2018 (7) TMI 2082 - AT - Income Tax

MAT computation - whether deduction u/s 80IB(10) of the Act is not allowable while computing book profit u/s 115JB - HELD THAT - There should not be any dispute that the methodology provided in sec. 115JB for computing book Profit did not prescribe for reducing the amount eligible for deduction u/s 80IB(10) of the Act from the Net Profit. We also notice that the assessee has considered sec. 80IB(10) of the Act as an exemption provision. It is well settled proposition that the deductions prescribed in Chapter VIA are deductions provision and they shall be allowed only if the Gross Total income is in positive figure. A deduction for a particular type of income is available only if it forms part of Gross Total Income. Thus, the concerned income is taken as part of Gross Total income and thereafter, deductions are allowed under Chapter VIA of the Act. Certain incomes are totally exempt from tax and such type of income does not enter into the Gross Total income at all. Hence the deduction allowed u/s 80IB(10) falls under the category of deduction provision and not exemption provision as contended by the assessee. The provisions of sec. 115JB prescribes exclusion of certain exempted income and do not provide deduction given u/s 80IB(10) of the Act. The Hon ble Karnataka High Court has made this point very clear in the case of in the case of Sankhla Polymers P. Ltd. 2013 (6) TMI 310 - KARNATAKA HIGH COURT as held that provisions of Section 115JB would apply to the assessee who is claiming deduction under Section 80IB of the Act and deduction under Section 80IB(10) of the Act cannot be allowed while computing book profit under Section 115JB The contention of the learned A.R. that provisions of Section 80IB(10) would fall under the category of all other provisions of the Act as mentioned in Section 115JB(5) is liable to be rejected. Accordingly we hold that the assessee is not entitled to claim deduction u/s 80IB(10) of the Act from the Net profit for the purpose of computing Book Profit u/s 115JB of the Act. Accordingly we confirm the order passed by Ld CIT(A) on this issue. Interest under Sections 234B and 234C - HELD THAT - There is no dispute that interest u/s 234B and 234C is chargeable on the tax payable u/s 115JB of the Act. Only grievance of the assessee is that the interest u/s 234C is charged on the returned income as per the provisions of sec. 234C of the Act. We find merit in the said submissions. Accordingly we restore this issue relating to charging of interest u/s 234C of the Act to the file of the AO.

Summary

Issues Involved:
1. Deduction under Section 80IB(10) while computing book profit under Section 115JB.
2. Interest under Sections 234B and 234C on book profit.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IB(10) while computing book profit under Section 115JB:
The assessee, engaged in construction and sale of buildings, claimed a deduction under Section 80IB(10) while computing total income under normal provisions, which was allowed by the AO. However, while computing book profit under Section 115JB, the AO did not allow this deduction. The CIT(A) upheld the AO's decision, referencing the Karnataka High Court's decision in Sankhla Polymers P. Ltd. vs. ITO and the Ahmedabad Tribunal's decision in Ganesh Housing Corporation Ltd. vs. ACIT, which both held that deductions under Section 80IB are not allowable while computing book profit under Section 115JB.

The assessee argued that Section 115JB(5) implies that all provisions of the Act, including Section 80IB, should apply while computing book profit. However, the CIT(A) and the Tribunal rejected this, emphasizing that Section 115JB provides a specific methodology for computing book profit, which does not include deductions under Section 80IB(10).

The Tribunal noted that the purpose of Section 115JB is to ensure that companies showing substantial book profits still pay a minimum tax, and the methodology prescribed does not allow for the deduction under Section 80IB(10). The Tribunal cited the Karnataka High Court's decision in Sankhla Polymers P. Ltd., which clarified that Section 80IB operates in a different sphere from Section 115JB, and the latter's specific provisions take precedence.

The Tribunal also addressed the argument that Section 80IB(10) should be considered an exemption rather than a deduction, stating that Chapter VIA deductions, including Section 80IB(10), are not exemptions but deductions from gross total income, which do not apply to the computation of book profit under Section 115JB.

2. Interest under Sections 234B and 234C on book profit:
The assessee contended that interest under Sections 234B and 234C should not be levied on the tax computed on book profit. The CIT(A) rejected this, following the Bombay High Court's decision in CIT vs. Kotak Mahindra Finance Ltd., which upheld the levy of interest under these sections on book profit.

The Tribunal confirmed that interest under Sections 234B and 234C is chargeable on the tax payable under Section 115JB, as per the Supreme Court's decision in Rolta India Ltd. However, the Tribunal acknowledged the assessee's submission that interest under Section 234C should be charged on the returned income and directed the AO to ensure this is correctly applied.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the CIT(A)'s decision that the deduction under Section 80IB(10) is not allowable while computing book profit under Section 115JB. However, it directed the AO to correctly apply the interest under Section 234C based on the returned income.