I-T - Deduction u/s 80IB(10) cannot be considered while calculating book profit under MAT provisions: ITAT
By TIOL News Service
MUMBAI, JULY 28, 2018: THE ISSUE BEFORE THE SPECIAL BENCH IS - Whether when "Total Income" and "Book Profit" are clearly distinguished under the Act, it cannot be said that since Chapter VIA deductions are considered while calculating Total Income, the same should also be allowed while calculating Book Profit u/s 115JB. AND THE VERDICT IS YES.
Facts of the case
The assessee-company, engaged in construction and sale of buildings had claimed deduction u/s 80IB(10) to the tune Rs. 2057.30 lakhs while computing total income under the normal provisions of the Act and the same was allowed by the AO. However, the AO computed the book profit u/s 115JB at Rs. 2062.19 lakhs and since the book profit was more than the total income computed under normal provisions of the Act, the AO treated the book profit as total income in terms of sec 115JB of the Act and accordingly did not allow deduction u/s 80IB(10) of the Act. Before the CIT(A), the assessee contended that the AO should have allowed deduction u/s 80IB(10) while computing book profit u/s 115JB. The CIT(A) noticed that identical issue was considered by the Karnataka High Court in the case of Sankhla Polymers P. Ltd. vs. ITO, wherein it was held that deduction available u/s 80IB while computing the total income under the normal provisions of the Act, could not be allowed to be deducted while computing book profit u/s 115JB. Accordingly the CIT(A) rejected the claim of the assessee.
The Tribunal held that,
++ the provisions of sec.115JB(5) protects the methodology of computing "Book Profit" prescribed in sec. 115JB of the Act and hence the it begins with the expression "save as otherwise provided in this section", i.e., except for the provisions specifically provided in sec. 115JB of the Act, all other provisions of the Act shall apply. This is the proper interpretation of sec. 115JB(5) of the Act. Section 115JB(5) of the Act was interpreted by the Supreme Court in the case of Rolta India Ltd. in the context of charging of interest u/s 234B of the Act. Admittedly provisions of Section 115JB does not provide for charging interest corresponding to sec. 234B and hence the Supreme Court held that the provisions of sec. 234B shall apply to the tax payable on the Book profit computed u/s 115JB of the Act, since sec. 115JB(5) states that "all other provisions the Act shall apply". There was no occasion for the Supreme Court to interpret the first portion of sec. 115JB(5), which states that "Save as otherwise provided in this section". Admittedly the methodology for computing book profit is provided only in Section 115JB of the Act and is saved by the provisions of Section 115JB(5) of the Act;
++ the assessee has considered sec. 80IB(10) of the Act as an "exemption" provision. It is well settled proposition that the deductions prescribed in Chapter VIA are "deductions" provision and they shall be allowed only if the Gross Total income is in positive figure. A deduction for a particular type of income is available only if it forms part of Gross Total Income. Thus, the concerned income is taken as part of Gross Total income and thereafter, deductions are allowed under Chapter VIA of the Act. Certain incomes are totally exempt from tax and such type of income does not enter into the "Gross Total income" at all. Hence the deduction allowed u/s 80IB(10) falls under the category of "deduction" provision and not exemption provision as contended by the assessee. The provisions of sec. 115JB prescribes exclusion of certain "exempted" income and do not provide deduction given u/s 80IB(10) of the Act. The Karnataka High Court has made this point very clear in the case of in the case of Sankhla Polymers P. Ltd., wherein the High Court has held that provisions of Section 115JB would apply to the assessee who is claiming deduction under Section 80IB of the Act and deduction under Section 80IB(10) of the Act cannot be allowed while computing book profit under Section 115JB of the Act. Identical view has been expressed by the Ahmedabad Bench of the Tribunal in the case of Ganesh Housing Corporation Ltd;
++ the term "Total Income" and "Book Profit" are clearly distinguished under the Act. The Book profit is required to be computed in accordance with the provisions of sec. 115JB of the Act, while the total income is required to be computed in accordance with the provisions of the Act. While computing the total income, the deduction u/s 80IB(10) is allowed. However, the book profit is required to be computed strictly in accordance with sec.115JB of the Act, which does not specify "amount computed u/s 80IB(10) as a permissible deduction".
(See 2018-TIOL-1158-ITAT-MUM)
