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Judgment
Per Satbeer Singh Godara, Judicial Member:
These assessee’s twin appeals for Assessment Years 2019-20 and 2020-21 arise against the CIT(A)-26, New Delhi’s DIN & order Nos. ITBA/AP L/M/250/2025-26/1075774503(1) and ITBA/APL/M/250/2024-25/1071697016(1) dated 15.04.2025 and 30.12.2024, in proceedings u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”) , respectively.
Heard both the p arties at length. Case files peruse d.
The asse ssee’s “lead” appeal ITA No. 3068/Del/2025 for assessment year 2019-20 raises the follow ing substantive grounds:
“1 . Asstt . f ramed U/s. 153A i s uns ustai nable in l aw as well as on merits.
2.That no proper and reaso nable oppor tuni ty of heari ng has been allowed.
3.That under the facts and circ umst ances of the case, there is no justifi cation in law i n computi ng book profit U/s. 115JB at Rs. 9,30,57,375/-.
4.(A ) That t he Ld. AO has erred i n law as well as on facts i n res tricti ng MAT cre dit to be set off U/s. 115JAA at R s. 2,11,85,180/- against at Rs. 3 ,93,30,475/-.
(8 ) That wit hout prejudice, t he MAT cr edit to be allowed U /s . 115JAA is to be allowed before char gi ng of surcharge and Health and Educatio n Cess.
5.That under the fac ts and circums tances , no i nteres t U/s. 234A, 234B & 234C s hould have been char ged, In any cas e, the calcula ti ons are e rroneous and exc essive.”
We next note that the CIT(A)’s impugned lower appellate discussion has rejected the assessee’s corresponding substantive grounds seeking exemptio n from section 115JB “MAT” computation; reads as und er:
10.Gr ound no. 8 and 9: Thes e grounds of appeal ha ve bee n raised agai nst the action of A O in consideri ng t he book pr ofit of IN R 9,30,57,375/- as the taxable i nc ome and levying the appl icable tax rate as per sectio n 115JB. The appellant stat ed that i n t he retur n filed i n respons e to notice U/s. 153A has claimed set off of MAT credit of Rs. 3,93,30,475/- U/s. 115JAA. The i ncome has b een assessed U/s . 115JB i n the assessment or der wi thout specifyi ng any reason and onl y for the reason t hat the same has been i n the i ntimation U/s. 143(1) issued. Appar ently, it shows boo k profit of INR 9,30,57,375 as per t he books of accounts mai ntained by it fo r the rel evant assessment year. Ther efore, the tax liability u/s 115JB of t he Ac t (MAT) w ould be 15 % of such book profit Further, as the tax liability under MAT provisions are hi gher than that under the normal c omputa tion under the income-tax Act, suc h book profit w ould be the taxable bas e as per s ecti on 115JB of the Act and the appellant is liable to pay tax at the rate spe cified under secti on 115JB of t he Act. Howe ver, the appellant’s cont ention is tha t the appellant company d oes not pa y dividend and theref ore, MAT provisi ons would not be appli cabl e to it. It has relied upon the decisi ons of BES T TRADING AND AGENC IES LTD . V S. DC IT IN ITA NO. 191 OF 2011 DTD. 26.08.2020 BY HON’BLE KARNAT AKA HIGH CO URT, Kolkat a ITAT i n case of SASA MUSA SUGAR WORKS P VT. LT D. VS. DCIT IN CO . NO . 15/KOL/2017 DTD. 04.07.2022.
10.1Before goi ng to decide the issue, it is essential to understand, in brief, t he evol uti on of suc h pro vision. Income-t ax Act gene rally provides a number of tax relief such as exempt ions or deducti ons i ncl udi ng super deduction or accel erate d depreciati on, etc. a s a m atte r of tax policy to promote cert ai n activities, etc. Acc ordi ngl y, certai n taxpayer, being a c ompany, may not be liabl e for pay ment of tax und er the pr ovisi ons of i ncome-tax Act because of tax re lief eve n whe n it has s ubs tantial bo ok profit as per fi nancial statem ent pre pared under t he compani es Act . This had res ul ted i n substa ntial inc rease in the number o f z ero tax pa yi ng compani es ove r a perio d o f time . In order to addr ess thi s issue, it was prop osed t o introduc e that such zer o tax c ompani es shoul d contri bute some amount of tax liability i f they hav e positiv e boo k profits. This ta x liability was known as Mi nimum Alternative Tax (MA T). MAT was i nt roduced for the fir st time by the Fi nanc e Act, 1987 with effect from ass ess ment year 1988-89. Later on, it was withdrawn by t he Fi na nce Act, 1990. T he Mi nimum Alter native Tax pr ovisions wer e re-i ntr oduced vide Fi nance Act , 1996 and became e ffec tive from 01.04.1997. The obj ec tive of i nt roducti on of MA T is to bri ng i nto the ta x ne t “zer o tax compa ni es” which i n spite of havi ng earned s ubstantial boo k pro fits, do not pay any tax due to vari ous tax concessions and i ncentives provided unde r the Income-tax Act. As a result, a new section 115J was insert ed i n the Income-tax Act. This provision is applicable to all the domestic companies. The rel evant portion of t he mem orandum explaini ng the provision of this new s ection depicting the legislat ive inte nt was as unde r:
“Mi nimum Al ter native Tax (MAT) on compa ni es was intr oduced by t he Fi nanc e (No.2 ) Act, 1996 with effect from 1.4 .1997 wit h a vie w t o e nsur e t hat compani es wi th busi ness profi ts do not regularly avoid payi ng tax. This was necessary due to rise i n the number of zero-tax compani es in vie w of t ax preferences grant ed i n the form of exemptions, deductions and hi gh r ate of depr eciati on. The rate of mi ni mum tax was kept a t a modes t figure by dee mi ng 30% of book profits as to tal income. This modest amo unt is likely to go down further with t he downwar d revision of corporate tax rate and abolition of surchar ge...” Since t he i nt roduction of MAT, several changes ha ve been intr oduced i n the pr ovisions of MA T and currently, i t is levied on companies as per the provisions of s ection 115JB. Ori ginally, the MAT provisions compare tax base as per the provisions of Income-tax Act and that det ermi ned under the MAT w hi ch was 30% of the bo ok profits. The hi gher of thes e two tax bas es was deemed to be t he tax base on whic h the c ompany was liable to pay tax. Ho wever, in subs equent period for assessment year commencing on or after t he 1st day of April, 2012, t he earlier provision was r eplaced with a new section 11 5JB of t he Act wher ei n comparison was made between t he tax liability under the pr ovisions of i nco me-tax Act and that under the MAT pr ovisi ons. As per sec tion 115JB of the Act, every com pany is required to compute the tax liability under no rmal computation and also under MAT and t he hi gher of the two would become the tax liabi lity of the c ompa ny. F or the purposes of brevi ty, t he s ecti on 115JB is repr oduced as under:
“S peci al provision for payme nt of ta x by certai n compani es.
115JB. (1 ) Notwi thstanding a nythi ng c ontained in any ot her provisio n of this Act, where in t he cas e of an assessee, being a company, the income-tax, payabl e on the total i nc ome as comput ed under this Act in res pect of any previ ous year rel evant to t he assessment year commencing on or aft er the 1st day of April, 2012, is less tha n ei ghtee n and one-half per cent of its book profit, s uch boo k profit s hall be dee med t o b e t he total income of the assessee and t he tax pa yabl e by the assess ee on s uc h to tal incom e s hall be the amount of income-tax at the rate of eight een and one-half per cent:
Pro vided that for the pr evious year relevant to the assessment year commencing on or aft er the 1st day of April, 2020, the provisions of t hi s s ub-section s hall hav e effect as i f for the words "ei ghteen and one-half per cent" occurri ng at b oth t he places , t he words "fi fte en per cent " had bee n s ubstitut ed.
(2 ) Every assesse e,—
(a)bei ng a c ompany, ot her tha n a company ref erred to i n clause (b), shall, fo r the purposes of this sec tion, pr epare its stat ement of profit and l oss for the rele vant previous year in accordance wit h the provisions of Schedule III to the Compa ni es Act, 2013 (18 of 2013); or
(b)bei ng a c ompany , to whic h the second proviso to s ub-secti on (1) of s ecti on 129 of the C ompani es Act, 2013 (18 of 2013) is applicable, shall, for t he pur poses of this section, prepar e i ts state ment of profit and loss f or the r elevant previ ous year in accordance with t he provisions of the Ac t governi ng such c ompany:
10.2As per the MA T provisions under secti on 115JB of the Act, the tax liability of a company will be hi gher of tax liability c omp uted as per the normal provisions of t he Income-t ax Act( normal t ax liabil ity) or tax comp uted @ 15% (plus surc harge a nd cess as applicabl e) on bo ok profit (tax liability under MAT) . As per Explanation 1 to section 115JB(2) “book profit” fo r the pur poses of s ection 115JB means net profit as shown in the s tatement of profit and l oss prepar ed in acc ordance wit h Schedule III to t he Companies Act, 2013 as i ncreased and decreased by certai n it ems prescribed i n this r egard p rovided thes e items ar e debited or cr edited respectively. Eve ry company to whom the provisions of section 115JB applies is required to obtai n a report fr om a c hartered acco untant i n For m No . 29B c ertifyi ng that the bo ok profit has been computed i n accordance wi th the provisions of section 115JB. The report shoul d be obtai ned before t he s pecified date referred to i n S ection 44AB. Audit report i n Form No. 29B shall be f iled electr onically.
10.3In t he i nstant ca se , t he appellant company has a taxabl e loss under the provisi ons of t he Inc ome-tax Act. Accordi ngly, it has NIL tax l iability under Income -tax Act. Ho wever, i t has a book profit of INR 9,30,57,375 as per Explanati on 1 t o s ecti on 115JB (2) r ead wi t h its st atement of profit and l oss f or the rel evant previ ous year prepared in ac cor dance wit h the provisions of Schedul e III to the Companies Act, 2 013. There is no disput e to this fact. Under t he s ec tion 115JB of the Act, the tax liability (MAT liability) would be 15% (pl us surcharge and cess as applicabl e) of such book profit. Apparently, t he MAT t ax liability would be hi gher as the tax liability under nor mal computa tion is NIL i n thi s case. The provision under section 115JB of the Act re quires every eli gible assess ee as menti oned i n sub-s ec tion(2 ) of Section 115JB to compute tax liability under the provisions of i ncome-tax Act and also the tax liability under t he provisions of MAT u/s 115JB . As pe r section 115JB (1 ) of the Act , t he income-tax, payable on t he total income as c omputed under this Ac t i n respect of any previous year relevant to the ass ess ment ye ar i s less than 15% of its book pro fit, such boo k profit shall be deemed to be the total inc ome of the assess ee and t he tax pa yabl e by t he asses s ee on such total i ncom e s hall be the amo unt of i nc ome-tax at the ra te of 15%.
10.4In view of the afor esaid discus sion, the condition of whether the c ompany is a dividend payi ng or not is immaterial for the purposes of application of MAT provisions under secti on 115JB of the Act. The only requirement for application o f MAT provision is when t he tax liabili ty computed under the normal provisions of the Income-t ax Act i s lower t han that co mputed under section 115JB of the Act, then the book profit as per t he financial state ment as adjusted as per s ub-secti on (2) of the Section 115JB of the Act is deemed to be the tax bas e of t he company and it is liable to pay tax at the rat e prescribe d t herei n.
10.5Appellant ’s reliance on the decision of Hon’bl e Karnataka Hi gh Court in the case of B es t Tra di ng and Agencies Ltd Vs. DCIT In ITA No. 191 of 2011 dated. 26.08.2020, the decisio n of K ol kata ITA T i n case of Sasamusa S ugar Works Pvt. Lt d V s. DCIT In CO. No. 15/KOL/2017 DTD. 04.07.2022., etc are i nappli cable bei ng contrary to provisions o f law. In this cont ext, I woul d l ike place further reliance on t he decision o f t he Ho n’bl e Supreme Court i n the cas e of Distributors (B ar oda) L td. Vs CIT [1985] 155 ITR 120/22 Taxman 49 (SC). The Hon’ble Apex C our t hel d t hat “to perpet uate an err or is no heroism. To r ectify it is t he compulsion o f the judicial conscience.” This ratio of the Hon’bl e Supre me Court has be en appl ied in s ever al cases . Therefore, followi ng the deci sion of a l egally wrong order under the pretext of uni formity and l egal consist ency is undesirable . T he Ho n’ble Apex Court in the case of Uni on of India & Anr V s Raghubir Si ngh (178 ITR 548) had reit erat ed t he same pri nciple. It hel d t hat, i f t he previous decisi on is plainl y err oneous, there is a duty of the Co urt to revi ew it and not perpetuat e the mistake i ,e. a vital poi nt was not considere d or when an rel evant statutory provision had not been br ought to t he notice of t he court. Similar vi ew was take n by the Apex C ourt i n the case of Sri Agas thayar Trust Vs. CIT (236 ITR 23). Ther efore, this a well settl ed legal position t hat an err oneous order does not s et any bi ndi ng precede nce. Ther efore, the dec isions cit ed above are not applicabl e to the fact of thi s case i n view of t he pri nciple lai d down by the H on’bl e Supreme Co urt i n aforesaid case s.
10.6In the light o f abov e disc ussi ons , t he action of A O in c onsidering the b ook pr ofit of INR 9,30,57,375 as taxabl e i ncom e and levyi ng the appl icable tax rat e as per section 115JB of the Act is uphel d and acc or dingly, this ground of appeal i s dismissed. ”
This is what leaves the assessee aggrieved.
It is in this factual backdrop that the asse ssee inter alia submits that both the learned lo wer authoritie s have erred in law and on facts in denying it’s exemp tion from MAT computat ion despite the fact that it is no t dividend paying company as per Best Trad ing & Agencies Ltd. Vs. DCIT in ITA No. 191 of 2011 dated 26.08.2020 (Karnataka HC), Sasamusa Sugar Works Pvt. Ltd. Vs. DCIT in CO No. 15/Kol/2017 dated 04.07.2022 and United Provinces Sugar Company Ltd. Vs. ITO ITA No. 1956/Kol/2018 dated 01.04.2021 have also been wrongly distinguished in the department’s favour.
The Revenue on the other hand has placed strong reliance on the CIT(A)’ foregoing discussion rejecting the assessee’s claim of exemption from section 115JB MAT co mputatio n.
We have given our thoughtful consideration to the assessee’s and the Revenue’s foregoing respective vehement submissions. A perusal of the case file indicates that the assessee had filed it’s return on 30.11.2022 u/s 139(5) of the Act stating income of Rs.11,25,5 2,8870/-. And that the learned departmental authorities in the meantime had received an information o f cash seizure involving the assessee and others on 14.05.2020 which made them to issue/execute section 132A warrant on 04 .12.2020 in the ir names. This followed the relevant panchnama dated 30.12.2020 as well. The departmental authorities thereafter initiated/issued section 153A notice to the assessee on 18.01.2022 which finally culminated the Assessing Officer’s assessment order dated 29.03.20222 computing it’s income under “MAT” provisions which stands upheld in both the lower appellate proceedings.
We have given our thoughtful consideration to the foregoing relevant facts as well as both the party’s respective rival stands. We find no reason to interfere with the learned CIT(A)’s impugned detailed discussio n. This is for the precise reason that there is no such stipulation of invoking the impugned “ MAT” computation of the learned departmental authorities only in case of comp any who issues dividend as is the case sought to be projected at the taxpayer’s behest. Coming to hon’ble Kar nataka high court decision, we notice that it involved assessment year 2006-07 whereas section 115JB is admittedly applicable from 01.04.2012. We further reiterate at the cost of repetitio n that till time the leg islature has not made dividend issuance/payment as a mandatory cond ition before section 115J B applicability, the same couldn’t be excluded as mere assumption and presumption. The assessee’s all o ther judicial precedents (supra) admittedly do not deal w ith the amended section 115JB of the Act. We thus invoke str icter interpretation in light o f Co mmissioner Vs. Dilip Kumar (2018) 9 SSC 1 (SC) to conclude that the CIT(A)’s impugned lower appellate discussion upho lding the assessee’s section 115JB deserves to be affirmed. We order accord ing ly. The assessee failed in it’s first and foremost grievance.
Next comes the assessee’s latter ground that it is entitled for “MAT” cred it. The Revenue quotes Jai Stee l (India), Jodhpur vs. ACIT (2013) 36 taxmann.com 523 (Raj.) to buttress the point that we are in a search assessment wherein the assessee is barred from r aising a claim altogether new relief; as the case may be.
We find no merit in the Revenue’s stand herein. This is for the precise reason that the impugned asse ssment year is admittedly an “abated” than “ unabated” one wherein the entire assessment is open to be framed afresh in light of incriminating as well as regular books of account in the assessee’s case. Hon’ble Bombay hig h court in JSW Steel Ltd. (20 20) 422 ITR 1 (Bom.) has further settled the issue that such a claim wo uld indeed be raised in an “abated” assessment u/s 153A of the Act. We will indeed be failing in our duty not to further make it clear that this tribunal’s Spe cial Bench in (2024) 167 taxmann.co m 44 6 (Hyd. SB) DC IT Vs. SEW Infrastructure Ltd. has further settled the issue that such an o ptio n is not applicable in an instance of an “unabated” than an “abated” assessment. We thus accept the assessee’s four th substantive ground here in seeking “MAT” credit in principle and direct the learned Assessing Officer to proceed afresh with the consequential computation as per law.
Same order to follow in assesse e’s latter appeal ITA No. 969/Del/2025 since involving identical issues.
No other ground or argument has been pressed before us.
These assessee’s tw in appeals ITA No s. 3 068 & 969/Del/2025 are partly allowed for statistical purpose. A copy of this common order be placed in the respective case files.