2014 (1) TMI 174 - AT - Income Tax

Application of Minimum Alternate Tax u/s 115JB of the Act Claim of deduction u/s 80-IC of the Act Held that - The AO can compute the total income or loss, after making adjustment of incorrect claim, if such incorrect claim is apparent from any information in the return Following Apollo Tyres Ltd. Versus Commissioner of Income Tax 2002 (5) TMI 5 - SUPREME Court - while computing the book profits of a company u/s 115J under the Act, the AO has only the power of examining whether books of accounts are certified by the authorities under the Companies Act and there after as the limited power of making increase or decrease of certain items specifically provided for in the Explanation to S.115J. A deduction u/s 80-IC, is not an item of adjustment in Explanation I to S.115 JB - While so, to claim reduction of the amount deductible u/s 80-IC, while computing book profits u/s 115 JB, is not in accordance with the apparent reading of the provisions of S.115 JB - such a claim is an incorrect claim and this is apparent from information in the return as defined in the Explanation (a) to S.143(1)(a)(ii) of the Act - the AO is correct in making adjustment u/s 143(1) - the return is processed by a computer or by the Officer himself, does not make a difference, computerized processing is only an aid to the AO - computation of book profits u/s 115 JB of the Act is not done in accordance with the provisions of the Act, and when an incorrect claim of reduction from book profits of amount which the assessee is eligible u/s 80 IC is made, it is an incorrect claim apparent from the record, which can be adjusted u/s 143(1) of the Act Decided in favour of revenue.

Summary

Issues:
Scope of powers of Assessing Officer under Section 143(1) of the Income Tax Act, 1961 regarding the application of Minimum Alternate Tax (MAT) provision under Section 115 JB to a company claiming deduction under Section 80-IC.

Analysis:

Issue 1: Scope of powers of Assessing Officer under Section 143(1) of the Income Tax Act, 1961
The appeal involved a dispute regarding whether the Assessing Officer (AO) had the authority to apply the Minimum Alternate Tax (MAT) provision under Section 115 JB to a company claiming deduction under Section 80-IC while processing the return under Section 143(1) of the Income Tax Act, 1961. The appellant contended that the AO's powers were limited to making adjustments for arithmetical errors or incorrect claims that were apparent from the return. The Commissioner of Income Tax (Appeals) accepted the appellant's contention, leading to the Revenue's appeal. The Tribunal analyzed the provisions of Section 143(1) and the Explanation provided therein, which allowed adjustments for incorrect claims apparent from the return. The Tribunal held that the deduction under Section 80-IC was not an item of adjustment in the computation of book profits under Section 115 JB. Therefore, claiming a reduction under Section 80-IC while computing book profits under Section 115 JB was deemed an incorrect claim, as defined in the Explanation to Section 143(1)(a)(ii). Consequently, the AO was deemed correct in making the adjustment under Section 143(1). The Tribunal emphasized that the computerized processing of returns did not alter the AO's authority in this regard. Ultimately, the Tribunal set aside the CIT(A)'s order and restored the AO's decision.

Conclusion:
The Tribunal allowed the appeal of the Revenue, affirming the AO's authority to adjust incorrect claims apparent from the return under Section 143(1) of the Income Tax Act, 1961, including the application of MAT provision under Section 115 JB to a company claiming deduction under Section 80-IC.