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TMI Blog2017 (2) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... by this amendment has thus removed this imparity between two classes of assessees so that mischief or prejudice caused to other class of assessees should be removed. 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. - I .T.A. No. 7496/Mum/2013 - - - Dated:- 19-1-2017 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee from AOP was chargeable to tax in the hands of the assessee in terms of second proviso to section 86. The A.O. further observed that both the AOPs had shown Nil income after claiming deduction u/s 80IB(10), therefore, the assessee s share in the income of both the AOP is to be computed at Nil in terms of proviso to section 67A. Thus, he held that the share amount of ₹ 54,58,717/- received by the assessee from both the AOPs would be brought to tax u/s 86. The A.O. further held that the said income would be chargeable to tax in the hands of the assessee u/s 115JB. The relevant observation of the A.O. while computing the income u/s 115JB is as under:- It is seen that the assessee company has shown the share of income from AOP and has included the same in its book profit in the P L account. As per explanation (1) to sec. 115J B, the book profit means the net profit as shown in the P L account for the relevant previous year. Therefore, the book profit of the assessee is to be computed on the basis of as shown in the P L account. Further, explanation to sec. 115JB permits certain deductions from the book profits and such deduction are permissible with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only Nil income has been taxed in the hands of the AOP. Therefore, taxing the appellant's share in the profits of the AOP will not amount to double taxation of the same income. (iii) The appellant's submission on the application of section 115JB to the share of the member is that any amount which is not the share of a member from an AOP cannot be included in the total income for levy of tax u/s 115 JB and the share of a member from the AOP is to be computed as per the provisions of section 67A of the I.T. Act 1961 and not otherwise. Further according to the appellant the share of profit from the AOP does not form part of the results of the company and therefore will not constitute a transaction of the business of the company. Therefore, the share of the appellant in the AOP will not be includable in the book profit of the company and therefore the same would not form part of income chargeable to tax u/s 115 JB of the LT. Act 1961. In this regard it is seen that the appellant has included its share in the profits of the AOP in its P L Account. The book profits of the appellant have to be calculated on the basis of the Net Profit shown in the P L Account. Only those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s own case for A.Y. 2008-09, wherein the Tribunal has decided this issue after observing and holding as under:- 9. Rival contentions have been considered and record perused. From the record, we found that assessee company is a member of two AOPs, income of which was claimed as exempt u/s.10(2A) in the return of income. It was explained before the AO that assessee has wrongly claimed exemption u/s.10 (2A) and it is actually entitled for exemption u/s.86 in respect of share income received from two AOPs. However, the AO did not allow exemption u/s.86 on the plea that the profit of AOPs were eligible for deduction u/s.80IB (10). The AO stated that after claim of deduction u/s.80IB, the income of Cosmos Estate has become nill on which no tax is payable. In respect of Cosmos Properties, the AO stated that entire income was eligible for deduction u/s.80IB (10) except a sum of ₹ 24,066/-. Accordingly, it was held by AO that income of ₹ 24,066/- will be the amount on which tax will not be chargeable as per provisions of Section 86. Balance amount of ₹ 2,18,39,396/- was brought to tax. The CIT (A) confirmed the action of the AO. Income of assessee was also found by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting share of the assessee company. 10. From the record we also found that the AO has also brought to net of tax its book profit which included share of profit in two AOPs as per provisions of Section 115JB. In this regard contention of learned AR was that amount of share of member from an AOP cannot be included in total income for the purpose of Section 115JB, because income of AOPs have already suffered tax in their respective hands. We do not find any merit in the contention of learned AR insofar as the assessee company had credited their share of income from AOP in its book profit in P L account and book profit has been worked out after taking into account such share of income in AOP. As per Section 115JB, the book profit means the net profit as shown in the P L account for the relevant previous year. Therefore, book profit is to be computed on the basis of income shown in the P L account subject to the adjustment as provided under Explanation 1 to Section 115JB. We had carefully gone through the adjustment provided under Explanation 1 and found that nowhere the explanation provide for exclusion of such share of profit from AOP while computing income u/s.115JB of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .04.2016 which provides that the amount of income being share of the assessee in the income of AOP on which no income tax is payable in accordance with the provisions of section 85 and any such amount is credited to the P L account, then same shall be reduced while computing the book profit. He submitted that this amendment is curative in nature and should be applied retrospectively. The provision inserted is only meant for rationalizing the provision of computation of book profit which is evident from the Explanatory notes to Finance Act, 2015 dated 27.11.2015. If an amendment has been brought in the statute to remove the rigors of the law and to remove hardships on the taxpayers then it has to be given effect retrospectively. In the case of the partnership firm, the partner s share of income was never included in the part of the book profit, therefore, in order to bring at par with the partnership firm, this provision has been extended to AOP also. In support of the proposition that amendment to section 115JB is curative in nature and should be applied retrospectively, he relied upon the following decisions:- (i) Allied Motors (P) Ltd. Etc. vs CIT - 224 ITR 0677(SC)(1997) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the computation of book profit. In order to extend this benefit and to provide remedial measures in the case of AOP also, a new clause has been inserted by the Finance Act, 2015 w.e.f. 1.4.2016, which reads as under: (iic) the amount of income, being the share of the assessee in the income of an association of persons or body of individuals, on which no income tax is payable in accordance with the provisions of section 86 if any, such amount is credited to the profit and loss account; or The rationale behind this section has been explained in the Explanatory notes to the Finance Act 2015 in the following manner:- Rationalising the provisions of section 115JB The existing provisions contained in section 115JB of the Act provide that in the case of a company, if the tax payable on the total income as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after 1st day of April, 2012, is less than eighteen and one-half percent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be eighteen and one-half percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable in accordance with the provisions of section 86 should be excluded while computing the MAT liability of the member u/s 115JB. It was further provided that expenditure if any debited to the P L account corresponding to such income which is to be excluded from the MAT liability shall be added back to the book profit for the purpose of computation of MAT. The intention of the legislature which can be gauged by the Explanatory notes to the amending Act, was to provide similar remedy which was applicable to the partners whose share income from the profit of the firm was not liable for MAT. If a provision has been brought to extend the benefit to certain class of assessees which was earlier applicable to other class of assessees on a similar circumstances and is remedial in nature, then, the same has to be reckoned as retrospective. It is quite a trite proposition that explanatory Act which is curative in nature or any remedial statute is brought in the statute either to remedy unintended consequence or to provide benefit which is applicable to particular class of assessee and is extended to other class of assessee, then, on reasonable interpretation it should be declared as retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even though the first proviso came to be inserted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Ltd. Etc. (supra). This Court, in Allied Motors (P) Ltd. Etc. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court in Allied Motors (P) Ltd. Etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act 2003 not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees, where in one case, statute envisaged that if the income of the assessee is not taxable, that is, in case of partner the share income from the partnership firm, then it cannot be taxed as book profit under MAT liability. Similarly, in second case also, that is, in case of member of an AOP where no income-tax is payable on the share of a member of an AOP in certain situations in terms of section 86, should also not be brought to tax under MAT liability. The legislature by this amendment has thus removed this imparity between two classes of assessees so that mischief or prejudice caused to other class of assessees should be removed. 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 gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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