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TMI Blog2018 (8) TMI 1634X X X X Extracts X X X X X X X X Extracts X X X X ..... al in assessee’s own case for the earlier assessment years including the A.Y. 2012-13 and when the disallowance made by the Assessing Officer in the earlier year has been deleted by this Tribunal and the decision of this Tribunal has been confirmed by the Hon’ble Jurisdictional High Court then in absence of any fresh investment or dividend received by the assessee during the year under consideration, no disallowance to be made - Decided against Revenue. MAT - adjustment made in the book profit computed U/s 115JB of the Act in respect of share of the assessee in the income of the joint venture - whether the share of profit from AOP/Joint Venture shall be excluded for the computation of book profit U/s 115JB? - CIT-A holding that clause (iic) inserted in Explanation 1 to sec. 115JB by Finance Act, 2015 is remedial and curative in nature - Held that:- 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 of the Act vide Finance Act, 2015 was brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law the Ld. CIT (A) was justified in holding that clause (iic) inserted in Explanation 1 to sec. 115JB by Finance Act, 2015 is remedial and curative in nature whereas in the Act this clause is applicable from 01.04.2016 i.e. for A.Y. 2016-17? The appellant craves the right to amend alter or add to any of the grounds of appeal given above. 2. Ground No. 1 of the appeal is regarding the disallowance made on account of Employees Contribution towards ESI and PF as the payment was not made within the prescribed time limit as per the respective Acts, which was deleted by the ld. CIT(A). 3. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset we note that this issue is covered by the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs SBBJ (2014) 363 ITR 70. We further note that an identical issue was considered and decided by this Tribunal in assessee s own case for the A.Y. 2009-10, 2010-11 and 2012-13. The Hon ble Jurisdictional High Court vide order dated 22/9/2017 has considered this issue in para 4.2 as under: 4.2 The issue No. 2, the same is now covered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of M/s Maxopp Investment Ltd. V/s CIT 402 ITR 640. The ld DR has submitted that the Assessing Officer has computed disallowance as per clause (ii) of Rule 8D, which provides disallowance equivalent to 1% of the average investment. 7. On the other hand, the ld AR of the assessee has submitted that the assessee s own interest free fund comprising of share capital and reserve and surplus was ₹ 513.45 crores as on 31/3/2014 whereas no fresh investment was made by the assessee during the year under consideration for which the provisions of Section 14A of the Act can be applied. The total investment is in the subsidiary/sister concerns of the assessee and therefore, in absence of dividend accrued or received by the assessee, no disallowance can be made U/s 14A of the Act. The ld AR has relied upon the decision of Hon ble Gujarat High Court in the case of CIT Vs Gujarat State Fertilizers Chemicals Ltd. (2013) 217 Taxman 343 (Guj) as well as the decision of Hon ble Bombay High Court in the case of Godrej Boycee Manufacturing Co. Ltd. Vs. CIT 328 ITR 81, which has been upheld by the Hon'ble Supreme Court. Thus, the ld AR has submitted that it is settled propositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said question, therefore, need not and cannot be gone into. Nevertheless, irrespective of the aforesaid question, what Section 14A(1) of the Act is proof of the fact that the expenditure sought to be disallowed/deducted had actually been incurred in earning the dividend income. Insofar as the Appellant-Assessee is concerned, the 1998-1999, 1999-2000 and 2001-2002. Earlier to the introduction of Subsections (2) and (3) of Section 14A of the Act, such a determination was required to be made by the Assessing Officer in his best judgment. In disallowed and the earning of the dividend income in question. In the standpoint of the requirements of the provisions of Subsections (2) and (3) of Section 14A of the Act which had by then been brought into force. It exemption claimed on account of dividend income. 37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely Assessee. Whether such determination is to be made on application of the Assessee. It is only thereafter that the provisions of Section 14A(2) and (3) earlier preva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I.T. Act. The Assessing Officer was of the view that the said share in the profit of joint venture is not deductible as per the provisions of Section 115JB of the Act. The Assessing Officer noted that as per explanation to Section 115JB, only income which is exempt as per the provisions of Section 10 of the Act and credited to the P L account, shall be reduced while computing the book profit. Though the amendment has been brought to the provisions of Section 115JB under clause (iic) of explanation (1), however, the said amendment is inserted by the Finance Act, 2015 w.e.f. 01/4/2016 and therefore, the same is not applicable for the year under consideration. The Assessing Officer accordingly, made an addition of the said amount of ₹ 19.19 crores. 10. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and submitted that the amendment brought in the provisions of Section 115JB by inserting Clause (iic) to explanation (1) is remedial in nature and shall have retrospective effect. The assessee relied upon the decision of Mumbai Benches of the Tribunal in the case of M/s Goldgerh Finance Pvt. Ltd. Vs ACIT, 78 taxmann.com 123. The ld. CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention on the object of taxability of income in India U/s 14(1) of Act 22 and U/s 86 of Act, 1961, it is specifically mentioned that for any income wherever it is found, tax is to be collected at the earliest possible stage. But the tax is not levied again on one passage of the money in the form of one sort of income. Thus, when a group of persons is taxed as the income of the group or otherwise, it would be double taxation. A member of family, firm or association is not liable to tax again in respect of share received by him out of the income of the assessable unit to which he belongs to. That is the provision made by this clause and Sec. 86 are to prevent the state from taxation twice over (CIT Vs. Bhagwati 15 TTR 409. 414; CIT Vs. Guan Manjuri 13 ITR 55, 63; Vedathanni Vs. CIT 1 ITR 70: Kanhaiyalal Vs. CIT 9 ITR 70). As such when any income has already been subject to full rate of tax, then it cannot be taxed twice and, therefore, the share of profit from the JV was received after paying tax at maximum marginal rate, therefore, it was not considered in income even for MAT calculation also. In this case we submit that no income can be taxed twice as referred above and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JB of the Act and the explanations of the provisions are clear that no such adjustment as made by the assessee i.e. reduction of profit from JV is allowable under eyes of law. 4) Moreover, clause (iic) has been inserted in Explanation 1 below sub-section (2) of section 115JB by the finance Act 2015 w.e.f. 01.04.2016 (i.e. A.Y. 2016- 17). It is apparent that the amendment (to exclude share of the assessee in the income of an AOP on which no income tax is payable in accordance with the provision of section 86) has not been made applicable retrospectively. Hence ₹ 37,60,20,402/- as per profit from OMIL JSC (JV) shall not be deductible in accordance with as per Part II III of schedule VI and accordingly be added to the Book Profit. 14. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and relied upon the decision of Mumbai Benches of the Tribunal in the case of M/s Goldgerg Finance Pvt. Ltd. Vs ACIT (supra). The ld. CIT(A) has decided the issue by holding as under: ( iv) I have duly considered the submissions of the appellant, assessment order and the material placed on record. The issue is relating to computation of book pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and looking to the totality of facts and circumstances of the case, it is held that the Assessing Officer was not justified in not excluding profit of share of the appellant from its AOP while computing book profit u/s 115JB of the Act and thus, the AO is hereby directed to exclude the same while computing book profit u/s 115JB of the Act. Thus, it is clear that the ld. CIT(A) has given a finding on the issue by following the decisions of this Tribunal. We further note that the provisions of Section 86 of the Act contemplates that no income tax shall be payable by the assessee in respect of his share in the income of association of persons or body of individuals and such share in the association or body is computed in the manner provided U/s 67A of the Act. Though, the share of profit in the association of persons or body of individuals as envisaged U/s 86 as well as Section 67A of the Act is not liable to income tax, however, the same shall be included in the total income of the assessee for the purpose of determining the average marginal rate of tax in terms of Section 66 of the Act. The second proviso to Section 86 set out the exception in the case where no income tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various heads of income in the same manner in which the income or loss of the association or body has been determined under each head of income. ( 3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head Profits and gains of business or profession in respect of his share in the income of the association or body, be deducted from his share. Explanation .- In this section, paid has the same meaning as is assigned to it in clause (2) of section 43.] Section 86. Where the assessee is a member of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India), income-tax shall not be payable by the assessee in respect of his share in the income of the association or body computed in the manner provided in section 67A : Provided that, - ( a) where the association or body is chargeable to tax on its total income at the maximum marginal rate or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Section 86 of the Act. The Mumbai Benches of the Tribunal in the case of M/s Goldgerg Finance Pvt. Ltd. Vs ACIT (supra) while dealing with this issue has held in para 10 and 11 as under: 10. We have heard the rival contentions and perused the relevant 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a firm, the share in the profits of the firm is exempt in the hands of the partner as per section 10(2A) of the Act and no MAT is payable by the partner on such profits . In view of the above, it is proposed to amend the section 115JB so as to provide that the share of a member of an AOP, in the income of the AOP, on which no incometax 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 section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usions Ltd . following the ratio of in the case of Allied Motors (P.) Ltd . ( supra ) reads as under:- Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only w.e.f. 1st April, 2004, would become curative 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. v. 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 sales-tax 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 sales-tax collected by the assessee for the last quarter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under s. 43B of the Act for all times. They would 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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