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2022 (5) TMI 1262 - AT - Income TaxMAT computation u/s 115JB - Inclusion/exclusion of income relating to SEZ/STPI while computing book profit - HELD THAT - We are of the view that, there is merit in the contention of the Ld.AR that, irrespective of the fact that, amendment has been made in clause (f) of Explanation (1) to section 115JB(2) of the Act, to apply the provisions of MAT in respect of units which are entitled to deduction under section 10A or 10B, the units which are in SEZ will continue to get benefits from the applicability of provisions of MAT in view of sub-section(6) of the Act. We note that section 115JB (6) does not refer section 10A or section 10AA, but, it states that, provisions of section 115JB will not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on in an unit located in SEZ. Hence, we are of the view that, the unit in SEZ will be covered by sub-section(6) to section 115JB of the Act, irrespective of the fact that, those units were claiming deduction u/s.10A of the Act. We also observe that benefit given to SEZ unit from the applicability of provisions of section 115JB has been withdrawn by the Finance Act, 2011 by inserting a proviso to section 115JB(6) The year under consideration is A.Y 2005-06 and therefore this benefit is available to assessee. We therefore hold that, authorities below were not justified to include the book profit in respect of SEZ/STPI unit of the assessee, while computing book profit u/s.115JB of the Act for year under consideration. Therefore, we reverse the orders of authorities below by holding that income relating to SEZ/STPI unit is to be excluded while computing book profit u/s.115JB of the Act for assessment year 2005-06. - Decided in favour of assessee.
Issues Involved:
1. Deduction of brought forward loss or unabsorbed depreciation in computing book profits under Section 115JB. 2. Adjustment of past profits of STPI units from brought forward loss or unabsorbed depreciation. 3. Exclusion of STPI unit profits/losses in computing book profits under Section 115JB. Detailed Analysis: 1. Deduction of brought forward loss or unabsorbed depreciation in computing book profits under Section 115JB: The primary issue was whether the assessee could deduct brought forward loss or unabsorbed depreciation related to non-STPI units while computing book profits under Section 115JB. The Tribunal initially held that the net profits must be determined as per the Companies Act, and the assessee cannot adjust the book profit except as provided under the Companies Act. However, the High Court observed that the Tribunal misconstrued the statutory provisions and remanded the matter for fresh consideration. The Tribunal, upon reconsideration, acknowledged that for purposes of Section 115JB, the loss brought forward and unabsorbed depreciation must be taken as per the books of account and not the balance sheet, supporting the assessee's claim for deduction. 2. Adjustment of past profits of STPI units from brought forward loss or unabsorbed depreciation: The Tribunal initially did not allow the adjustment of past profits of STPI units from the brought forward loss or unabsorbed depreciation related to non-STPI units. The High Court noted that the Tribunal had not adequately addressed this issue and remanded it for a fresh decision. Upon review, the Tribunal agreed with the assessee that the income and expenditure from 10A units are outside the purview of Section 115JB, thus eliminating the profits or losses of 10A units from the computation of book profits. 3. Exclusion of STPI unit profits/losses in computing book profits under Section 115JB: The Tribunal initially included the profits/losses of STPI units in the computation of book profits under Section 115JB. The High Court remanded the issue for reconsideration, noting the Tribunal's misinterpretation of statutory provisions. Upon review, the Tribunal concluded that Section 115JB(6) excludes the income of units located in SEZ from the computation of book profits for MAT purposes. The Tribunal held that the authorities below were not justified in including the book profit in respect of SEZ/STPI units while computing book profits under Section 115JB for the assessment year 2005-06. Conclusion: The Tribunal reversed the orders of the lower authorities, holding that income related to SEZ/STPI units should be excluded while computing book profits under Section 115JB for the assessment year 2005-06. The questions of law referred by the High Court were answered in favor of the assessee, and the appeal was allowed.
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