2019 (9) TMI 299 - AT - Income Tax

Applicability of MAT to the SEZ unit u/s 115JB - eligibility for exemption u/s 10AA - HELD THAT - In the instant case, it is not in dispute that the assessee carries on its business in an SEZ Unit and its income will therefore be subject to the provisions of Section 115JB of the Act. On bare reading of provisions of subsection (6) to section 115JB, it is crystal clear that provisions of section 115JB will apply to the assessee company for the assessment year beginning assessment year 2012-13 onwards. Therefore, while passing the assessment order u/s 143(3), where the Assessing officer has forgot to invoke the provisions of section 115JB of the Act, the matter clearly falls within purview of section 154 of the Act and the same can be rectified as mistake apparent from record. In sub-section (6) to section 115JB, as we have noted above, it has been specifically provided that income accruing or arising from the business carried on by the assessee company in its SEZ Unit shall be subject to MAT provisions for assessment year beginning 2012-13 onwards. Therefore, provisions of sub-section (5) is subject to provisions of sub-section (6) of section 115JB and reading both the provisions harmoniously, it is clear that the income of the assessee company shall be subject to the provisions of MAT under section 115JB In the instant case, the assessee company is eligible for relief under Section 10AA of the Act however the sub-section (6) specifically provides that MAT provisions continue to apply to the assessee company beginning assessment year 2012-13 onwards. In other words, the application of other provisions of the Act as so provided in sub-section (5) has been barred by virtue of sub-section (6) to section 115JB of the Act. None of these decisions, the provisions as contained in sub-section (6) to section 115JB have been examined and/or discussed which clearly provides that the MAT provisions will be applicable to income from business carried on by the assessee company in its SEZ unit. Therefore, in view of the specific provisions so contained in sub-section (6) of section 115JB, these decisions doesn t support the case of the assessee company. - Decided against assessee

Summary

Issues Involved:
1. Invocation of Section 154 for rectification of assessment order under Section 143(3).
2. Applicability of Minimum Alternate Tax (MAT) provisions under Section 115JB to income exempt under Section 10AA.

Issue-wise Detailed Analysis:

1. Invocation of Section 154 for Rectification of Assessment Order:
The assessee challenged the rectification of the assessment order under Section 154, arguing that the action was illegal, unjustified, and beyond the scope of rectification. The original assessment under Section 143(3) allowed a deduction under Section 10AA, but later, the Assessing Officer (AO) issued a notice under Section 154, stating that the assessee was liable to pay tax under Section 115JB on book profits, which had been inadvertently omitted. The rectification was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who relied on judicial precedents and confirmed the AO's action. The Tribunal found that the omission of MAT provisions in the original assessment was a clear mistake apparent from the record and thus rectifiable under Section 154.

2. Applicability of MAT Provisions under Section 115JB to Income Exempt under Section 10AA:
The core issue was whether the income exempt under Section 10AA could be subjected to MAT under Section 115JB. The assessee argued that Section 10AA exempts 100% of profits derived from exports and that this exemption should apply despite the MAT provisions. The assessee relied on various judicial pronouncements to support the claim that exempt income under Section 10AA should not be liable for MAT.

The Tribunal analyzed the provisions of Section 115JB, particularly sub-sections (5) and (6). Sub-section (6) explicitly states that the provisions of Section 115JB shall not apply to income accrued from SEZ units until 1st April 2012, after which the exemption ceases. The Tribunal noted that the Finance Act, 2011 introduced a sunset clause, making MAT applicable to SEZ units from the assessment year 2012-13 onwards. The Tribunal concluded that the assessee's income from the SEZ unit was subject to MAT for the relevant assessment year.

The Tribunal also addressed the argument that the issue was debatable and beyond the scope of Section 154. It referred to the Supreme Court decision in ITO vs. Volkart Brothers, which held that a debatable issue cannot be rectified under Section 154. However, the Tribunal found that the application of MAT provisions was clear and not debatable, thereby justifying the rectification.

Conclusion:
The Tribunal dismissed the appeal, affirming the CIT(A)'s order and concluding that the MAT provisions under Section 115JB were applicable to the assessee's income from the SEZ unit for the assessment year 2012-13 onwards. The rectification under Section 154 was deemed appropriate as the omission of MAT in the original assessment was a clear mistake apparent from the record. The Tribunal's decision was pronounced in favor of the Revenue, confirming the applicability of MAT to the assessee's exempt income under Section 10AA.