provisions of the Act, in year one. As stated, the difference of the two is the amount of tax credit to be allowed. The A.O. may vary the amount of tax credit to be allowed pursuant to completion of summary assessment under Section 143(1) or regular assessment under Section 143(3) for year one, in terms of Section 115JAA(6). As a consequence of such variation the tax credit to be allowed for year one is liable to change. With every change in the amount of tax payable on book profits and/or tax payable on income computed under the normal provisions of the Act, the tax credit to be allowed would have to be changed by the A.O. by passing consequential orders, deriving authority from Section 115JAA(6) of the Act. Thus, the tax credit allowable can be set off by the assessee while computing advance tax/self-assessment tax payable for years 2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble of Rs.7,75,03,252/- minus TDS and Advance Tax paid by the assessee resulting in the figure of Rs.5,39,88,163/- being the balance tax payable by the assessee plus interest under Section 234B and under Section 234C in all amounting to Rs.6,90,73,894/- from which the A.O. deducts the MAT credit of Rs.5,40,15,189/-. Consequently, under the computation of the assessee no tax was payable whereas under the computation, assessee became liable to pay tax of Rs.1,50,58,707/-. This conversion from refund to demand took place because while computing interest under Sections 234B and C the A.O. computed the shortfall of the tax payable without taking into account the set off of MAT credit. For sake of clarity, we set out the above facts in the case of M/s. Titan Industries Limited in the form of a Chart: Particulars Return of Income 154 Order Business income 163,486,461 163,486,461 Capital gains-short 14,937 14,937 Capital gains-long 90,780,066 90,780,066 Gross Total Income 254,281,464 254,281,464 Less deduction under Chapter VI-A80G-Donation 1,500,000 1,500,000 80HHC-profits 6,590,600 6,590,600 80-1A new industrialunit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the quantum of advance tax that is to be paid it must follow that an assessee would be entitled to do so otherwise it results in absurdity, viz, that an assessee pays advance tax on the footing that it is not entitled (when in fact it is so entitled as discussed above) to the credit and thereafter claims a refund of such advance tax paid as a consequence of the set off. Moreover, when an A.O. makes an intimation under Section 143(1) he accepts the return filed by the assessee to which the A.O. may make an adjustment and consequently makes a demand or refund. Section 143(1) provides that where a return is made under Section 139 and if any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of sub-section (2), an intimation will be sent to the assessee specifying the amount so payable and such intimation shall be deemed to be a notice of demand under Section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the A.O. determines the tax payable he has ....