2011 (9) TMI 1101 - AT - Income Tax

Compute tax on normal income before rebate u/s. 88E on book profit for applying provisions of section 115JB - whether CIT(A)-VI, has erred in law in directing to compare Tax on normal income before rebate u/s. 88E with 10% of Book Profit for applying Sec. 115JB? - Held that - In present assessment year provisions of section 115JB of the Act provides for a minimum alternate tax for companies under this provision and company is required to pay at least 10% of its book profit as corporate tax and in case tax liability of a company under regular provision is more than this amount the provision of MAT will not apply and company will pay corporate tax as per regular scheme. Simultaneously, the assessee is eligible for rebate u/s. 88E (1) of the Act as is available to assessee whose total income in previous year includes any income chargeable under the head profits and gains of business or profession arising from taxable securities under sub-section (2) of Section 88E of the Act an assessee is eligible for deduction from the amount of income tax on such income arising from securities from such transactions computed in the manner provided in section 88E (2) of the Act of an amount equal to securities transaction tax paid by him in respect of taxable securities transaction entered into in the course of his business during the relevant previous year. It means that in case the assessee s income under normal provisions is more than 10% of book profit, as is in the present case, MAT provision u/s. 115JB of the Act will not apply. In our view, the tax payable as referred to in section 115JB of the Act is gross tax payable and not the tax after rebate under other provisions of the Act. In view of the above, we are of the view that the tax payable on the income computed under normal provisions, in the case of the assessee, is much greater than 10% of book profit and, therefore, the findings of CIT(A) are clearly within the provisions of the Act. Appeal of the revenue is dismissed.

Summary

Issues:
1. Interpretation of provisions of section 115JB of the Income Tax Act, 1961 regarding computation of tax on normal income before rebate u/s. 88E for applying provisions of section 115JB.

Analysis:
The appeal before the Appellate Tribunal ITAT Kolkata arose from the order of CIT(A), VI, Kolkata regarding the assessment framed by DCIT, Circle-VI, Kolkata for the Assessment Year 2007-08. The specific issue in this appeal was the direction given by CIT(A) to compute tax on normal income before rebate u/s. 88E for applying provisions of section 115JB of the Act. The primary contention raised by the revenue was against the order of CIT(A) in this regard. The Tribunal considered the facts and circumstances of the case, where the assessee had filed a return of income declaring income under normal computation, which included a rebate u/s. 88E. The Assessing Officer charged tax as per Minimum Alternate Tax (MAT) u/s. 115JB of the Act since the tax under normal computation was lower due to the rebate. The CIT(A) allowed the claim of the assessee, emphasizing that section 115JB applies only when tax payable under normal computation is less than 10% of Book Profit and not when any credit is granted u/s. 88E of securities tax. The CIT(A) analyzed the computation of income tax, surcharge, education cess, and interest, concluding that the tax payable under section 115JB is the gross tax payable and not the tax after rebate under other provisions.

The Tribunal further explained the provisions of section 115JB, which mandate a minimum alternate tax for companies, requiring them to pay at least 10% of their book profit as corporate tax. If the tax liability under regular provisions exceeds this amount, the MAT provision does not apply. The assessee is eligible for rebate u/s. 88E, which allows deduction from the income tax on securities transactions. The Tribunal concurred with the CIT(A)'s interpretation that the tax payable under section 115JB is the gross tax payable, and in the present case, the tax on income computed under normal provisions exceeded 10% of book profit, thereby justifying the CIT(A)'s decision. Consequently, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s findings within the provisions of the Act. The judgment was pronounced on 09.09.2011, with the revenue appeal being dismissed.