2014 (11) TMI 1177 - AT - Income Tax

Minimum Alternate Tax (MAT) on SEZ units - Applicability of provisions of section 115JB on unit located in Speical Economic Zone - Income relating to 10A unit as includible in the book profit - Held that - As decided in Genesys International Corporation Ltd. v. ACIT (2012 (12) TMI 491 - ITAT MUMBAI) that a unit located in Speical Economic Zone (in short SEZ) is covered by sub section (6) of section 115JB irrespective of the fact that such unit is claiming deduction u/s 10A and, therefore, the book profit of the SEZ unit could not be included while computing book profit under section 115JB for A.Y. 2008-09, despite the fact that clause (f) of Explanation 1 to section 115JB(2) has been amended to apply the provisions of MAT to units which are entitled to deduction under section 10A. - Decided in favour of assessee.

Summary

Issues:
Applicability of provisions of section 115JB of the Income Tax Act, 1961 (the Act) to the assessee.

Detailed Analysis:

1. Issue: Applicability of Section 115JB to the Assessee
- The appeal was filed against the order of the CIT(A) for the assessment year 2008-09, challenging the applicability of provisions of section 115JB of the Income Tax Act, 1961 to the assessee.
- The AO noted that the assessee had reduced the deduction claimed u/s. 10A while computing book profits u/s 115JB. The AO required the assessee to justify the claim as the amended provisions of section 115JB do not permit the deduction u/s. 10A.
- The assessee contended that section 115JB(6) exempted it from taxability under section 115JB, specifically mentioning that all units in Special Economic Zones (SEZ) were exempted from its provisions.
- The AO did not agree with the assessee and included the income relating to the 10A unit in the book profit u/s. 115JB.
- On appeal, the CIT(A) upheld the AO's order, leading the assessee to approach the Tribunal.

2. Judicial Precedent and Analysis
- The Tribunal referred to a similar case, Genesys International Corporation Ltd. v. ACIT, where it was held that a unit in an SEZ is covered by section 115JB(6) regardless of claiming deduction u/s. 10A.
- The Tribunal analyzed the SEZ Act and the provisions of section 115JB(6), concluding that income of units in SEZ should not be included while computing book profit for Minimum Alternate Tax (MAT) purposes.
- The Tribunal emphasized that the benefits provided to units in SEZ under section 115JB(6) were applicable irrespective of any amendments made to section 115JB(2).
- It was noted that the Finance Act, 2011 withdrew the benefit given to SEZ units under section 115JB(6) from the assessment year commencing on or after April 1, 2012.
- Following the decision in Genesys International Corporation Ltd., the Tribunal held that the income relating to the SEZ unit should be excluded while computing book profit u/s. 115JB for the assessment year 2008-09.

3. Conclusion
- Considering the similarity of facts with the Genesys International Corporation Ltd. case and the absence of any contrary decision brought by the Revenue, the Tribunal allowed the appeal, holding that the income related to the SEZ unit should be excluded while computing book profit u/s. 115JB for the assessment year 2008-09.
- The Tribunal reversed the orders of the authorities below and pronounced the appeal as allowed on November 5, 2014.