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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri B.R. Baskaran & Shri Pawan Singh
Per B.R. Baskaran, AM
This appeal filed by the assessee is directed against the order dated 20.06.2016 passed by the learned CIT(A)-21, Mumbai and it relates to A.Y. 2012-13.
The assessee is aggrieved by the decision rendered by the learned CIT(A) in holding that the deduction u/s 80IB(10) of the Act is not allowable while computing book profit under Section 115JB of the Income Tax Act (hereinafter “the Act”) and also in holding that the interest under Sections 234B and 234C of the Act is chargeable on the book profit.
Facts relating to the issue are stated in brief. The assessee is engaged in construction and sale of buildings. The assessee claimed deduction under Section 80IB(10) of the Act to the tune `2057.30 lakhs while computing total income under the normal provisions of the Act. The same was allowed by the AO and accordingly the total income was computed at `4,96,803/-. However, the AO computed the book profit
2 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. under Section 115JB of the Act at `2062.19 lakhs. Since the book profit was more than the total income computed under normal provisions of the Act, the AO treated the book profit as total income in terms of sec 115JB of the Act. While computing book profit, the assessee did not allow deduction u/s 80IB(10) of the Act.
Before the CIT(A), the assessee contended that the AO should have allowed deduction under Section 80IB(10) of the Act while computing book profit under Section 115JB of the Act. The learned CIT(A) noticed that identical issue was considered by the Hon'ble Karnataka High Court in the case of Sankhla Polymers P. Ltd. vs. ITO 257 CTR 185 wherein it was held that deduction available under Section 80IB of the Act while computing the total income under the normal provisions of the Act cannot be allowed to be deducted while computing book profit under Section 115JB of the Act. The learned CIT(A) also noticed that identical view has been expressed by the Ahmedabad Bench of the Tribunal in the case of Ganesh Housing Corporation Ltd. vs. ACIT (2009) 32 SOT 207. Accordingly the learned CIT(A) rejected the claim of the assessee.
The assessee also contended before Ld CIT(A) that the interest under Sections 234B and 234C of the Act should not be levied on the income tax charged on book profit. The learned CIT(A) rejected the same by following the decision rendered by the Hon'ble Bombay High Court in the case of CIT vs. Kotak Mahindra Finance Ltd. (2003) 183 CTR 491. The assessee is aggrieved by the decision rendered by the learned CIT(A) on both the issues, referred above.
The first issue relates to the claim for deduction u/s 80IB(10) of the Act, while computing book profit u/s 115JB of the Act. The learned A.R. submitted that provisions of Section 115JB(5) of the Act, which reads as under:-
“Save as otherwise provided in this Section, all other provisions of this Act shall apply to every assessee, being a company mentioned in this Section.”
3 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. He submitted that the Hon'ble Supreme Court in the case of Rolta India Ltd. 330 ITR 470 has interpreted Section 115JB(5) of the Act and has held that all other provisions of the Act shall apply. Accordingly the learned A.R. contended that provisions of Section 80IB should also apply for computing book profit under Section 115JB of the Act.
The learned A.R. further submitted that deduction prescribed under Section 80HHC of the Act has been allowed in the case of CIT vs. Indian Petrochemicals Corporation Ltd. (2016) 74 taxmann.com 163 (Guj). He further submitted that the receipts which are not in the nature of income cannot be taxed under Section 115JB of the Act as per the decision rendered by the Mumbai Bench of the Tribunal in the case of Income Tax Officer vs. Frigsales (India) Ltd. (2005) 4 SOT 376. He also submitted that the capital receipts which do not constitute income of the assessee cannot be brought to tax net by employing the mechanism of section 115JB of the Act, as held in the case of ITO vs. Suraj Jewellery (India) Ltd. (2008) 21 SOT 79 (Mum). The learned A.R. further submitted that provisions of Section 115JB were introduced to bring certain companies within the tax net, since they were showing book profit, but not paying any tax by availing various exemptions and deductions. He submitted that the assessee herein does not fall in the category of “certain companies”, referred to in the objective of introducing sec. 115JB of the Act and hence the provisions of Section 115JB should not be applied to the assessee. He further submitted the exemption given to the company under Section 80IB(10) of the Act shall represent the income which is not taxable and hence the same should be deducted while computing book profit. In this regard the learned A.R. took support of the decision rendered by the Hon'ble Supreme Court in the case of CIT vs. D.P. Sandhu Brothers 273 ITR 1 wherein it was held that receipts which are not taxable cannot be brought to tax net under any other Section. Accordingly the learned A.R. submitted that the assessee should be allowed deduction under Section 80IB(10) of the Act while computing book profit. He submitted that the Mumbai Bench of the Tribunal has considered identical issue in the case
4 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. of Neha Home Builders P. Ltd. vs. CIT (2018) 92 taxmann.com 102 and held that the assessee was entitled to deduction under Section 80IB(10) of the Act while computing book profit under Section 115JB of the Act.
On the contrary, the learned D.R. submitted the provisions of Section 115JB of the Act is applicable to all companies mentioned therein and hence the contentions of the learned A.R. that it would cover only “certain companies” is not in accordance with the mandate of the provisions. She further submitted that provisions of Section 115JB is an alternate tax mechanism brought into statute to collect tax from companies covered by the Section and the income tax so paid can be adjusted by the assessee from the liability to pay income tax in subsequent years under normal provisions of the Act. She further submitted that provisions of Section 115JB prescribe the method of computation of book profit. As per the method so prescribed, certain items of expenditure debited to the Profit & Loss Account has to be added to the net profit and certain types of income credited to the Profit & Loss Account has to be reduced from the net profit. Except the adjustments so provided, the assessee is not entitled to claim any other deduction.
The Ld D.R submitted that the provisions of Section 115JB(5) provides that all other provisions of sec.115JB shall apply to the companies specified in that section except for the items specifically provided in sec. 115JB of the Act. She further submitted that the method of computation of “Book Profit” is provided in sec. 115JB of the Act only and not in another provisions. Hence for determining the “Book Profit”, one has to look into the provisions of sec. 115JB only and not elsewhere.
The learned D.R. further submitted that provisions of Section 115JA prevailed before the introduction of sec. 115JB of the Act. The provisions of sec. 115JB specifically provided for deduction under Section 80HHC of the Act and hence the same was discussed in the case of Indian Petrochemicals Corporation Ltd. (supra). The decision in the case of Frigsales (India) Ltd. discussed about the receipts, which are not in the
5 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. nature of income. Similarly in the case of Suraj Jewellery (India) Ltd. (supra) the issue considered was about capital receipts. The learned D.R. submitted that the above said decisions do not apply to the facts of the present case. since the issue contested by the assessee relates to the claim for deduction under Section 80IB(10) of the Act while computing book profit. The learned D.R. submitted that the provisions of Section 115JB does not provide for deduction under Section 80IB(10) of the Act and hence the same could not be allowed. The learned D.R. further submitted that an identical issue was considered extensively by Hon'ble Karnataka High Court in the case of Sankhla Polymers P. Ltd. (supra) and he Hon'ble High Court has held that provisions of Section 115JB would apply to the assessee who is claiming deduction under Section 80IB of the Act and deduction under Section 80IB(10) of the Act cannot be allowed while computing book profit under Section 115JB of the Act. The learned D.R. further submitted that an identical view has been expressed by the Ahmedabad Bench of the Tribunal in the case of Ganesh Housing Corporation Ltd. (supra). The learned D.R. further submitted that the decision in the case of D.P. Sandhu Brothers (supra) was rendered by the Hon'ble Supreme Court in the context of computation of capital gains and hence the observations made therein cannot be taken support by the assessee while computing book profit under Section 115JB of the Act.
We have heard the parties on this issue and perused the record. As submitted by the learned D.R., provisions of Section 115JB prescribe the methodology to collect minimum amount of tax and hence the tax so collected was called Minimum Alternate Tax. This provision is successor to sec. 115JA and sec. 115J, which were brought into the statute by the Parliament on noticing that certain companies are declaring huge book profits, but are not paying income tax under the normal provisions of the Act by availing various deductions and exemptions. The minimum alternative tax is levied on the amount of “Book Profit” computed as per the provisions of Section 115JB of the Act. This section prescribes a methodology to compute “book profit” as per which the financial
6 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. statements has to be prepared in accordance with the provisions of Companies Act and the net profit should be arrived at. Thereafter certain items of expenditure debited to Profit & Loss Account has to be added to the net profit and certain items of income credits to the Profit & Loss Account has to be reduced, meaning thereby, the “book profit” has to be computed in accordance with the methodology provided in Section 115JB of the Act. Admittedly, the deduction under Section 80IB(10) of the Act was not listed as a permissible deduction from the net profit while computing book profit.
We have noticed that the learned A.R. has placed reliance on various case laws. We notice that those case laws have been rightly distinguished by the learned D.R. and hence we are of the view that the assessee cannot take support of those case laws. The learned A.R. placed heavy reliance on provisions of Section 115JB(5) of the Act which states that “save as otherwise provided in the Section all other provisions of the Act shall apply”. The Ld A.R placed emphasis on the expression “all other provisions of the Act shall apply” and stated that the provisions of sec. 80IB(10) also shall apply while computing book profit u/s 115JB of the Act. Admittedly, the Ld A.R missed out the expression “Save otherwise provided in this section” occurring in first part of sec. 115JB of the Act.
We have noticed that the provisions of sec. 115J/115JA/115JB were introduced in the Income tax Act to bring certain companies popularly called “Zero Tax Companies” into tax net by devising an alternative mechanism of collection of tax. These companies were not paying tax by availing various exemptions and deductions. Under these provisions, “book Profit” of the company is computed as per the methodology provided in sec.115JB of the Act. The income tax payable as per sec. 115JB is more than the tax payable under normal provisions of the Act, then the “book profit” computed u/s 115JB of the Act is taken as total income and tax shall be levied thereon as per the provisions of sec.115JB of the Act. It is pertinent to note that the methodology to compute “Book Profit” is prescribed in sec. 115JB of the Act. In our view,
7 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. the provisions of sec.115JB(5) protects the methodology of computing “Book Profit” prescribed in sec. 115JB of the Act and hence the it begins with the expression “save as otherwise provided in this section”, i.e., except for the provisions specifically provided in sec. 115JB of the Act, all other provisions of the Act shall apply. In our view, this is the proper interpretation of sec. 115JB(5) of the Act. We notice that sec.115JB(5) of the Act was interpreted by the Hon'ble Supreme Court in the case of Rolta India Ltd.(supra) in the context of charging of interest u/s 234B of the Act. Admittedly provisions of Section 115JB does not provide for charging interest corresponding to sec. 234B and hence the Hon’ble Supreme Court held that the provisions of sec. 234B shall apply to the tax payable on the Book profit computed u/s 115JB of the Act, since sec. 115JB(5) states that “all other provisions the Act shall apply”. There was no occasion for the Hon’ble Supreme Court to interpret the first portion of sec. 115JB(5), which states that “Save as otherwise provided in this section”. Admittedly the methodology for computing book profit is provided only in Section 115JB of the Act and is saved by the provisions of Section 115JB(5) of the Act.
There should not be any dispute that the methodology provided in sec. 115JB for computing “book Profit” did not prescribe for reducing the amount eligible for deduction u/s 80IB(10) of the Act from the Net Profit.
We also notice that the assessee has considered sec. 80IB(10) of the Act as an “exemption” provision. It is well settled proposition that the deductions prescribed in Chapter VIA are “deductions” provision and they shall be allowed only if the Gross Total income is in positive figure. A deduction for a particular type of income is available only if it forms part of Gross Total Income. Thus, the concerned income is taken as part of Gross Total income and thereafter, deductions are allowed under Chapter VIA of the Act. Certain incomes are totally exempt from tax and such type of income does not enter into the “Gross Total income” at all. Hence the deduction allowed u/s 80IB(10) falls under the category of “deduction” provision and not exemption provision as contended by the assessee. The
8 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. provisions of sec. 115JB prescribes exclusion of certain “exempted” income and do not provide deduction given u/s 80IB(10) of the Act. The Hon’ble Karnataka High Court has made this point very clear in the case of in the case of Sankhla Polymers P. Ltd. (supra), wherein the Hon'ble High Court has held that provisions of Section 115JB would apply to the assessee who is claiming deduction under Section 80IB of the Act and deduction under Section 80IB(10) of the Act cannot be allowed while computing book profit under Section 115JB of the Act. Identical view has been expressed by the Ahmedabad Bench of the Tribunal in the case of Ganesh Housing Corporation Ltd. (supra).
For the sake of convenience, we extract below the relevant observations made by Hon’ble Karnataka High Court in the case of Sankhla Polymers P Ltd (supra):- “26. Section 115JB is in the nature of a special provision, a charging provision, and creating liability in respect of an assessee which is a company and whose taxes as determined on the returns filed in the normal manner falls short of the stipulated amount and a charge is created for making the difference i.e. the object of the legislation is to ensure a minimum tax of 7½% on the book profit as ascertained under Section 115JB is levied and collected from the companies whose payment of tax always without the application of this provision falls short of this amount of tax. 27. Though Sri Shankar, learned counsel for the appellant has called in aid not only the budget speech but also the circular issued by the board and the principles of promissory estoppel and legitimate expectation etc., we are afraid none of these principles are attracted for the simple reason that a budget speech being only an introductory to the bill in the Parliament and that in itself is 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-à- 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 115JB, the benefit of Section 80-IB is taken away. Section
9 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. 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 any other 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 contains certain incentives and concessions given to an assessee on fulfilling the requirement specified in each section mentioned therein. 30. Section 80-IB in the first instance is not an exemption provision and it is only a provision providing certain concessions or benefit to an assessee and it does factor while computing the total taxable income of the assessee, as charged under Section 4 of the Act. 31. While this is not in any way denied to an assessee, Section 115JB is a special charging section for regulating tax liability of companies in general and made applicable in particular and is confined to the assessee companies whose tax liability, when computed in the normal manner falls short of the liability as computed under this provision. Therefore, we are of the view that there is absolutely no question of Section 80-IB having any bearing or effect or control over the provisions of Section 115JB of the Act. It is to be noticed that Section 80-IB concession is in respect of those assessees who qualify for that and Section 115JB levy is confined to companies and such companies which are roped in within the scope of this section. It is because of this position, we are of the view that there is no occasion for the interpretation or examination of the principles of promissory estoppel or doctrine of legitimate expectation. The benefit under Section 80-IB is not denied, it works as it is. It is only because the assessee happens to be a company to which the provisions of Section 115JB is also attracted, levy as indicated therein becomes operative. Therefore, we do not find the applicability of the decisions relied upon by the learned counsel for the appellant-assessee on this aspect of the matter, in the present situation. 32. In so far as the reliance placed on the judgment of this court in the case of M/s United Breweries Ltd [supra] is concerned, while that was with reference to the provisions of Section 115JA and we are now examining the liability under Section 115JB of the Act. The scheme of charging under Section 115JB being totally different and not with reference to general rate, but with reference to a specified rate as indicated in Section 115JB itself i.e. 7½% of deemed income for the purpose of Section 115JB, we are afraid the judgment will not advance the case of the assessee in the present situation. 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
10 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. 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, nevertheless 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 115JB of the Act. 34. Arguments are advanced by Sri Shankar, learned counsel for appellant-assessee based on principle of interpretation that Section 115JB should be so interpreted or understood as to ensure that the benefit given to the appellant-assessee under Section 80-IB of the Act is not taken away and the interpretation suggested by Sri Shankar fails for more than one reason even on applying the principle of interpretation. Though there is no need for interpreting the provision and examination can only be in the context of understanding the scope of Section 115JB of the Act, nevertheless, if it is sought to be interpreted as contended by Sri Shankar in the backdrop of Section 80- IB of the Act, the principle of harmonious construction of a statute will have to be kept in mind. It is a well settled principle that no provision of an enactment should be so interpreted or understood as to render otiose or ineffective any other provision of the same enactment. Therefore, Section 80-IB cannot be interpreted so as to render the provision of Section 115JB of the Act nugatory or otiose or ineffective or does not achieve the purpose for which it is enacted. 35. Section 115JB, in fact, in no way either denies the benefit given under Section 80-IB or reduces the same. While the appellant- assessee can claim the benefit under Section 80-IB of the Act and it is not denied per se to the appellant-assessee, in the given case, the provisions of Section 115JB may be attracted or may not be attracted depending upon the nature or legal composition of the assessee. 36. In fact, the minimum alternate tax is sought to be levied earlier under Section 115JA and now under Section 115JB of the Act, only in respect of such companies which, by availing various concessions given in Chapter VI-A of the Act, are able to show either a nil taxable income or much reduced taxable income. Concession given under Section 80-IB is also one such and therefore no exception can be taken. Only in respect of the availability of a concession under Section 80-IB and to make it immune from the applicability of the provisions of Section 115JB of the Act. Both provisions operate in their own respective spheres and have to be given effect.
11 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. 37. Secondly and more importantly, no provision of a statute can be so interpreted as to render it unconstitutional. If the argument of Sri Shankar, learned counsel for the appellant, is to be accepted, then it will result in a discrimination 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-IBof 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 reading down or reading up the provisions of Section 115JB 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.” 17. The Ahmedabad bench of Tribunal also considered an identical issue in the case of Ganesh Housing Corporation Ltd vs. ACIT (2009)(32 SOT 207), wherein it was held as under:- “8. From the perusal of aforesaid section, it is apparent that if in the case of an assessee being a company the income-tax computed in accordance with the provisions of the Income-tax Act comes to less than 10 per cent of the book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income, i.e., book profit will be computed at the rate of 10 per cent. In such a situation, no other provisions contained in the Income-tax Act will be applicable. Sub-section (2) stipulates that for the purpose of this section, the profit and loss account for the relevant previous year shall be prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. It has further been laid down that while preparing the annual accounts including the profit and loss account, the accounting policies, accounting standards, the methods and rates adopted for calculating the depreciation shall be the same as has been adopted for the purpose of preparing such accounts including the profit and loss account and laid before the company at the Annual General Meeting in accordance with the provisions of section 210 of the Companies Act, 1956. Explanation 1 defines ‘book profit’ for the purpose of section 115JB to mean the net profit as shown in the profit and loss account for the relevant previous year as prepared under sub-section (2) and increased with the items as has been stipulated under clauses (a) to (h ) of Explanation 1 and has to be reduced by the items as stipulated under clauses (i) to (viii). Thus, the book profit will be the net profit as shown in the profit and loss account as has been laid
12 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. before the company at its Annual General Meeting in accordance with the provisions of section 210 of the Companies Act, 1956 and as has been arrived at by following the accounting policies, accounting standards and the methods and rates adopted for calculating the depreciation as has been adopted for preparing the profit and loss account as laid before the Annual General Meeting. Thus, the net profit as shown in the profit and loss account laid before the Annual General Meeting will be the book profit but this book profit is subject to the adjustment as laid down under Explanation 1, clauses (a) to (h ) and clauses (i) to ( viii). Clauses (iv), (v) and (vi ) no doubt state that the profit has to be reduced by the amount of profit eligible for deduction under section 80HHC, under section 80HHE and under section 80HHF, respectively. Clauses (i) to (viii) under Explanation 1 nowhere provides for the reduction of the deduction allowable under section 80-IB out of the book profit. Sub-section (3) states that the provisions of section 115JB(1) will not affect the determination of the amounts in relation to the relevant previous years to be carried forward to the subsequent year or years under section 32(2) or 32A(3) or 72(1) or 73 or 74A(3). Section 115JB(4) makes it mandatory on the part of the assessee-company to whom section 115JB is applicable to furnish a report in the prescribed form from the Chartered Accountant certifying that the book profit has been computed in accordance with the provisions of this section and such report should be furnished along with the return of income filed under section 139(1) or in response to a notice under section 142(1)(i). Sub-section (5) provides that all the provisions of this Act shall apply to every assessee being a company except to the extent otherwise provided in this section. The crux of the arguments of the learned AR is on this sub-section and, therefore, he pleaded that the deduction available under section 80-IB since falls under Chapter VI-A and has to be allowed to the assessee even a company while computing the total taxable income, therefore, in view of sub-section (5) of section 115JB, the assessee should be allowed the deduction in respect of the income eligible for deduction under section 80-IB while computing the book profit under this section. We do not agree with the contention of the learned AR because the deduction under section 80-IB if we read the language of section 80-IB is available out of the gross total income provided the gross total income of an assessee includes any profits and gains derived from the eligible business. Section 115JB is concerned with the computation of book profit, and not the total income. The terms "book profit" and "total income" both are having different meanings. "Book Profit" is defined under Explanation 1 as pointed out by us earlier under section 115JB while the "total income" is defined under section 66. Under section 115JB, we are concerned with the determination of the book profit, and not the total income or the gross total income. 9. Charge of income-tax as per section 4 of the Income-tax Act is on the total income of the previous year of every person. The scope of the total income is defined under section 5 of the Income-tax Act which is
13 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. different in the case of Residents and Non-Residents. The Resident in India or non-resident has to be determined in accordance with the provisions of section 6 of the Income-tax Act. Sections 10 to 13A deal with the income, which do not form part of the total income. Section 14 deals with the provisions how the total income is to be computed under different heads of income, viz., ‘Salaries’, ‘Income from house property’, Profits and gains of business or profession, ‘Capital gains’ and ‘Income from other sources’. After computing the income under the different heads as per the provisions of sections 14 to 59, there are certain income of other persons which are to be included in assessee’s total income. They are being dealt with under sections 60 to 65 of the Act. Section 66 lays down that in computing the total income of the assessee there shall be included all the income on which no income-tax is payable under Chapter VII. Sections 67 to 79 falling under Chapter VII deal with the aggregation of the income and set-off and carry-forward of the losses while computing the total income of the assessee. However, Chapter VI-A deals with various provisions relating to the deductions to be made in computing the total income of the assessee. These deductions are to be made out of the gross total income. Gross total income is defined under section 80B(5) to mean the total income computed in accordance with the provisions of the Income-tax Act before making any deduction under Chapter VI- A. The deduction under section 80-IB is allowable to the assessee on the profits of the eligible business included in the gross total income out of the gross total income and falls under Chapter VI-A. Section 80A(1) provides in computing the total income of an assessee, there shall be allowed from his gross total income in accordance with and subject to the provisions of this Act, the deduction specified in sections 80C to 80U. Thus, the income computed prior to the deduction under Chapter VI-A has to be regarded to be the gross total income and once the deductions under Chapter VI-A are allowed, the total income is arrived at. On this total income, the tax is computed subject to the provisions contained in Chapters VII and VIII of the Income-tax Act. Section 115JB as has been reproduced hereinabove itself distinguishes in the terms ‘total income’ and ‘book profit’. It clearly states that firstly, the total income of the assessee has to be computed in accordance with the provisions of the Income-tax Act. Secondly, the income-tax payable on the total income so computed has to be determined. Thirdly, the book profit has to be worked out in accordance with the provisions of section 115JB. Fourthly, the income-tax payable on the total income has to be compared with the book profit and on comparison, if it is found that the income-tax payable is less than 10 per cent of the book profit, the book profit so worked out shall be deemed to be the total income of the assessee and the tax payable by the assessee on such book profit shall be the amount of income-tax at the rate of 10 per cent. Thus, the ‘book profit’ and ‘total income’ has to be computed independently. Therefore, in our opinion, the assessee could not be allowed deduction under section 80-IB while computing the book profit under section 115JB.”
14 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. 18. The above said decisions clearly bring out that the term “Total Income” and “Book Profit” are clearly distinguished under the Act. The Book profit is required to be computed in accordance with the provisions of sec. 115JB of the Act, while the total income is required to be computed in accordance with the provisions of the Act. While computing the total income, the deduction u/s 80IB(10) is allowed. However, the book profit is required to be computed strictly in accordance with sec.115JB of the Act, which does not specify “amount computed u/s 80IB(10) as a permissible deduction”.
The Ld A.R placed heavy reliance on the decision rendered by the Co- ordinate bench in the case of Neha Home Builders (P) Ltd vs. CIT (2018)(92 taxmann.com 102), wherein it was held that the assessee is entitled for deduction u/s 80IB(10) of the Act while computing book profit u/s 115JB of the Act. On a careful perusal of the order passed in the case of Neha Home Builders (P) Ltd (supra), we notice that the same is related to the appeal preferred against the revision order passed by Ld CIT u/s 263 of the Act. In the above said case, the AO had accepted the claim of the assessee for granting deduction u/s 80IB(10) of the Act from the net profit, while computing “book profit” u/s 115JB of the Act. The Ld CIT followed the decision rendered by Hon’ble Karnataka High Court and Ahmedabad bench of Tribunal (both the cases referred above) and held that the assessee cannot claim deduction u/s 80IB(10) of the Act while computing book profit. The Tribunal took the view that the AO has taken a possible view and accordingly set aside the revision order. The Tribunal has taken the view that the decision rendered by non-jurisdictional High Court cannot trigger revision proceedings u/s 263 of the Act. Since the decision has been rendered by the Tribunal in the context of provisions of sec.263 of the Act, we are of the view that the assessee cannot place reliance on this decision rendered by the co-ordinate bench.
In view of the foregoing discussions, in our considered view, the contention of the learned A.R. that provisions of Section 80IB(10) would fall under the category of “all other provisions of the Act as mentioned in Section 115JB(5)” is liable to be rejected. Accordingly we hold that the
15 ITA No. 5125/Mum/2016 M/s. Rockline Developers P. Ltd. assessee is not entitled to claim deduction u/s 80IB(10) of the Act from the Net profit for the purpose of computing “Book Profit” u/s 115JB of the Act. Accordingly we confirm the order passed by Ld CIT(A) on this issue.
The next issue urged by the assessee relates to the interest charged u/s 234B and 234C of the Act. At the time of hearing, the Ld A.R submitted that this ground has to be decided against the assessee in view of the decision rendered by Hon’ble Supreme Court in the case of Rolta India ltd (supra). He submitted that the interest u/s 234C is charged on the returned income and accordingly prayed that the AO may be directed accordingly.
We heard Ld D.R on this issue. There is no dispute that interest u/s 234B and 234C is chargeable on the tax payable u/s 115JB of the Act. Only grievance of the assessee is that the interest u/s 234C is charged on the returned income as per the provisions of sec. 234C of the Act. We find merit in the said submissions. Accordingly we restore this issue relating to charging of interest u/s 234C of the Act to the file of the AO.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 6th July, 2018. Sd/- Sd/- (Pawan Singh) (B.R. Baskaran) Judicial Member Accountant Member
Mumbai, Dated: 6th July, 2018
Copy to:
The Appellant 2. The Respondent 3. The CIT(A) -21, Mumbai 4. The Pr. CIT - 13, Mumbai 5. The DR, “F” Bench, ITAT, Mumbai By Order
//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.