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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA
This is an appeal by the Department against the order dated 20th January 2004, passed by the learned Commissioner (Appeals)-16, Mumbai, for the assessment year 2010–11. The effective grounds raised by the Department are as under:-
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to exclude the income of SEZ unit while computing Book Profit u/s115JB of the IT Act ignoring the amendment by Finance Act, 2007 w.e.f. 01.04. 2008 whereby the words 10A and lOB have been omitted from Explanation 1(f) and (ii) of section 115JB of the Act, thereby M/s. Genesys International Corporation Ltd. 2 bringing the profit/loss of 10A & lOB units within the purview of MAT.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AG to exclude the income of SEZ unit while computing Book Profit u/s115JB of the IT Act without appreciating that clause (6) has been inserted by the Special Economic Zones Act, 2005 w.e.f. 10-02-2006 concurrently with the insertion of section 10AA, also by the Special Economic Zones Act, 2005 and hence clause (6) of section 115JB is applicable only to 10AA units and not to 10A units since due to the amendment in clauses (f) and (ii) of Explanation 1 of section 115JB by Finance Act, 2007, profit/loss of 10A & 10B units has been expressly brought within the purview of MAT w.e.f. A. Y. 2008-09.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to exclude the income of SEZ unit while computing Book Profit u/s.115JB of the IT Act without considering the clarification given in para 44 of CBDT's Circular No.3/2008 regarding the amendment in section 115JB by Finance Act, 2007, which is applicable to the assessee's case in the assessment year under consideration."
Briefly stated, assessee a company is engaged in the business of information technology solution by providing geographical information services. For the assessment year under consideration, the assessee filed its return of income on 29th September 2010, declaring total income of ` 8,94,49,275, under the normal provisions. The assessee also declared book profit of ` 23,16,65,577 under section 115JB. During the assessment proceedings, the Assessing Officer found that assessee while computing the book profit has reduced the profit from its SEZ Unit. He, therefore, called upon the assessee to justify the M/s. Genesys International Corporation Ltd. 3 same. While doing so, he also observed that in the assessment year 2009-10, assessee’s explanation that book profit under section 115JB will not include the profits of SEZ unit was rejected. Though, the assessee in its reply submitted that the Tribunal in assessment years 2008-09 and 2009-10, has accepted assessee’s claim that book profit under section 115JB will not include profits of SEZ Unit but the Assessing Officer rejecting such contention of the assessee held that profits of SEZ Unit has to be included in the book profit under section 115JB. Accordingly, he increased the book profit by ` 11,00,39,281.
Being aggrieved of such addition to the book profit made by the Assessing Officer, assessee preferred appeal before the first appellate authority. The learned Commissioner (Appeals), upon considering the fact that the Tribunal in assessee’s own case for the assessment year 1989-90 has accepted assessee’s claim that profit of SEZ Unit will not form part of the book profit, directed the Assessing Officer to exclude the income relating to SEZ Unit while computing book profit under section 115JB.
We have considered the submissions of the parties and perused the material available on record. At the outset, learned Representative of both the parties agreed before us that the issue in dispute is squarely covered by the decision of the Tribunal in assessee’s own case for the assessment year 2008-09 and 2009-10. On a perusal of M/s. Genesys International Corporation Ltd. 4 the order passed by the co-ordinate bench of the Tribunal in ITA no.6903/Mum./2011 and ITA no.609/Mum./2012, dated 31st October 2012, it is noticed that the Co-ordinate bench, while considering identical issue as to whether income of SEZ Unit will be included for computing book profit under section 115JB, held as under:-
“21. It is evident from above that an existing SEZ unit will also be governed by Special Economic Zones Act, 2005. Therefore, we are of the considered view that the benefits which are to be provided to the newly established unit in SEZ as per section 10AA of the Act will also be available to the existing units in SEZ. Moreover, section 4(1) of SEZ Act provides that an existing SEZ unit shall be deemed to have been notified and established in accordance with provisions of SEZ Act and the provisions of Special Economic Zones Act shall apply to such existing SEZ units. It is also observed that by the SEZ Act, sub-section (6) to section 115JB was also inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 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 be. Hence, income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act. In view of above, we are of the considered view that there is merit in the contention of ld A.R. that irrespective of the fact that amendment has been made in clause (f) of Explanation (1) to section 115JB(2) of the Act to apply the provisions of MAT in respect of units which are entitled to deduction u/s.10A or 10B but the units which are in SEZ will continue to get benefits from the applicability of provisions of MAT in view of sub-section(6) of the Act. The contention of ld D.R. that assessee will not be entitled to get the benefit u/s.115JB(6) of the Act as assessee has claimed deduction u/s.10A of the Act is to be rejected for the reason that section 115JB (6) does not refer section 10A or section 10AA but it only refer that provisions of section 115JB will not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on in an unit located in SEZ. Hence, we are of the considered view that the unit in SEZ will be covered by sub-section(6) to section 115JB of the Act irrespective of the fact that those units were claiming deduction u/s.10A of the Act. We also observe that benefit given to SEZ unit from the applicability of provisions of section 115JB has been withdrawn by the Finance Act, 2011 by inserting a proviso to section 115JB(6) of the Act, which reads as under:
M/s. Genesys International Corporation Ltd. 5 “Section 15JB(6)……….. Provided that the provisions of this sub-section shall cease to have effect in respect of an previous year relevant to the assessment year commencing on or after the 1st day of April, 2012.” …. …… 22. Hence, we hold that authorities below were not justified to include the book profit in respect of SEZ unit at Mumbai of the assessee while computing book profit u/s.115JB of the Act for assessment year 2008-09. Therefore, we reverse the orders of authorities below by holding that income relating to SEZ unit at Mumbai is to be excluded while computing book profit u/s.115JB of the Act for assessment year 2008-09. Hence, Ground No.4 of appeal taken by the assessee for assessment year 2008-09 is allowed.”
In view of the aforesaid decision of the co-ordinate bench of the Tribunal in assessee’s own case holding that book profit computed under section 115JB will not include income of SEZ Unit, we do not see any infirmity in the order of the learned Commissioner (Appeals) in directing the Assessing Officer to exclude the income of the SEZ Unit while computing book profit under section 115JB of the Act. Accordingly, grounds raised by the Department are dismissed.
In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 30.10.2015