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2019 (5) TMI 529 - AT - Income TaxAdjustment to book profit u/s 115JB for calculation of MAT - share of the assessee in the income of joint venture - scope of amendment in Section 115JB - share in the income of AOP or BOI - HELD THAT - The share of a partner in the total income of the firm is exempt as per provisions of Section 10(2A) and consequently is excluded from the total income of the partner and therefore, the said share shall be excluded while computing the book profit U/s 115JB as envisaged in clause (ii) of explanation (1) to the said Section. The reference in second proviso to Section 86 is made to the association of persons or body of individuals whose total income is exempt U/s 10 of the Act and not otherwise. Once the share in the joint venture which is treated as share in the association of persons is not hit by the second proviso to Section 86 then the same is akin the share from the partnership firm. Thus to bring it to the parity of share in partnership firm, the amendment in Section 115JB vide Finance Act, 2015 was brought by inserting clause (iic) w.e.f. 1/4/2016. Therefore, the purpose and intention to bring the amendment is to remove the mischief or hardship of the assessee on MAT in respect of the income being share in the association of persons or body of individuals which is otherwise not subject to income tax in accordance with the provisions of Section 86 of the Act. As decided in M/S GOLDGERG FINANCE PVT. LTD. VERSUS ACIT- CIRCLE 3, THANE 2017 (2) TMI 643 - ITAT MUMBAI the mischief which has been sought to be remedied is that the share income of the member of the AOP which was not taxable in terms of section 86 was getting taxed under MAT while computing the book profit. This was also never the purpose of section 115JB to tax any income or receipts which is otherwise not taxable under the Act. If the intention of legislature was always that income which is not taxable under the normal provisions of the Act should not be brought to tax under MAT also, then it has to be interpreted that such a benefit has to be given to all and where the income is otherwise not taxable under the Act cannot be brought to be taxed under MAT. Therefore, any remedy brought by an amendment to remove the disparity and curb the mischief has to be reckoned as curative in nature and hence, is to be held retrospectively. Accordingly, this issue is allowed in favour of the assessee.
Issues Involved:
1. Deletion of addition made to book profit under Section 115JB for calculation of MAT. 2. Deletion of addition made to book profit under Section 115JB which was the share of profit from JV firm OMIL-JSC-JV. Issue-wise Detailed Analysis: 1. Deletion of Addition Made to Book Profit under Section 115JB for Calculation of MAT: The revenue's appeals questioned the deletion of an addition of ?53,26,040/- to the book profit under Section 115JB for the calculation of Minimum Alternate Tax (MAT). The core issue was whether the share of profit from a Joint Venture (JV) should be excluded from the computation of book profit under Section 115JB. The Tribunal noted that the CIT(A) had deleted the addition made by the Assessing Officer (AO) by following a prior decision of the Tribunal in the assessee’s own case for the assessment year 2014-15. The AO had rejected the assessee's contention that the share of profit from AOP/Joint Venture should be excluded from the computation of book profit under Section 115JB. The AO argued that only the share of profits from a firm governed by the Partnership Act is excluded from the computation of total income as per Section 10(2A). However, the share of profits from an AOP, although exempt from taxation under Section 86, cannot be excluded while computing the book profits under Section 115JB. The CIT(A) countered this by referencing judicial pronouncements that emphasized the objective of MAT provisions to reflect the real profit of companies. It was observed that including receipts not in the nature of income in the computation of book profits would defeat this purpose. The CIT(A) directed the AO to exclude the share of profit from the AOP while computing book profit under Section 115JB, aligning with the Tribunal’s earlier decisions and the provisions of Section 86, which states that no income tax is payable by the assessee on their share in the income of an AOP. 2. Deletion of Addition Made to Book Profit under Section 115JB which was the Share of Profit from JV Firm OMIL-JSC-JV: The Tribunal further elaborated on the provisions of Sections 66, 67A, and 86 of the Act. These sections collectively stipulate that while the share of profit in an AOP is not liable to income tax, it should be included in the total income of the assessee for determining the average marginal rate of tax. The second proviso to Section 86 clarifies that if no income tax is chargeable on the total income of the AOP, the share of a member should be taxed as part of their total income. The Tribunal also referenced the amendment introduced by the Finance Act, 2015, which inserted clause (iic) in Explanation 1 below subsection (2) of Section 115JB, effective from 01.04.2016. This amendment was intended to exclude the share of the assessee in the income of an AOP from the computation of book profit for MAT purposes. The Tribunal, citing the case of M/s Goldgerg Finance Pvt. Ltd. Vs ACIT, held that this amendment was remedial and curative in nature, intended to remove the disparity between partners of a firm and members of an AOP regarding MAT liability. The Tribunal concluded that the CIT(A) was justified in excluding the share of profit from the AOP while computing book profit under Section 115JB. However, the AO was instructed to verify whether the income of the joint venture assessed as an AOP was exempt from income tax and then apply the provisions of Section 67A accordingly. Conclusion: The appeals of the revenue were dismissed, and the Tribunal upheld the CIT(A)'s decision to exclude the share of profit from the AOP while computing book profit under Section 115JB, provided the AO verifies the exemption status of the joint venture's income. The judgment emphasized the remedial nature of the amendment to Section 115JB and the need for consistency in applying judicial precedents.
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