2022 (11) TMI 966 - AT - Income Tax

MAT Computation of book profit u/s 115JB - Assessee was declared a sick company u/s 3 1 o of the SICA - Whether company turning into positive net worth, the benefit of exemption of book profit tax should be provided to the assessee.? - HELD THAT - Undisputedly, the net worth of the company has turned positive in the impugned assessment year. Naturally, therefore, for this year, assessee is not eligible for exclusion of its profit from the chargeability of book profit tax. There is no provision under the income tax act or under the sick industrial Companies act to exclude such profit from book profit tax u/s 115 JB of the act in these circumstances. Learned lower authorities have correctly interpreted the law and denied benefit to the assessee. Whenever, the provisions of law are clear and unambiguous they should be given full effect thereof and should be read as it is without adding or subtracting anything. No infirmity in the orders of the lower authorities. AO is correct in not excluding the book profit earned by the assessee from the provisions of 115 JB of the income tax act as the assessee s net worth turned positive during the year. There is no infirmity in the order of the learned CIT A in confirming the same. Solitary ground of appeal of the assessee is dismissed.

Summary

Issues:
1. Computation of tax under Section 115JB for a sick company with positive net worth.

Analysis:
The appeal was filed by the assessee against the appellate order passed by the Commissioner of Income Tax (Appeals) concerning the computation of tax under Section 115JB for the assessment year 2012-13. The main issue raised was whether the company, previously declared as a sick industrial company under the Sick Industrial Companies Act, should be exempt from the provisions of Section 115JB despite having a positive net worth. The assessee contended that until the rehabilitation scheme was completed, it should be allowed the benefit of exemption under Section 115JB. The revenue authorities, however, argued that once the net worth of the company exceeds the accumulated losses, the company is liable to pay book profit tax under Section 115JB, as per the clear language of the law.

The facts of the case revealed that the assessee company was initially declared as a sick industrial company and a revival scheme was approved by the BIFR. Subsequently, the company's net worth became positive, and it was discharged from the provisions of the Sick Industrial Companies Act. The issue revolved around the interpretation of Section 115JB, particularly clause [vii] of explanation [1], which excludes the profit of a sick industrial company from book profit tax until the net worth exceeds accumulated losses. The authorized representative argued that the assessee should be granted the exemption until the completion of the rehabilitation scheme, while the departmental representative emphasized the clear language of the law and the absence of provisions for continued exemption post positive net worth.

After considering the contentions and reviewing the lower authorities' orders, the Tribunal upheld that once the net worth of the company became positive, the assessee was not eligible for exclusion of profit from book profit tax under Section 115JB for that assessment year. The Tribunal emphasized that clear and unambiguous provisions of the law should be applied as is, without adding or subtracting anything. Therefore, the Tribunal found no infirmity in the lower authorities' decision to deny the benefit to the assessee, concluding that the assessing officer was correct in not excluding the book profit earned by the assessee from the provisions of Section 115JB due to the positive net worth. As a result, the appeal of the assessee was dismissed, affirming the orders of the lower authorities.