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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 ..... e Id CIT (A) failed to appreciate that the income of the AOP, M/s. Cosmos Properties had been charged to tax in its own hands at maximum marginal rate in the assessments completed for A.Y.2009-1O u/s 143(3) and therefore the rationale advocated by the Id A.O did not hold good. ID. The action of the Id CIT (A) in upholding the addition has resulted in double taxation of the same income, once in the hands of the AOP and again in the hands of the appellant. 2. The Id CIT (A) erred in arriving at the conclusion that Rs. 54,58,717/- being share of the appellant from the AOP was also chargeable as income u/s 115 JB of the IT. Act 1961." 3. Brief facts qua the issue raised in ground No.1A and 1D are that the assessee is a Private Limited Company and a member of two Associations of Persons (AOP) namely, M/s Cosmos Estate and M/s Cosmos Properties. The assessee has received share of income amounting to Rs. 54,58,717/- from AOP, M/s Cosmos properties which was claimed as exempt under section 86 of the Act. The A.O. held that this share of profit is to be taxed in the assessee's hand on the ground that the total income of M/s Cosmos Properties after claiming deduction u/s 80IB(10) was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the same precedence, he confirm the addition under the normal provisions of the Act and also u/s 115JB. The relevant conclusion of the ld. CIT (A) reads as under:- "In this appeal not only the issue involved is the same as in the immediately preceding year, but the appellant's submissions and even the grounds of appeal are the also the same. After having gone through, the A.O's observations in the assessment order and the appellant's detailed submissions on the same as reproduced above, I agree with the findings of my predecessor as reproduced above. Therefore, the amount of Rs. 54,58,717/- has rightly been brought to tax by the A.O. for the following reasons: (i) Exemption to a member of an AOP that can be allowed is as per section 86 of the Act. As per this section share of a member in the income of an AOP computed in the manner provided in section 67 A shall not be included in the total income of the assessee. In the appellant's case its share in the "total income" of the AOPs as computed u/s 67 A of the Act is Nil. Therefore, Nil is the amount which is entitled for exemption u/s 86 of the Act. (ii) The contention of the appellant that income has alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 1 to section 115JB. Another vital fact pointed out by the ld. Counsel before us was that, in the assessment order of the AOP in the case of M/s Cosmos Properties for the A.Y. 2009-10 itself, the income has been determined at Rs. 2,72,93,590/- vide order dated 28-12-2011 disallowing the assessee's claim for deduction u/s 80IB(10). Thus, the entire basis on which the assessment has been framed gets vitiated. 6. On the other hand, the ld. D.R. strongly relied upon the order of the ld. CIT(A). 7. After considering the aforesaid submission of the assessee and on perusal of the impugned order, we find that the ld. CIT(A) as regards the issue raised in ground nos. 1A to 1D, that is, the taxability of assessee's share of income of Rs. 54,58,717/-, has followed the earlier appellate order of the CIT(A), which stands reversed by the Tribunal. Not only that, as pointed out by ld. Counsel the income of AOP, M/s Cosmos Properties has been charged to tax at a maximum margin rate in the assessment completed u/s 143(3) for the A.Y. 2009-10 vide order dated 28-12-2011, that is, entire income of Rs. 2,72,93,590/- on which the claim of deduction u/s 80IB(10) was made has been taxed. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, is deductible/will not be chargeable to tax, subject to the proviso to Section 86. Further as per Section 167B of the Act, the AOP will be chargeable to maximum marginal rate of tax if the income of the member of AOP exceeds the maximum amount which is not chargeable to tax. As per second proviso to Section 86, if the total income of the AOP is less than the prescribed limit for taxation, then there will be no application of Section 86 while computing the total income of the member of AOP. So the income of the AOP is to be computed as per the provisions of the Act and the member's share is to be computed as per the provisions of Section 67A of the Act and not otherwise. We accordingly set aside the order of the lower authorities and restore the matter to the file of the AO to work out the total income of the assessee as per the provisions of Section 67A read with provisions of Section 86 of the I.T. Act. Here, it is pertinent to mention that computation of share of the assessee will be dependent upon the final determination/computation of total income of the AOP. If the AOP will not be allowed deduction u/s.80IB, there will be enhancement in the share of the assessee to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to exclusion of such income while computing book profit u/s.115JB is not tenable." Thus, respectfully following the earlier year precedence, we hold that, so far as first issue is concerned as raised in ground No. 1A to 1D, the same is decided in favour of the assessee because in the order giving effect to the Tribunal's, the A.O. has allowed the assessee's contention and the Department has not filed any appeal before the Hon'ble High Court as informed by the ld. Counsel for the assessee. Thus, the issue raised vide ground nos. 1A to 1D is decided in favour of the assessee and accordingly, these grounds raised by the assessee are treated as allowed. 8. So far as the issue relating to computation of book profit u/s 115JB on this amount is concerned, as noted above the Tribunal has decided this issue against the assessee on the ground that the assessee company itself has treated the share income from AOP in its book profit in the P&L account and once it is part of net profit shown in the P&L account, then it has to be computed as part of the book profit subject to adjustment as provided under Explanation 1 to section 115JB. Before us, the ld. Counsel for the assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant findings given in the impugned order. The addition of share income of AOP in the book profit has been made on the ground that the assessee itself has credited the share income from AOP in the P&L account and consequently the book profit has to be computed on the basis of amount shown in the P&L account. On a perusal of Explanation to Section 115JB specifically the second part dealing with exclusion/reduction from the book profit it can be seen that clause (ii) permits certain deduction from book profit with regard to the amount of income to which the provisions of sections 10, 11 or 12 applies if such amount has been credited to the P&L account. The said clause reads as under:- "the amount of income to which any of the provisions of section 10 [other than the provisions contained in clause (38) thereof] or section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or" Section 10 includes section 10(2A) also which provides for exemption of share income of partner from the partnership firm. Thus, if share income of partner is credited to the profit & loss account, then, Explanation 1 to sec 115JB envisages its exclusion or deduction from bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an AOP, in the income of the AOP, on which no income-tax is payable in accordance with the provisions of section 86 of the Act, should be excluded while computing the MAT liability of the member under 115JB of the Act. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is being proposed to be excluded from the MAT liability) are also proposed to be added back to the book profit for the purpose of computation of MAT." [Emphasis added is ours] This has been further explained and clarified by the CBDT Circular in the similar manner. From the reading of above clarification it is ostensible that, the background and intention behind for such an insertion of clause was that, in case of a partner of a firm, the share in the profit of the firm which is exempt in the hands of the partner in terms of section 10(2A), there were no liability to pay MAT by the partner on such profit. However, this benefit was lacking in the case of share of a member of an AOP where in certain circumstances was not taxable in hands of member in terms of section 86 were not excluded from the book profit while computing the MAT liability of the member. It was felt by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve in nature, hence, it would apply retrospectively w.e.f. 1st April, 1988 (i.e. the date on which the related legal provision was introduced). Secondly, it may be noted that, in the case of Allied Motors (P) Ltd. Etc. vs. CIT (1997) 139 CTR (SC) 364: (1997) 224 ITR 677 (SC), the scheme of s. 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales-tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant salestax law should be disallowed under s. 43B of the Act while computing the business income of the previous year? That was a case which related to asst yr. 1984-85. The relevant accounting period ended on 30th June, 1983. The ITO disallowed the deduction claimed by the assessee which was on account of salestax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under s. 43B which, as stated above, was inserted w.e.f. 1st April, 1984. It is also relevant to note that the first proviso which came into force w.e.f. 1st April, 1988 was not on the statute book when the assessments were made in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under s. 43B of the Act. In our view, therefore, Finance Act 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988 when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate w.e.f. 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003." 11. Thus, we are of the opinion that the clause (iic) inserted in Explanation 1 to section 115JB by the Finance Act 2015 is remedial and curative in nature as it was brought in the statute to provide similar benefit to the member of the AOP which was earlier applicable to the partner of the firm, therefore, it is to be reckoned as retrospective. This proposition can be viewed from another angle that, the amending Act had sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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