2018 (8) TMI 1316 - HC - Income Tax

Validity of provisions of Section 115JB 80IC - whether ultravires inasmuch as the benefits granted under Section 80IC cannot be withdrawn by introduction of provisions of Section 115JB. - Counsel for the petitioners has contended that in view of the various decisions of the Supreme Court, the provisions which has been introduced by the legislation by amendment of Section 115JB is discriminatory - deduction in respect of unit situated in Uttarakhand and Himachal Pradesh (special category states) Held that - Before proceeding with the matter, it will not be out of place to mention that while deciding the vires of statute, we have to look at the object of the special introduction of Section 115JB which falls under Chapter 12B which pertains to special provisions relating to certain companies and keeping in mind, the speech delivered by the Finance Minister referred hereinabove. In our considered opinion, the very purpose of the introduction of this provision is to charge minimum tax on book profit. The distinction between the book profit and the taxable book profit is to match with the minimum tax as shown under the Companies Act by the special Act which was introduced. In that view of the matter, the argument canvassed by counsel for the petitioners though attractive but in our considered opinion, is devoid of any merit and the taxing statute is to be looked into for the purpose of interpretation of the introduction of the Section. In our considered opinion, the very object was to avoid net tax liability by the company through book profit from the company. In that view of the matter, while interpreting the statute, the court has to be very cautious in holding it to be bad in law otherwise the object of introduction of the Section will be frustrated. In our considered opinion, the provisions are in accordance with law and the Government has power to introduce such provisions. Apart from that 80IC deduction which is made is from the gross profit and will apply only on the book profit therefore, Section 115 JB 80 IC both run in different fields. Decided against the assessee.

Issues Involved:
1. Constitutionality of Section 115JB and Section 80IC of the Income Tax Act, 1961.
2. Alleged discrimination under Article 14 of the Constitution of India.
3. Applicability of Section 115JB to companies availing benefits under Section 80IC.
4. Jurisdiction and procedural aspects concerning the filing of the petition.

Detailed Analysis:

1. Constitutionality of Section 115JB and Section 80IC:
The petitioners challenged the provisions of Section 115JB and Section 80IC of the Income Tax Act, 1961, arguing that the benefits granted under Section 80IC cannot be withdrawn by the introduction of Section 115JB. Section 80IC allows deductions for certain undertakings in special category states, whereas Section 115JB imposes a minimum tax on book profits for companies. The court examined the provisions and found that Section 115JB is a special provision introduced to ensure that companies pay a minimum tax on their book profits, irrespective of the deductions available under other sections, including Section 80IC.

2. Alleged Discrimination under Article 14:
The petitioners contended that the application of Section 115JB results in discrimination against companies benefiting from Section 80IC, violating Article 14 of the Constitution. They argued that while Section 80IC applies to all categories of assessees, Section 115JB specifically targets companies, creating an unequal tax burden. The court held that there is a reasonable classification between individual assessees and companies, and the imposition of a minimum tax on companies' book profits under Section 115JB does not violate Article 14. The classification was deemed reasonable and in line with the objective of ensuring that profitable companies contribute a minimum tax.

3. Applicability of Section 115JB to Companies Availing Benefits under Section 80IC:
The petitioners argued that Section 80IC, being a special provision, should override Section 115JB, and companies enjoying deductions under Section 80IC should not be subjected to the minimum tax under Section 115JB. The court referred to previous judgments, including the Uttarakhand High Court's decision and the Supreme Court's directive, which clarified that Section 115JB, being a special provision for minimum tax, applies even to companies availing benefits under Section 80IC. The court emphasized that Section 115JB ensures that companies pay a minimum tax on their book profits, thus maintaining the legislative intent behind its introduction.

4. Jurisdiction and Procedural Aspects:
The respondents argued that the petition should have been filed in Uttarakhand, where the company's registered office is located. The court noted that the petitioners had previously approached the Uttarakhand High Court, and the Supreme Court had directed them to pursue the matter through normal statutory remedies. The court found that the current petition was filed with a significant delay and reiterated that the appropriate forum for such disputes is the appellate authority under the Income Tax Act.

Conclusion:
The court dismissed the petition, upholding the constitutionality of Section 115JB and Section 80IC. It held that Section 115JB's imposition of a minimum tax on book profits for companies, including those availing benefits under Section 80IC, does not violate Article 14 of the Constitution. The court emphasized the legislative intent behind Section 115JB to ensure that profitable companies contribute a minimum tax, thereby rejecting the petitioners' arguments of discrimination and procedural irregularities.

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