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TMI Blog2019 (6) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... e for exemption from payment of MAT also, since it is a developer of housing projects, and dismiss all arguments made by the Ld. Counsel for the assessee in this regard. We, therefore, hold that the assessee is not eligible for exemption from payment of MAT as per the provisions of section 115JB(6), since, admittedly, it does not qualify as a business or services rendered by an entrepreneur or developer in a unit or SEZ as per definition of the said terms in the SEZ Act. We find that the Ld. Counsel for the assessee for this purpose has relied heavily on the provisions of section 115JB(5) , pointing out that as per the said sub-section, all other provisions of the Act would apply to the assessee and, therefore, the provisions of section 80IB (10) would also apply to it requiring it to be deducted /reduced for arriving at the taxable book profits. We do not find any merit in this contention of the Ld. Counsel for the assessee also. Deduction under section 80IB(10) is provided against the gross total income of an assessee, while section 115JB levies taxes on the book profits . Both the sections clearly operate in different spheres. Therefore sub-section (5) of section 115JB cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 422/CHD/2016 relating to assessment year 2008-09 and our decision rendered therein would apply mutatis-mutandis to the rest of the appeals. 5. The brief facts relating to the case are that the assessee is a Private Limited company dealing in the business of development of housing project units. It filed its return of income for the impugned assessment year i.e. A.Y 2008-09 on 04.03.2009 declaring income of ₹ 2, 20, 013/-. The Assessing Officer (AO) framed assessment u/s 153A read with Section 143(3) of the Act and assessed the total income at ₹ 12, 74, 720/- and the tax payable under MAT was determined at ₹ 96, 28, 336/-. The Tax computed under MAT being higher than that under the normal provisions, the same was determined as payable by the assessee. Aggrieved by the levy of tax under MAT, the assessee filed appeal before the Ld.CIT(A), contending that it was exempt from paying tax under MAT, as per section 115JB(6) of the Act. The Ld.CIT(A) , dismissed the contention of the assessee and upheld the order of the AO. 6. Aggrieved by the same, the assessee has now come up in appeal before us raising the following grounds: "1. On the facts & in the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee company is inaccordance with the provisions of section 115JB(6) of the Act reproduced here as under:- Section 115JB(6): "The provisions of this section shall not apply to the income accrued or arising on or after the Is' day of April, 2005 from any business carried on or services rendered by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. " The provisions has been bifurcated into three parts. Each part is explained as under : business carried on, or services rendered an entrepreneur or a Developer a Unit or Special Economic Zone. In all the three parts a word or has been used which shows that the provisions are applicable even to the assessee having fulfilled one part of the above. Therefore, after removing the other part the provisions if read should be as under :- Section 115JB (6): "The provisions of this section shall not apply to the income accrued or arising on or after the Is' day of April, 2005 from any business carried on, by a Developer, in a Unit, as the case may be. " Admittedly the assessee company is having business income as developer in a unit (development of residential unit). As s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed companies u/s 115JB. In the circumstances, there is no merit in AR's claim on the issue. Hence the action of the A.O. in charging the MAT in this case is sustained. Accordingly, this ground of appeal is dismissed." The ld. DR contended that the meaning of the terms used in the section has to be taken from the SEZ Act, 2005, from where it was inserted and accordingly the provision of Section 115JB(6) provided an exemption from payment of MAT to only entrepreneurs and developers as defined under the SEZ Act, situated in units or Special Economic Zone as defined in the said Act. In nutshell the Ld. DR contended that the exemption was only to units in SEZ's .To buttress its contention, ld. DR further drew our attention to the explanatory note to the provisions of the Finance Act, 2011 stating that the Finance Act 2011 had withdrawn this exemption granted u/s 115JB(6) and a perusal of the explanatory notes to the Finance Act clearly revealed that the exemption was available only to units in Special Economic Zones. Our attention was drawn to the heading clarifying the withdrawal of exemption at para 19 and the para 19.2.2 which reads as under: "19. Provisions relating to M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 80IB(10) of the Act the said deduction was also to be made from the Profits of the assessee while working out/calculating the book profits on which taxes were to be paid u/s 115JB of the Act. The ld. counsel for the assessee in this regard relied upon the decision of the Mumbai Bench of the ITAT in the case of Neha Home Builders Pvt. Ltd. Vs CIT-13, Mumbai (2018) 92 Taxmann.com 102. Copy of the order was placed before us. 16. The ld. DR countered by stating that this argument had been taken up for the first time by the assessee before us. 17. We have heard the rival contentions carefully and gone through the order of the authorities below. The issue before us relates to the liability of the assessee to pay Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act. To deliberate on the same, therefore, we consider it fit to reproduce the relevant provisions of section 115JB, as under:- "115JB.(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for losses of subsidiary companies; or (e ) the amount or amounts of dividends paid or proposed ; or (f ) the amount or amounts of expenditure relatable to any income to which [ section 10 (other than the provisions contained in clause (38) thereof) or [***] section 11 or section 12apply; or] [( g) the amount of depreciation, ] [(h) the amount of deferred tax and the provision therefor, if any amount referred to in clauses (a ) to (h) is debited to the profit and loss account, and as reduced by-] [( i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account: Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions) Act, 1985 (1 of 1986); or [ (viii) the amount of deferred tax, if any such amount is credited to the profit and loss account.] [Explanation 2.- For the purposes of clause (a) of Explanation 1, the amount of income-tax shall include- (i ) any tax on distributed profits under section 115-O or on distributed income under section 115R; (ii ) any interest charged under this Act; (iii ) surcharge, if any, as levied by the Central Acts from time to time; (iv ) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and (v ) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time.] (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 subsection (1) of section 72 or section 73 or section 74 or subsection (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act , listing modifications to the Income Tax Act, 1961, inserts sub-section (6) to section 115JB of the Act, by way of clause (h) which reads as under:- (h) in section 115JB, after sub-section (5), the following subsection shall be inserted, namely:- "(6) The provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. 22. Reading section 27 of the SEZ Act along with the second schedule thereto, it is clear, that the SEZ Act made the provisions of the Income Tax Act, 1961, applicable to developers and entrepreneurs carrying out authorized activities in SEZ's and Units and the SEZ Act modified the provisions of the Income Tax Act by exempting developers and entrepreneurs from payment of MAT by inserting sub section (6) to section 115JB.Thus the SEZ Act is the main Act which has brought about the impugned amendment to the Income Tax Act. The harmonious interpretation of the sub section (6) to section 115JB, therefore requires it to be read in conformity and in sync with the main A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated in the new Act" (p. 244). Once we have ascertained the object behind the legislation and held that the provisions of s. 205 quoted hereinabove stand bodily lifted and incorporated into the body of s. 115J of the IT Act, all that we have to do is to read the provisions plainly and apply rules of interpretation if any ambiguity survives. Sec. 205(1), proviso cl. (b), of the Companies Act brings out the unabsorbed portion of the amount of depreciation already provided for computing the loss for the year. The words "the amount provided for depreciation" and "arrived at in both cases after providing for depreciation" made it abundantly clear that in this clause 'loss' refers to the amount of loss arrived at after taking into account the amount of depreciation provided in the P&L a/c." 24. We find that the ITAT Mumbai Bench had an occasion to deal with the question whether Special Economic Zone Act, 2005 and Special Economic Zone Rules could be inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified therein: Provided that different dates may be appointed on which the amendments specified in the Third Schedule shall apply to a particular Special Economic Zone or a class of Special Economic Zones or all Special Economic Zones." After going through the relevant provisions of the above statutes, we find that the SEZ Act is the main Act under provides to give certain incentives to the SEZ units. To give effect to the provisions of the SEZ Act, corresponding amendments have been made in the relevant provisions of various related Acts as mentioned in the Third Schedule to the Act, relaxing the conditions or providing for incentives or deductions to the SEZ units. It is to be mentioned here that Income Tax Act 1961 inter alia is also included in the Third Schedule and it has also been provided as to what amendments are made into the provisions of the Income Tax Act to give effect to the provisions of the SEZ Act 2005. Further sections 27 and 57 of the SEZ Act are also relevant in this respect which read as under: "27. The provisions of the Income-tax Act, 1961, as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the General Agreement on Trade in Services annexed as IB to the Agreement establishing the World Trade Organisation concluded at Marrakes on the 15' day of April, 1994; (ii) may be prescribed by the Central Government for the purposes of this Act; and (i) earn foreign exchange; (j) "entrepreneur" means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15." (zc) "Unit" means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act; (za) "Special Economic Zone" means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (7) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone; 26. Reading section 115JB(6) of the Act with the definition provided of the terms used in the SEZ Act as above, we find that the exemption from the payment of MAT is provided only to the units set up in a SEZ or Offshore banking unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould come from within the provision itself, which we find are incorporated in the section by way of Explanation 1 to sub section 2 of section 115JB of the Act, which outlines all the adjustments to be made to the profits as shown in the Profit and Loss account prepared in accordance with the Companies Act, to arrive at the Book Profits on which taxes are to be levied under MAT.A perusal of the Explanation reveals that it provides for reduction from the Profits of assesses, the incomes exempt from tax under section 10 of the Act, as also profits eligible for deduction u/s 80HHC, 80HHE & 80HHF of the Act, under clause (ii), (iv), (v), &(vi) of the Explanation. Deduction u/s 80IB or for that matter any other section under chapter VI-A of the Act is not allowed adjustment. With the adjustments to the profits so specifically provided for, adjustments by way of a general clause, as contended by the Ld. Counsel for the assessee, cannot be read into the section. The same would only result in making the provision otiose and ineffective since MAT is sought to be levied only in respect of companies which by availing various concessions given in chapter VI -A of the Act, which includes section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IC, when the total income, as computed after taking into consideration all deductions, including the deductions available under s. 80-IC of the Act, is less than what has been mentioned in s. 115JB, it would be the obligation of the assessee company to pay such tax as mentioned in s. 115JB. 19. Had the legislature exempted an assessee from paying income-tax, the matter would have been different. But that has not been done. The legislature allowed a deduction. If, after such deduction, income-tax payable is less than what has been mentioned in s. 115JB, by reason of the plain words used in s. 115JB, an assessee, being a company, is liable to pay such tax as mentioned in s. 115JB. In the circumstances, I am of the view that if by virtue of s. 80-IC, no income-tax is payable by an assessee, being a company, it would be liable to pay income-tax to the extent as mentioned in s. 115JB and that was and still is the very object of inserting s. 115JB in the Act." Further the Hon'ble High Court of Karnataka also reiterated the above proposition with respect to allowability of deduction u/s 80IB for the purposes of paying tax under MAT in the case of Sakhla Polymers (P) Ltd. Vs Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance is not an exemption provision and it is only a provision providing certain concessions or benefit to an assessee and it does factor while computing the total taxable income of the assessee, as charged under Section 4 of the Act. 31. While this is not in any way denied to an assessee, Section 115JB is a special charging section for regulating tax liability of companies in general and made applicable in particular and is confined to the assessee companies whose tax liability, when computed in the normal manner falls short of the liability as computed under this provision. Therefore, we are of the view that there is absolutely no question of Section 80-IB having any bearing or effect or control over the provisions of Section 115JB of the Act. It is to be noticed that Section 80-IB concession is in respect of those assessees who qualify for that and Section 115JB levy is confined to companies and such companies which are roped in within the scope of this section. It is because of this position, we are of the view that there is no occasion for the interpretation or examination of the principles of promissory estoppel or doctrine of legitimate expectation. The benefit under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n away and the interpretation suggested by Sri Shankar fails for more than one reason even on applying the principle of interpretation. Though there is no need for interpreting the provision and examination can only be m the context of understanding the scope of Section 115JB of the Act, nevertheless, if it is sought to be interpreted as contended by Sri Shankar in the backdrop of Section 80-IB of the Act, the principle of harmonious construction of a statute will have to be kept in mind. It is a well settled principle that no provision of an enactment should be so interpreted or understood as to render otiose or ineffective any other provision of the same enactment. Therefore, Section 80-IB cannot be interpreted so as to render the provision of Section 115JB of the Act nugatory or otiose or ineffective or does not achieve the purpose for which it is enacted. 35. Section 115JB, in fact, in no way either denies the benefit given under Section 80-IB or reduces the same. While the appellant-assessee can claim the benefit under Section 80-IB of the Act and it is not denied per se to the appellant-assessee, in the given ca.se, the provisions of Section 115JB may be attracted or may n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther contentions were raised by the Ld. Counsel for the assessee before us and, therefore, we hold that the assessee was liable to pay tax on its profits as per provisions of section 115JB of the Act. We, therefore, uphold the order of the Ld. CIT(A) and dismiss the appeal filed by the assessee. In effect, the appeal of the assessee in ITA No.422/CHD/2016 is dismissed. Since it was common ground that the issue involved in all the appeals of the assessee was identical, our decision rendered above in assessee's appeal in ITA No. 422/CHD/2016, will apply to the appeals of the assessee in ITA no 423, 780/CHD/2016 and ITA No.781/CHD/2016, following which we dismiss all the appeals of the assessee. We now take up the appeal of the Revenue in ITA No.765/CHD/2016. ITA 765/CHD/2016 ( A.Y. 2012-13) 34. The present appeal has been filed by the Revenue against the order dated 18.03.2016 of CIT (Appeals)-5 Ludhiana pertaining to 2012-13 assessment year. 35. At the time of hearing, the Ld. AR has stated that tax effect involved in the present case is less than ₹ 20 lacs. The Ld. DR on going through the material available on record has also fairly admitted that CBDT circular No. ..... 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