INCOME TAX ACT, 1961

MAT- Book profit under section 115JB-Computation

Assessee company was engaged in business of manufacturing heavy chemicals. It had filed its return of income declaring loss. Return was processed under section 143(1) taking income declared under section 115JB. Thereafter, notices under sections 143(2) and 142(1) were issued and the assessment was completed as per the computation of income under section 115JB, inter alia, making disallowances while computing the income under normal provisions. Assessee submitted additional grounds that since there was no income-tax payable on total income as computed on regular basis, provisions of section 115JB were not attracted and it denied its liability to be charged interest under sections 234B and 234C.AO submitted that assessee had declared profits under section 115JB and had not filed any revised return. Assessee intended to withdraw its computation under section 115JB on the ground that same was not applicable. AO referred to the decision of the Supreme court in the case of Goetze (India) Ltd. v. (2006) 284 ITR 323 (SC), wherein, it was held that there is no power with AO to entertain claim made otherwise than by way of revised return. Held: Section 115JB is charging section but it is a code by itself and, thus, contains substantive as well as procedural provisions. Therefore, which part of the section precisely creates the charge, has to be specifically identified before arriving at any conclusion. If closely examined section 115JB, having due regard to the punctuation, there is comma between income-tax and payable and further there is comma before is less. Therefore, full effect will have to be given to the phrase following comma after the phrase income-tax. As per the terms of this section, it will be attracted if income tax payable in respect of total income computed under the Act is less than seven and one-half per cent of its book profit. Thus, tax payable should be less than seven and one-half per cent of its book profit. Consequently if the tax payable is more than seven and one-half per cent of its book profit, then this section will not be attracted. Therefore, the dividing line for determining the applicability or non-applicability of the section is seven and one-half per cent of its book profit as compared to tax payable, which actually creates the charge. The charge is not with reference to income-tax payable but with reference to book profits. Charge under section 115JB is to be determined with reference to 7.5 per cent of book profits. The process of determination of book profit is to be preceded with the comparison of liability for income-tax under normal provisions of income-tax which may be nil also. The income-tax payable could not be circumscribed by positive figure only. Once there is no charge then there could not be any levy of interest under sections 234B and 234C of the Act. Hence, additional ground raised by revenue for the assessee was dismissed.