TaxTMI 
TaxTMI 
2019 (6) TMI 1110
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....s in ITA 422 and 423/CHD/2016 have been restored back by the Hon'ble High Court vide its order in ITA 417 & 418 of 2016( O&M ) dated 26.04.2017, setting aside the earlier order passed by a Single Member of the Tribunal, holding that the appeal should be heard by a Division Bench. Accordingly, the impugned appeals were fixed before us. 3. It was common ground that the issue involved in all the appeals was identical, relating to whether the assessee was liable to pay minimum alternate tax (MAT) under the provisions of Section 115JB of the Act. They were therefore heard together and are being disposed of by way of this common consolidated order. 4. For the sake of convenience, we shall be dealing with the facts in the case of ITA No. 422/CHD/2016 relating to assessment year 2008-09 and our decision rendered therein would apply mutatis-mutandis to the rest of the appeals. 5. The brief facts relating to the case are that the assessee is a Private Limited company dealing in the business of development of housing project units. It filed its return of income for the impugned assessment year i.e. A.Y 2008-09 on 04.03.2009 declaring income of Rs. 2, 20, 013/-. The Assessing Offi....
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....f facts are that the assessee company is a developer of housing project units. During the year assessee company was having income from the sale of its flats. The income of which exempted under section 80IB(10) of the Income Tax Act as each unit is having area less than 1500 Sq. Feets. The assessee company claimed exemption and filed return declaring Nil income and further claimed that the provisions of section 115JB are not applicable to the developer company but the claim of the assessee company was disallowed the AO. Hence this appeal. That during the assessment proceedings the assessee company claimed thai the provisions of section 115JB are not applicable to the assessee company as the income of the assessee company is from the business carried as a developer. The claim of the assessee company is inaccordance with the provisions of section 115JB(6) of the Act reproduced here as under:- Section 115JB(6): "The provisions of this section shall not apply to the income accrued or arising on or after the Is' day of April, 2005 from any business carried on or services rendered by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may ....
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....lied on the order of the CIT(A). Drawing our attention to para 5.1 of the same as under: "5.1 It is seen that the AR's reliance upon the exception carved out u/s 115JB(6) is misplaced as it is quite apparent that the exception are in respect of concern entrepreneur or developer as defined under the SEZ Act) situated in a Unit or Special Economic Zone, (also defined under the SEZ Act) as the case may be. The assessee is not situated in a Unit or Specific Economic Zone (which are defined under SEZ Act, 2005). Therefore, the case of the assess does not fall under u/s 115JB(6). The interpretation given on behalf of the assessee defies the logic of enacting the amended provisions of section 115JB. The exception cannot be as large as the main provision so such so to nullify the legislative intent of imposing tax on specified companies u/s 115JB. In the circumstances, there is no merit in AR's claim on the issue. Hence the action of the A.O. in charging the MAT in this case is sustained. Accordingly, this ground of appeal is dismissed." The ld. DR contended that the meaning of the terms used in the section has to be taken from the SEZ Act, 2005, from where it ....
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....ct and pointed out that the same was also misplaced since the said Section did not use any such term for housing project 'Developers' but on the contrary, it was pointed out that the word used was "an undertaking developing and building housing projects". The ld. DR contended that it was the ld. counsel for the assessee who had given his own interpretation and used the term 'developer' for the purpose of Section 80IB and borrowed it for the purpose of Section 115JB(6) of the Act, which was totally misplaced. The ld. Counsel for the assessee at this juncture rebutted the contentions of the ld. DR stating that the reliance placed by the ld. DR on the Finance Act, 2011 in isolation was misplaced. 15. The next contention raised by the ld. counsel for the assessee was an alternate argument that even if it was required to pay taxes under MAT, since it was eligible for deduction u/s 80IB(10) of the Act the said deduction was also to be made from the Profits of the assessee while working out/calculating the book profits on which taxes were to be paid u/s 115JB of the Act. The ld. counsel for the assessee in this regard relied upon the decision of the Mumbai Bench of the ITAT in the c....
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....method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation [1] .-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection (2), as increased by- (a ) the amount of income-tax paid or payable, and the provision therefor; or (b ) the amounts carried to any reserves, by whatever name called [, other than a reserve specified under section 33AC]; or (c ) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d ) the amount by way of provision for losses of subsidiary companies; or (e ) the amount or amounts of dividends paid or proposed ; or (f ) the amount or amounts of expenditure relatable to any income to which [ section 10 (other t....
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....ion; or (v ) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi ) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or (vii) the amount of profits of sick industrial company for the assessment year commencing on and 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 equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or [ (viii) the amount of deferred tax, if any such amount is cr....
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....ither, is not exempt from the payment of MAT. 20. We are in agreement with the contention of the ld. D.R. The reasons are as follows. Sub-section (6) to section 115JB of the Act was inserted by the Special Economic Zone Act, 2005 (hereinafter referred to as "SEZ Act"), which was enacted to provide for the establishment, development and management of Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. The Act is a complete code in itself dealing with all aspects relating to SEZ's, making necessary amendments in other Acts, as required. The applicability of the Income tax Act, 1961 and modifications thereto for the purposes of the SEZ Act , have been made by section 27 of the said Act , and the second schedule to the Act .Section 27 of the SEZ Act reads as under:- "27. The provisions of the Income-tax Act, 1961, as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the authorised operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule." 21. The second Schedule to the SEZ Act , listing modifications ....
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....y Interpretation (7th Edn., 1999)- "Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act into the later. When an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been 'bodily transposed into it'. The effect of incorporation is admirably stated by Lord Esher, M.R. : 'If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it'. (p. 233) : "Even though only particular sections of an earlier Act are incorporated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by Lord Blackburn: 'When a single section of an Act of Parliament is introduced into another Act, I think it must be read in th....
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....s 13 and 14 and thereafter at page 20 are, as under:- 'The above reproduced approval letter read with section 15(9) of the SEZ Act 2005 and Rule 19 of the SEZ Rules 2006 reveals that the facilities and privileges as admissible to the units situated in SEZ have been granted to the assessee for the manufacture of plain gold jewellery upto 500 kg on the basis of maximum utilization of plant and machinery. The assessee has also been granted facilities and privileges as admissible for trading activity in gold and polished diamonds as noted above. It is pertinent to note here that the Development Commissioner has to particularly specify as to what activities or authorized operation are allowed to be carried out in an SEZ unit for the claim of privileges and benefits under SEZ Act. Now the question comes whether the above provisions of the SEZ Act and SEZ Rules can be invoked to decide the benefits admissible to an assessee under the Income Tax Act. Section 57 of the SEZ Act is relevant in this respect which read as under: "57. With effect from such date as the Central Government may by notification appoint, the enactments specified in the Third Schedule shall b....
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....s unit has not been approved for providing of any services. 20. We find that the claim of the assessee is required to be examined in the light of the provisions of SEZ Act/ SEZ Rules and also the provisions as envisaged in SEZ scheme 2007 to 2009 as referred to in the approval letter of the Development Commissioner dated 21.09.2005." 25. Moreover the Explanatory Note to the Finance Act, 2011, withdrawing the exemption granted from payment of MAT u/s 115JB(6) of the Act, further clarifies the legislative intent , by clearly referring to Special Economic Zones, in the heading of the Note explaining the provision withdrawing the exemption, as pointed out by the Ld.DR before us. Thus, we have no hesitation in holding that the terms used in sub section (6) of 115JB, derive their meaning from the SEZ Act, 2005. Having said so, the definition of the different terms used in sub section (6) of 115JB, in section 2 of the SEZ Act, we find is as under:- "(g) "Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer." ....
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....he said terms in the SEZ Act. 29. Taking up the alternate contention of the assessee that profits eligible for deduction under section 80IB (10 ) of the Act were to be reduced for arriving at the book profits of the assessee also, we find that the Ld. Counsel for the assessee for this purpose has relied heavily on the provisions of section 115JB(5) of the Act, pointing out that as per the said sub-section, all other provisions of the Act would apply to the assessee and, therefore, the provisions of section 80IB (10) of the Act would also apply to it requiring it to be deducted /reduced for arriving at the taxable book profits. 30. We do not find any merit in this contention of the Ld. Counsel for the assessee also. The reasoning is as follows. Section 115JB of the Act is a charging section for collecting minimum taxes from corporates, which though are apparently prosperous showing profits in their Profit and Loss account and paying dividends, yet not paying taxes as per the Income Tax Act. Under the section, taxes at a specified rate are levied on the Book Profits of the corporate where they exceed the tax payable on its total income as computed under the Income Tax Act af....
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....essee, if it is a company, will be liable to pay income-tax to be ascertained in the manner and to the extent prescribed in s. 115JB. Since these two sections deal with two different situations, they play their role in two different situations and, accordingly, should be read to ascertain the purpose thereof as depicted by the clear words mentioned therein. Whereas s. 80- IC grants deduction to all assessees and, accordingly, a company is also entitled to such deduction, s. 115JB applies only to a company and comes into play only when, after such deduction, income-tax payable by it is less than what has been mentioned therein and thereupon fastens a totally new incometax liability to the extent mentioned therein. 18. It is true that when s. 115JB was inserted, there was no contemplation that, in future, s. 80-IC would be inserted. Therefore, at the time when s. 115JB was inserted, it was not intended to control s. 80-IC. However, a look at s. 115JB would make it amply clear that, from the day one, s. 115JB controlled income-tax payable on the total income as computed under the Act and, in the matter of computing income-tax on the total income, after insertion of s. 80-IC, ....
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....not an end. 28. Though many decisions are roped in for interpreting this, we find there is no scope for interpretation in the present situation, as the provision of the statute should be given effect to, as it occurs and if there is only any ambiguity in understanding the statute then only the tool of interpretation should be called in aid. We do not find any competing or derogatory provision in Section 115JB vis-a-vis Section 80-IB of the Act is concerned. 29. Section 80-IB operates in a particular sphere and Section 115JB is operative in a totally different sphere. It is not the case of the appellant-assessee that Section 80- IB is not operated or given effect to. Grievance of the assessee is that because of the operation of Section 115-JB, the benefit of Section 80-IB is taken away. Section 115JB occurring in a taxing statute is in the nature of a charging section and that too a special charging section, exemption or concession or another benefit sought should come from within the provisions of Section 115JB itself, which occurs in Chapter XII-B of the Act. Section 80-IB is a provision which occurs in Chapter VI-A of the Act and a chapter which contain....
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.... 33. A budgetary speech while will have some significance for understanding a provision if there is any ambiguity, in the wake of clear language of the Section 115JB, in the first instance there is no ambiguity, in the second instance, the ambiguity sought to be introduced on certain premise which is not apparent and is only on a limited reading of the budget speech, at any rate a budget speech in itself cannot regulate or control the statutory provision, more so a charging section in a revenue yielding statute, we are of the clear opinion that the provisions of Section 115JB should be given full effect to without being influenced or guided or regulated by the budget speech of the finance minister. The board circular being in the context of the earlier provisions, but, never the less more by way of extraction of the budget speech, that by itself cannot have any special significance, as the board circular does not in any way seeks to clarify the levy and rate of levy as provided in Section 115JB of the Act. Levy and rate of tax alone is what matters for the purpose of Section 115.JB of the Act. 34. Arguments are advanced by Sri Shankar, learned counsel for appellant-assesse....
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....mination against such assessee-companies who have to pay tax under Section 115JB of the Act, but have no concession available under Section 80-IB, whereas the tax liability of the person under Section 115JB of the Act, who can claim concession under Section 80-IB of the Act gets reduced for the purpose of Section 115JB of the Act. It is, therefore, to avoid Section 115JB being rendered discriminatory and unconstitutional being violative of Article 14 of the Constitution of India, the contention of Sri Shankar for leading down or reading up the provisions of Section 115-JB of the Act, particularly by adding to different situations mentioned in the explanation, to be expanded by including reference to Section 80-IB of the Act cannot be accepted. A statutory provision cannot be so read down to render it unconstitutional, but reading down a statutory provision is to make it constitutional and not otherwise. Therefore, the arguments fail." 33. In view of the above, we dismiss the contentions of the Ld. Counsel for the assessee that deduction provided under section 80IB (10) of the Act is to be made from the book profits of the assessee for the purpose of payment of MAT. The decision ....