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TMI Blog2018 (8) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of this provision is to charge minimum tax on book profit. The distinction between the book profit and the taxable book profit is to match with the minimum tax as shown under the Companies Act by the special Act which was introduced. In that view of the matter, the argument canvassed by counsel for the petitioners though attractive but in our considered opinion, is devoid of any merit and the taxing statute is to be looked into for the purpose of interpretation of the introduction of the Section. In our considered opinion, the very object was to avoid net tax liability by the company through book profit from the company. In that view of the matter, while interpreting the statute, the court has to be very cautious in holding it to be bad in law otherwise the object of introduction of the Section will be frustrated. In our considered opinion, the provisions are in accordance with law and the Government has power to introduce such provisions. Apart from that 80IC deduction which is made is from the gross profit and will apply only on the book profit therefore, Section 115 JB 80 IC both run in different fields. Decided against the assessee. - D.B. Civil Writs No. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Techno-logy Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North Eastern States; (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. (7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. (8) For the purposes of this section,- (i) Industrial Area means such areas, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii) Industrial Estate means such estates, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (iii) Industrial Growth Centre means such centres, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (iv) Industrial Park means such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (v) Initial assessment year means the assessment year releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) : Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation .-For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation .-For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below subsection (2) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial units and existing industrial units on their substantial expansion as defined, set up in Growth Centres, Industrial Infrastructure Development Centres(IIDCs), industrial Estates, Export Processing Zones, Theme Parks (Food Processing Parks, Software Technology Parks, etc.) as stated in Annexure-1 and other areas as notified from time to time by the Central Government are entitled to (I) 100%(hundred per cent) outright excise duty exemption for a period of 10 years from the date of commencement of commercial production. 100% income tax exemption for initial period of five years and therafter 30 % for companies and 25% for other than companies for a further period of five years for the entire states of Uttaranchal and Himachal Pradesh from the date of commencement of commercial production. (ii) All New industries in the notified location would be eligible for-capital investment subsidy @ 15% of their investment in plaint machinery, subject to a celling of ₹ 30 Lakh. The existing units will also be entitled to this subsidy on their substantial expansion, as defined. (iii) Thrust Sector Industries as mentioned in Annexure-II are entitled to similar conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries, Ministry of Small Scale Industries etc, are requested to amend act/ Rules/Notifications etc and issue necessary instructions for giving effect to those decisions. 4. He has also taken us through the prayers which were claimed before the High Court of Uttarakhand at Nainital which reads as under:- It is therefore, most respectfully prayed that this Hon ble Court may be pleased to A Issue a writ order or direction in the nature of Certiorari quashing the order/letter dated 5th June, 2008 (filed as part of Annexure-3) passed by the respondent No.3. B Declare and restrain the respondents from implementing the order/letter dated 5th June 2008(filed as part of Annexure-3) passed by the respondent No.3 as the same would be violative of Article 14 19 of the Constitution of India. C Issue a writ, order or direction in the nature of Mandamus directing the respondents not to apply Section 115JB of Income Tax, Act in the case of the petitioner covered under Section 80-IC of the income Tax Act and also covered under the promise made by the Government of India on 07.01.03(Annexure-4): D. Issue a writ, order or direction in the nature of Mandamus declari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main ground of appeal namely that there is gross discrimination and in this regard it has been averred as under:- The petitioners state that any different view would result in invidious discrimination and manifestly unjust and unreasonable consequences, and would render the provisions of section 115JB of the Income Tax Act, 1961 vulnerable to challenge for being violative of Article 14 read with Article 265 and 300A of the Constitution of India. To elaborate- (a) Section 80-IC is applicable to all categories of assessees, whether they be individuals, firms, companies, etc. The exemption under section 80-IC is meant to be enjoyed by all assessees. (b) Section 115JB is applicable only to a company assessee in whose case the income tax payable on its total income is less than 10% of its book profit. (C) Whereas all assessees, including a company assessee in whose case the income tax payable on the total income is more than 10% of the book profit, would enjoy the exemption under section 80-IC and would not be called upon to pay any income tax, another company assessee having similar undertaking in Uttarakhand would be called upon to pay tax under section 115JB mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bar the State from taxing unearned increment if the object is to deny owners the full benefit of increase of value due to development of a town. It seems to us, as we have already said, that to accede to the contentions of the appellant and the States would be destructive of the protection afforded by Article 14 of the Constitution. The States would only have to constitute separate acquiring bodies for each city, or Division or indeed to achieve one special public purpose and lay down different principles of compensation. 2. Union of India (UOI) and Ors. Vs. A. Sanyasi Rao and Ors. (1996) 3 SCC 465 :- 22. However, the denial of relief provided by Sections 28 to 43C to the particular businesses or trades dealt with in Section 44AC calls for a different consideration. Even according to Revenue, the provisions (Sections 44AC and 206C) are only machinery provisions . If so, why should the normal reliefs afforded to all assesses be denied to such traders? Prima facie, all assessees similarly placed under the Income Tax Act are entitled to equal treatment. In the matter of granting various reliefs provided under Sections 28 to 43C, the assessees carrying on business are si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two commodities on a rational basis for the purpose of imposing tax. This court in the case of Tata Motors Ltd. v. State of Maharashtra and Ors.MANU/SC/0464/2004 : AIR2004SC3618 , has held: It is no doubt true that the state has enormous powers of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because several fiscal adjustments are to be made by the government depending upon the needs of the revenue and the economic circumstances prevailing in the state. Even so an action taken by the state cannot be irrational and so arbitrary so as to one set of rules for one period and another set of rules for another period by amending the laws in such a manner as to withdraw the benefit that had been given resulting in higher burden so far as the assessee is concerned without any reason. Retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. (Underlining is ours). 15. The learned Counsel appearing for the State relyingheavily on the case of Kerala Hotel and Restaurant Association and Ors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of Article 14 of the Constitution of India. 4. Nand Kishore Vs. State of Punjab (1995) 6 SCC 614 :- 19. It would then have to be seen the twin play of the notion of deemed constitutionality and bar of constructive res-judicata. Raising the constitutionality of a provision of law, as it appears to us, stands on a different footing than raising a matter on a bare question of law, or mixed question of law and fact or on fact. There is a presumption always in favour of constitutionality of the law. The onus is heavy on the person challenging it. It is by the discharge of onus that the presumption of constitutionality can be crossed over. When a person enters a Court for relief and does not challenge the constitutionality of the law governing the matters directly and substantially in issue, it only means and implies that he goes by the presumption of constitutionality. He cannot on this stance be deemed to have raised the question of constitutionality and the question of constitutionality to have been decided against him and such matter to have been directly and substantially in issue. The constitutionality of the Rule relating to compulsory retirement cannot be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 226 of the Constitution. In fact this Court while construing the provisions of United Provinces High Courts (Amalgamation) Order, 1948 stated the law thus: The conclusion as well as the reasoning of the High Court is incorrect. It is unsound because the expression cause of action in an application under Article 226 would be as the expression is understood and if the cause of action arose because of the appellate order or the revisional order which came to be passed at Lucknow then Lucknow would have jurisdiction though the original order was passed at a place outside the areas in Oudh. It may be that the original order was in favour of the person applying for a writ. In such case an adverse appellate order might be the cause of action. The expression cause of action is well-known. If the cause of action arises wholly or in part at a place within the specified Oudh areas, the Lucknow Bench will have jurisdiction. If the cause of action arisen wholly within the specified Oudh areas, it is indisputable that the Lucknow Bench would have exclusive jurisdiction in such a matter. If the cause of action arises in part within the specified areas in Oudh it would be open to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 80IC and 115JB and contended that there is distinction between deduction under Section 80IC subject to Clause-3 and it is not exemption and when the question of exemption arises the same is to be made in appropriate case. In support of his submissions, he has relied upon the following decisions:- 1. Bhavesh D. Parish Ors. vs. Union of India Anr.; (2000) 5 SCC 471 30. Before we conclude there is another matter to which we must advert to. It has been brought to our notice that Section 45-S of the Act has been challenged in various High Courts and few of them have granted the stay of provisions of Section 45-S. When considering an application for staying the operation of a piece of legislation, and that to too pertaining to economic reform or change then the courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the courts must show judicial restrain in staying the applicability of the same. Merely because a statute comes up for examination and some arguable point is raised, which persuades the courts to consider the controversy, the legislative will should not normally be put under suspension pending such consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e zones or units for the purposes of this provision. 19. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. 3. Dharmendra Kirthal vs. State of U.P. and Anr. (2013) 8SCC 368:- 23. In Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar and Ors. MANU/SC/0024/1958 : AIR 1958 SC 538 , this Court had ruled that there is always a presumption in favour of the constitutionality of an enactment and the burden is on him who challenges the same to show that there has been a clear transgression of the constitutional principles and it is the duty of the Court to sustain that there is a presumption of constitutionality and in doing so, the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to change that domicile.... The residence of a company is of great importance in revenue law, and the place of incorporation is not conclusive on this question. In general, residence depends upon the place where the central control and management of the company is located. It follows that if such central control is divided, the company may have more than one residence. The locality of the shares of a company is that of the register of shares. The head office of a company is not, however, necessarily the registered office of the company, but is the place where the substantial business of the company is carried on and its negotiations conducted. Like an individual or a firm, a company can, for the purposes of the Rules of the Supreme Court, carry on business in more places than one. 13. We have heard counsel for both the sides. 14. Before proceeding with the matter, it will not be out of place to mention that while deciding the vires of statute, we have to look at the object of the special introduction of Section 115JB which falls under Chapter 12B which pertains to special provisions relating to certain companies and keeping in mind, the speech delivered by the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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