2010 (11) TMI 671 - HC - Income Tax

MAT - Deduction u/s 80IC - It is true that when section 115JB was inserted, there was no contem-plation that, in future, section 80-IC would be inserted. Therefore, at the time when section 115JB was inserted, it was not intended to control sec-tion 80-IC - Therefore, even after insertion of section 80-IC, when the total income, as computed after taking into consideration all deductions, including the deductions available under section 80-IC of the Act, is less than what has been mentioned in section 115JB, it would be the obligation of the assessee-company to pay such tax as mentioned in section 115JB - held that - while section 80-IC, as a special provision, allows deductions, section 115JB, as a special provision, imposes a tax liability on an assessee, being a company, if its tax liability, assessed after grant of such deductions, is less than what has been provided therein - an assessee, being a company and entitled to deduction under section 80-IC, would be liable to pay income-tax, if it comes within the provisions of sec-tion 115JB to the extent mentioned therein. - Decided against the assessee

Issues Involved:
1. Applicability of Section 115JB to companies entitled to deductions under Section 80-IC.
2. Interpretation of the policy granting tax exemptions and its legislative acceptance.
3. Harmonious reading of Sections 80-IC and 115JB.
4. Promissory estoppel and its applicability.
5. Alleged discrimination between companies and other assessees.

Detailed Analysis:

1. Applicability of Section 115JB to Companies Entitled to Deductions Under Section 80-IC:
The primary issue concerns whether Section 115JB, which mandates a minimum tax on book profits, applies to companies that qualify for deductions under Section 80-IC. Section 115JB, inserted by the Finance Act, 2000, dictates that if the income-tax payable by a company on its total income is less than 10% of its book profit, the book profit shall be deemed the total income, and the company shall pay tax at 10%. This section contains a non obstante clause and a deeming clause, making it applicable regardless of other provisions in the Act.

2. Interpretation of the Policy Granting Tax Exemptions and Its Legislative Acceptance:
The policy announced by the Executive Government on January 7, 2003, promised 100% income-tax exemption for the first five years and subsequent partial exemptions for companies setting up new industrial units or expanding existing ones in specific areas of Uttaranchal (now Uttarakhand) and Himachal Pradesh. However, the court noted that the policy required legislative acceptance to be enforceable. The Legislature, by inserting Section 80-IC, provided for deductions rather than exemptions, indicating an action contrary to the Executive policy. Thus, the policy's promise of exemption was subject to legislative approval, which was not granted.

3. Harmonious Reading of Sections 80-IC and 115JB:
The court emphasized that Sections 80-IC and 115JB deal with different aspects and can be read harmoniously. Section 80-IC allows deductions from total income for certain industrial undertakings, while Section 115JB imposes a minimum tax liability on companies if their tax payable is less than 10% of their book profit after such deductions. The court clarified that Section 115JB applies even after considering deductions under Section 80-IC, as it addresses a situation where the tax liability is less than the specified threshold.

4. Promissory Estoppel and Its Applicability:
The petitioners argued that the government was estopped by promissory estoppel from imposing tax under Section 115JB after promising 100% exemption. The court rejected this argument, stating that a promise contrary to statute is unenforceable. The Executive Government lacked the authority to grant tax exemptions without legislative approval, and since the Legislature did not accept the policy's promise, the principle of promissory estoppel did not apply.

5. Alleged Discrimination Between Companies and Other Assessees:
The petitioners contended that applying Section 115JB to companies, while other assessees benefiting from Section 80-IC deductions were not subject to similar tax, constituted discrimination. The court noted that the vires of Section 115JB were not challenged on this ground. It observed that Section 115JB specifically targets companies and imposes a minimum tax liability, which does not apply to other assessees, thus not addressing the alleged discrimination in this judgment.

Conclusion:
The court concluded that Section 115JB applies to companies entitled to deductions under Section 80-IC. The legislative intent behind Section 115JB was to ensure a minimum tax liability for companies, regardless of other deductions. The Executive policy's promise of tax exemption required legislative approval, which was not granted, and thus, promissory estoppel did not apply. The court dismissed the writ petitions, affirming that companies benefiting from Section 80-IC deductions must still comply with the minimum tax requirements of Section 115JB.

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