Case Law Details
AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX)
ZD, In re
P.K. Balasubramanyan, Chairman, J.
A.A.R. No. 1098 of 2011
June 8, 2012
RULING
1. The applicant is a company registered under the laws of Panama. India has not entered into a Double Taxation Avoidance Convention with Panama.
2. The applicant holds shares in two Indian companies, both governed by the Companies Act, 1956. Both are public limited companies. The shares of one were acquired by the applicant in a public issue in the year 1991, augmented by an acquisition under a rights issue in the year 1995. The shares in the other, were purchased by the applicant in the year 2001, in three different lots.
3. The applicant proposes to transfer the shares held by it in the two companies through recognized stock exchanges, it is filing an application before the Reserve Bank of India seeking approval for the proposed transfers.
4. According to the applicant, section 10(38) of the Income-tax Act exempts any income arising from the transfer of a long-term capital asset, being an equity share in a company, when such transaction is chargeable to securities transaction tax. According to it, however, the proviso to section 10(38) of the Act states that such long-term capital gain earned by a company shall be taken into account in computing the book profit and income-tax payable thereon under section 115JB of the Act. The shares held by it in the Indian companies are long-term capital assets in terms of section 2(29A) of the Act read with section 2(42A) thereof. According to it, the capital gains arising out of the sales through the stock exchanges in India on which securities transaction tax would be paid, would be exempt under section 10(38) of the Act. Since the proviso to section 10(38) would be attracted, it is desirous of seeking a ruling whether, the computation of tax based on the prescription contained in section 115JB of the Act would be applicable. The applicant had no physical presence in India. The applicant, therefore, postulated the following three questions for ruling :
“1. Whether the provisions of section 115JB of the Act relating to payment of minimum alternate tax (MAT) are applicable only to domestic Indian companies ?
2. If the answer to question No. 1 is negative, whether the provisions of section 115JB of the Act relating to payment of MAT are applicable to only such foreign companies that have a physical business presence in India ?
3. Based on the answer to question No. (2) since the applicant is a foreign company who does not have any physical presence in India in the form of an office or branch and also in the light of the declaration provided by the applicant that it does not have a permanent establishment in India, whether the provisions of section 115JB of the Act are applicable to the applicant on the sale of shares of listed companies, viz., “A” and Industries Ltd. and “B” Industries Ltd., which has suffered securities transaction tax and is accordingly, exempt from tax under section 10(38) of the Act ?”
5. This Authority allowed the application under section 245R(2) of the Act for rendering a ruling under section 245R(4) of the Act.
6. According to the applicant, section 115JB had no application to a foreign company which had no presence in India and its application was confined to companies that are resident in India. According to the Revenue, if section 115JB was confined in its operation to resident companies, then, section 10(38) of the Act was also confined to resident companies. Hence, the stand adopted by the applicant while seeking the ruling was untenable.
7. At the hearing under section 245R(4) of the Act, the representative for the applicant emphasized that he was not seeking a ruling on the question whether the transaction would be exempt from taxation under section 10(38) of the Act, but was seeking a ruling only on the applicability of section 115JB of the Act to the proposed transaction. A ruling can be sought by an eligible applicant in relation to a transaction. It is the case of the applicant that in relation to this particular proposed transaction, it is seeking a ruling only on one aspect and it does not want or need a ruling on any other aspect that may arise, and it can raise the question of exemption of the income under section 10(38) of the Act before the Assessing Officer. On behalf of the Revenue, it is submitted that the first question to be ruled on is on the applicability of section 10(38) of the Act especially in the light of the proviso to that section and a ruling on it is essential for giving rulings on the questions the applicant has raised.
8. The stand adopted on behalf of the applicant that no question of applicability of section 10(38) of the Act arises, cannot be accepted. Question No. 3 formulated for ruling by the applicant asserts that the sales are exempt from tax under section 10(38) of the Act since the sales have suffered securities transaction tax. This position is controverted by the Revenue contending that section 10(38) does not apply to the applicant and the transaction is not exempt. Therefore, for giving a ruling on question No. 3, this Authority cannot assume that there is no dispute on this question, and the exemption from taxation en grafted in section 10(38) of the Act applies. Thus, it is seen that a ruling on the applicability of section 10(38) of the Act cannot be avoided on the basis that such a question has not been raised by the applicant.
9. An advance ruling, so far as it is relevant in the case of the applicant before me, is a determination by this Authority “in relation to a transaction which has been undertaken or is proposed to be undertaken” by the applicant. That proposed transaction is the sale of shares of two Indian companies through a recognized stock exchange in India. The question of the taxability of the transaction under the Act arises, since there is no Tax Convention with Panama. In considering the question of charge ability to tax under the Act, the two relevant provisions admittedly are, section 10(38) and section 115JB of the Act. According to the applicant itself, section 115JB would get attracted, in any event, by virtue of the proviso to section 10(38) of the Act. That is why this need for a ruling on the applicability of section 115JB of the Act. According to the Revenue, section 10(38) has no application to a non-resident company, since section 115JB itself has no application to a non-resident company, if an earlier ruling of this Authority were to be adopted and that is the case put forward by the applicant itself.
10. Whether the applicant has sought a ruling on the applicability of section 10(38) of the Act to the income generated by the transaction in question, for answering the questions posed by it for ruling, this Authority has to consider the scope of section 10(38) of the Act, as that would be satisfying the principle of harmonious construction, repeatedly recommended by courts. On the facts, I have also referred to the assumption made by the applicant in posing question No. 3 for a ruling and the stand of the Revenue on the applicability of section 10(38) of the Act. Thus, it appears to be not possible to keep out a determination of the scope of section 10(38) of the Act read with its proviso for giving a ruling on the questions raised in this application.
11. It is in this context, that the question arises whether the applicant can approach this Authority not for a ruling on the main or equally relevant question whether the income from the transaction proposed would be exempt under section 10(38) of the Act, but only on the so-called applicability of section 115JB of the Act. It is true that under section 245Q of the Act the applicant has to make an application in the form prescribed “stating the question on which the advance ruling is sought” and under section 245R(4) of the Act, this Authority has to pronounce its ruling on the question specified in the application. These provisions may suggest that an applicant is entitled to seek a ruling only on the questions it wants, even while leaving open other questions in respect of the transaction that may be controversial, to be agitated before the regular tax authorities.
12. Proceeding further, I may also notice rules 11 and 12 framed by this Authority. Rule 11 enables facts additional to those set out in the application to be brought in for deciding the application. Under rule 12, in deciding the application, this Authority at its discretion, can consider all aspects of the questions set forth, as may be necessary to pronounce a ruling on the substance of the questions posed for its consideration. This according to me, gives sufficient leeway to this Authority to advert to any other aspect in respect of the transaction relevant to the questions formulated before it for ruling.
13. A ruling pronounced by this Authority is binding on the applicant, in respect of the transaction in relation to which the ruling has been sought and on the Commissioner and the income-tax authorities subordinate to him. The ruling is in respect of the applicant and the transaction involved. This shows that this Authority is expected to give a ruling in respect of the transaction ; on the chargeability to tax either under the Act or the DTAC in appropriate cases, so that there will be a binding adjudication on the charge ability to tax under the Act. That, this is the purpose of creating this Authority, is also clear from the object sought to be achieved by the introduction of Chapter XIX-B in the Act, by the Finance Act of 1993. In my view, seeking of a ruling only on a part of a transaction or on a truncated transaction, cannot be said to be proper and in any event is not a practice that ought to be encouraged. The applicant is bound to come forward and seek a ruling on all the relevant aspects of the charge ability to tax, of a transaction and not rest content with raising questions on aspects of the transaction which may suit it.
14. It is to be noticed that while asking the third question, the applicant has assumed that section 10(38) of the Act exempts the income from the proposed transaction from within the tax net. This claim that the sale of shares which has suffered securities transaction tax and is accordingly exempt from tax under section 10(38) of the Act is controverted by the Revenue. It is the contention of the Revenue that section 10(38) has no application to a company like the applicant-being not a resident company-as is clear from the context and as is clarified or made clear by the proviso added to section 10(38) of the Act with effect from April 1, 2007. It is pointed out that the stand of the applicant is that section 115JB of the Act does not apply to a non-resident company. In this situation, it appears to me that a ruling on the applicability of section 10(38) of the Act in juxtaposition to section 115JB of the Act cannot be avoided.
15. I am of the view that when a ruling on a transaction is given, the ruling must embrace the relevant aspects of taxation involved in that transaction. A ruling is transaction related. I have, therefore, no doubt in this case, that this Authority has also to rule on the question of the applicability of section 10(38) of the Act to the income likely to be earned by the applicant from the proposed transaction before proceeding to give a ruling on the question posed by the applicant about the applicability of section 115JB of the Act.
16. In this case, I must notice that the Revenue has not joined issue with the applicant on the applicability of section 115JB of the Act to a non-resident company or a foreign company. The Revenue appears to have accepted, for the purpose of this case, the view earlier adopted by this Authority in the ruling in Timken Co., In re [2010] 326 ITR 193 (AAR – New Delhi) and has joined issue only on the applicability of section 10(38) of the Act to a non-resident company. It is the submission of the Revenue that if the operation of section 115JB is confined to resident companies, then clearly, the operation of section 10(38) of the Act is also confined to resident companies. This is made clear by the insertion of the proviso to that section. The reference in the proviso to section 115JB of the Act is significant and if section 115JB of the Act is held to be not applicable, section 10(38), also must be held to be not applicable to a foreign company. Referring to the meaning of the expression “proviso” given in Black’s Law Dictionary as, “a limitation, condition, or stipulation upon whose compliance a legal or formal document’s validity or application may depend”, it is submitted that the proviso must be understood as limiting the operation of section 10(38) of the Act to domestic or Indian companies. I find force in this submission on behalf of the Revenue.
17. I may indicate that a ruling to be given by this Authority cannot merely depend on the stand adopted by the Revenue or the applicant. This Authority is a judicial Authority entrusted with the duty of giving an advance ruling on the tax ability or otherwise of a transaction. This Authority has, therefore, the right, nay, the duty to consider the terms of the transaction and the terms of the relevant provisions of the Act or the DTAC to understand the scope of taxation. Hence, I am of the view that when this Authority is requested to give a ruling whether section 115JB of the Act would apply to it and the transaction it proposes to undertake, the question has to be decided by the Authority with reference to the transaction and the relevant provisions, on a proper interpretation and understanding of their scope.
18. In this case, the applicant might have been misled by the stand adopted by the Revenue. After considering for myself the relevant aspects, I re-opened the hearing under section 245R(4) of the Act and heard the applicant on the question of the applicability of section 115JB of the Act to non-resident companies.
19. Section 115JB(1) of the Act reads :
“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 commencing on or after the 1st day of April, 2011, is less than eighteen per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen per cent.”
20. On a reading of this sub-section, which is said to prevail over the other provisions of the Act, what emerges is that a company has to pay tax as provided for in this sub-section if the tax payable by it as otherwise determined under the Act, is less than the minimum prescribed herein. It also provides the rate at which the tax is to be paid. This section does not need any aid from tools of interpretation for its understanding. It is plain and clear.
21. Sub-section (2) of section 115JB which is sought to be shoved in to deprive sub-section (1) of its width actually reaffirms the independent operation of sub-section (1). It exhorts every company, for the purpose of sub-section (1) to prepare its profit and loss account as provided for therein. The operation of sub-section (1) does not depend on the applicability of sub-section (2). It is on the applicability of sub-section (1) that the obligation under sub-section (2) arises. It is a fallacy to think that unless sub-section (2) is independently attracted, sub-section (1) also cannot be operated. Sub-section (2) gets attracted when sub-section (1) operates proprio vigore. It is for the purpose of the section that the account has to be prepared as detailed therein. The liability to tax under sub-section (1) does not depend on the accounting. It arises from charge ability to tax under the Act.
22. Section 115JB of the Act on its wording makes no distinction between a resident company and a non-resident company. Prima facie, it applies to all companies. The definition of a company in section 2(17) of the Act means an Indian company or any company incorporated by or under the laws of a country outside India. In other words, by definition, a company means a non-resident company as well. In an earlier ruling in Timken Co., In re case (supra) this Authority essentially relied on the requirements prescribed by sub-section (2) of section 115JB, the Notes on Clauses Explaining the Provisions of the Finance Bill, 2002, a circular issued by the Central Board of Direct Taxes and a statement in the speech of the Finance Minister that it is intended to cover domestic companies, to come to the conclusion that the operation of section 115JB is limited to resident companies and, consequently, the expression “company” as defined in the Act cannot be adopted in construing section 115JB of the Act. This Authority referred to the non obstante clause contained in the definition section, “unless the context otherwise requires” to give a meaning to the expression “company” different from the definition in the Act. This interpretation was heavily based on the requirement of section 115JB(2) of the Act. With great respect, it appears to me that sub-section (2) of section 115JB deals with the mode of calculation of the asses-sable profit in the context of sub-section (1) of section 115JB. There is no lack of clarity or ambiguity in section 115JB to warrant the undertaking of an interpretative exercise, by referring to extraneous material to understand the meaning of the section. As repeatedly noticed, if the language is clear and explicit, the court must give effect to it “for in that case the words of the statute speak the intention of the Legislature” and the intention of Parliament must be deduced from the language used, for, “it is well accepted that the beliefs and assumptions of those who frame Acts of Parliament cannot make the law” and where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise (See Maxwell on the Interpretation of Statutes, 12th edition, pages 1, 28 and 29). In fact, in the ruling of this Authority reported in P. No. 14 of 1997, In re [1998] 234 ITR 335 (AAR), it was held that the special provision under section 115JA of the Act would apply to foreign companies as well. Section 115JA is parallel to section 115JB, but, of course, this ruling was sought to be distinguished in the ruling in Timken Co. In re case (supra) based on the existence of a permanent establishment in that case.
23. In the ruling reported in P. No. 14 of 1997, In re case (supra) (AAR) this Authority dealing with the argument that section 115JA of the Act is confined in its operation to Indian companies, after a discussion stated (page 343) : “a large number of decisions were cited, relating to well-known rules of construction of a taxing statute. What is important to bear in mind is the object of introduction of section 115JA. A number of companies with huge profits were avoiding payment of tax by adjusting their profits against various allowances which are permitted under the Income-tax Act. To circumvent this strategy, section 115JA was inserted. The simple method adopted by section 115JA is to find out whether the total income of a company after all the deductions and allowances was less than 30 per cent. of its book profit. In such a situation, the total income chargeable to tax is deemed to be 30 per cent. of such book profit. There is no reason to confine this section to Indian companies alone. If a foreign company is avoiding tax lawfully by similar devices, this section will be applicable also to such companies. This section has been made applicable to companies generally and not to Indian companies or domestic companies only”. This Authority noticed that the Act contained provisions which are made applicable to Indian companies or the domestic companies only and there was no such confinement of operation in section 115JA of the Act. In the ruling in Timken Co., In re case (supra) the above ruling was distinguished stating that the foreign company involved therein and a permanent establishment in India. With respect, it is difficult to agree with this approach to distinguish the ruling reported in P. No. 14 of 1997, In re case (supra). On facts that might have been a case where there was a permanent establishment of the company in India, but the reasoning and the conclusion clearly appear to be that section 115JA has application both to foreign and domestic companies. The passage from that ruling quoted above, also reaffirms this. The ruling reported in P. No. 14 of 1997, In re case (supra) was followed in the ruling in Niko Resources Ltd. v. CIT [1998] 234 ITR 828 (AAR).
24. The passage quoted from Kanga and Palkhivala commenting on section 115J of the Act, “This section which was inserted by the Finance Act, 1987, with effect from the assessment year 1988-89 and replaces section 80VVA applies to all companies except to electricity companies” does not support the argument that the section does not apply to foreign companies. The subsequent comments deal with the newly introduced section not having retrospective operation.
25. I may notice here that when section 115JB was inserted by clause (49) of the Finance Act, 2000, the Notes on the Clauses Explaining the Finance Bill, 2000, did not indicate that section 115JB proposed to be introduced with effect from April 1, 2001, was confined in its operation to domestic companies only. Amendments were made to section 115JB of the Act by the Finance Act of 2006 which came into effect from April 1, 2007. Additions and reductions of amounts to and from “book profit” as explained in Explanation 1 were made. Dealing with deductions, in the proviso, clause (ii) was modified by showing the amount of income to which any of the provisions of “section 10 (other than the provisions contained in clause 38 thereof)” were introduced, thus, taking out income from long-term capital assets from the reckoning. Simultaneously, the proviso to section 10(38) of the Act was also inserted bringing income from long-term capital gains in for the purpose of section 115JB of the Act while calculating the book profit. If the Notes on Clauses to the Finance Bill of 2002 or in his speech the Minister mentioned domestic companies, can it be taken to indicate that the operation of section 115JB is confined to domestic companies ? With respect, it appears to me that the relevant aspects require further consideration. After all, when a statute defines an expression and uses that expression generally without confining it to Indian companies (like the provisions in section 80HH series ; for example), can one so easily discard the defined meaning of the expression when construing a section in the Act using that expression?
26. Generally, when a word has been defined in the interpretation clause, prima facie, that definition governs whenever that word is used in the body of the statute (See, Indian Immigration Trust Board of Natal v. Govindaswamy AIR 1920 PC 114 and Vanguard Fire and General Insurance Co. Ltd. v. Fraser and Ross [1960] AIR 1960 SC 971. In any event as observed in Wyre Forest District Council v. Secretary of State for the Environment [1990] 2 AC 357 (HL). “If Parliament in a statutory enactment defines its terms (whether by enlarging or by restricting the ordinary meaning of a word or expression), it must intend that, in the absence of a clear indication to the contrary, those terms as defined shall govern what is proposed, authorized or done under or by reference to that enactment”. Is a clear indication to the contrary available in this case ?
27. Both section 10(38) and section 115JB refer to a company. Company as per the definition in the Act, takes in an Indian company and a foreign company. As far as a company is concerned, the proviso exhorts that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB of the Act. Section 115JB by its wording, overrides section 10(38) and section 115JB(1) of the Act, leads to the position that as far as a company is concerned, its total income has to be computed based on its book profit in juxtaposition to the prescription in section 115JB of the Act. Thus, as far as a company is concerned, section 10(38) and section 115JB of the Act are to some extent interlinked, though section 115JB would override section 10(38) itself. If by an interpretative process one were to come to the conclusion that section 115JB of the Act is confined in its operation to resident companies, one has also logically to say that section 10(38) will also operate only in respect of a resident company.
28. Surely, there is no need to restrict or warrant for restricting the operation of these two sections in the Act in the absence of any compelling circumstance. In this context, with great respect, it appears to me that the reasoning in the ruling in P. No. 14 of 1997, In re case (supra) (AAR) is impressive. I am respectfully inclined to follow that reasoning. The circumstances highlighted in Timken ruling have been dealt with and explained in P. No. 14 of 1997, In re case (supra) followed in Niko Resources Ltd.’s case (supra).
29. On a reading of the section 115JB it can be seen that sub-section (1) thereof imposes the liability to be taxed and sub-section (2) only charts out the procedure for calculating the taxable profit. In fact sub-section (2) casts an obligation on a company to which section 115JB(1) is attracted to prepare an account in terms of the Companies Act, 1956. It is not as if the liability to be taxed depends on the obligation to prepare an account in terms of the Companies Act, 1956. The liability to tax depends on the profit earned or deemed to be earned. The deemed profit is specified in sub-section (1) and the rate of tax is also specified. Only the mode of determining the book profit is left to sub-section (2) and a duty is cast on the assessee to determine the book profit as set out in sub-section (2). Taking note of the inconvenience that may be caused by this mandate to some of the companies coming under the proviso to section 211(2) of the Companies Act, the requirement to comply with the mandate has been done away with by the Finance Act, 2012, leaving untouched the liability under sub-section (1) of that section. This also would support the soundness of the reasoning in P. No. 14 of 1997, In re case (supra) and would indicate that section 115JB(1) of the Act always subjected even the companies coming under the proviso to section 211(2) of the Companies Act.
30. Section 10(38) of the Act, through its proviso, brings into play, section 115JB. Section 115JB is the overriding provision. It overrides all the other provisions in the Act. It is the overriding charging provision. It is clear. It provides for payment of income-tax by an assessee, which is a company. That company normally, is a company of whatsoever hue, or in the alternative, a company as defined in the Income-tax Act. There is no warrant for borrowing the definition of a company from section 3 of the Companies Act, 1956. Merely because sub-section (2) of section 115JB refers to the Companies Act, it does not mean that the definition from therein has to be borrowed. There may be practical difficulties for foreign companies to prepare an account in terms of Schedule VI to the Companies Act, but that is no reason to whittle down the scope of section 115JB of the Act. The difficulties are for the Legislature to consider and remove and not for this Authority. In fact, the difficulties in respect of some of them are now sought to be removed by the amendment made by the Finance Act, 2012.
31. A harmonious construction of section 10(38) and section 115JB of the Act would suggest that both the sections have operation in the field of taxation of a company. Section 10(38) deals with income arising from transfer of a long-term capital asset, being an equity share in a company and section 115JB deals with payment of tax by certain companies. The proviso to section 10(38) directs attention to section 115JB, in so far as income from long-term capital gains of a company is concerned and the obligation of the company to include it in its book profits for the purpose of taxation. The income from long-term capital gains otherwise exempt if the conditions of section 10(38) are satisfied, is to be included in the income of a company for the purpose of its taxation under section 115JB of the Act. So far as a company is concerned, both the sections are clear and unambiguous. If so, both operate or do not operate together. If section 115JB of the Act does not apply to a foreign company, does it mean that it cannot be taxed at all ? Its income from long-term capital gains in that case may be exempt under section 10(38) of the Act, if the conditions, are fulfilled. But, by virtue of the proviso, that income has to be reckoned with for calculating the book profit for taxation under section 115JB of the Act. Section 115JB of the Act overrides sections 45 to 48 of the Act as well. So, by reading section 115JB of the Act as confined in its operation to domestic companies alone, we would be doing violence to the special scheme of taxation adopted for taxing certain companies. Unless there are compelling reasons, no such interpretation is justified. As pointed out in the ruling in 234 ITR 335, there is no compelling reason to jettison the scheme of taxation adopted by the Act by reading section 115JB of the Act or section 10(38) of the Act as confined to domestic companies.
32. It is well settled that an Act has to be read as a whole to understand its purport and effect. It is also settled that when more than one provision in the Act deals with a subject the proper course to adopt is to read the provisions together harmoniously to understand their effect. An interpretation of a provision in isolation without reference to the other provisions in the statute is not warranted or justified. Hence, in this case, one has to read section 115JB of the Act along with section 10(38) of the Act with its proviso to understand the scope of taxation under the Act. Such an approach will compel this Authority not to ignore section 10(38) of the Act or its scope or impact on the chargeability to tax of the income earned by a company.
33. The position thus emerges that section 115JB of the Act has to be construed harmoniously with section 10(38) of the Act dealing first with the exempting of a particular income and then roping it in for the purpose of calculation of the liability under section 115JB of the Act. The interpretation of one without looking at the other relating to the transaction in question here, is not justified.
34. The income of a person arising from the transfer of a long-term capital asset, being an equity share in a company is exempt from taxation, if the transaction of sale is after April 1, 2004, and the transaction is chargeable to securities transaction tax under the Finance Act of 2004. A company is taken up for a different treatment by the proviso. The proviso provides that such income of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB. So, in respect of the income of a company, under the head of long-term capital gains, from sales subject to securities transactions, one has to go to section 115JB of the Act. On going to section 115JB, one finds that the income of the company has to be determined in cases covered by sub-section (1) at 18 per cent. of the total income, again calculated at 18 per cent. of its book profit, if the actual income computed under the Act, is lower than 18 per cent. of the book profit. There is nothing to show that either section 10(38) with its proviso or section 115JB is confined to a domestic company. The preparation of the account by a company under sub-section (2) of section 115JB is for the purpose of that section. It is a requirement of the section. The requirement arises when section 115JB is attracted. If section 115JB(1) is not attracted, the need to fulfill section 115JB(2) also does not arise. It is not as if a species of companies is excluded from the operation of the section.
35. I am of the view that the principle of the decision in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) does not get attracted to cases covered by section 115JB of the Act. The charge ability to tax of the concerned income and the quantification of the tax liability of the company otherwise than under section 115JB of the Act cannot be in question. Section 115JB(1) of the Act only provides for a minimum quantum of tax to be paid by a company, if the determination of that tax under the Act otherwise, is less than what is contemplated by the section. There is no question of any inability to quantify the profits or the tax otherwise due, involved. There is also no question of inability to determine the cost of acquisition or the cost of sales, if it is a capital gain. It is only on determination of the tax payable otherwise, that section 115JB(1) of the Act, an overriding provision, operates. One has first to determine the tax payable under the Act s de hors section 115JB(1). One has then to apply section 115JB(1). There is no parallel to the principle stated in B. C. Srinivasa Setty’s case (supra). I have no hesitation in overruling the attempt to invoke the principle in B. C. Srinivasa Setty’s case (supra).
36. Normally, when the charging provision itself indicates how to determine the chargeable income and the rate at which it is to be taxed, one cannot resort to the so-called machinery provision to nullify the effect of the charging provision. Here, the requirement of the machinery provision, (if section 115JB(2) is a machinery provision) has to be complied with by one who comes within the sphere of the charging provision, that is, section 115JB(1). The principle of B. C. Srinivasa Setty’s case (supra) cannot be legitimately invoked to find non-tax ability when the tax ability is patent.
37. The argument that a foreign company which is an investment company cannot comply with section 115JB(2) of the Act since it has no other business in India may only mean that the long-term capital gain covered by section 10(38) of the Act may itself become the book profit for the purpose of section 115JB. A foreign company under section 112 of the Act may have to pay tax at 20 per cent. of the gain, but for section 10(38) read with section 115JB(1).
38. The applicant has insisted even at the concluding hearing that it does not seek or want a ruling on the applicability of section 10(38) of the Act canvassed for by the Revenue. I have endeavored to show that for giving a ruling satisfactory to its conscience, this Authority has to interpret both sections, section 10(38) and section 115JB of the Act together. That alone will answer the question of tax ability of the transaction in question, in the context of section 115JB of the Act. Since the applicant does not seek and positively does not want a ruling on all the aspects arising out of the questions posed for ruling, I think that it would be proper to decline a ruling on the questions as raised. Hence, I decline to give a ruling on this application. As noticed by this Authority, in Microsoft Operations (P.) Ltd., In re [2009] 310 ITR 408 (AAR- New Delhi) this Authority has the discretion not to entertain an application or to give a ruling, if the circumstances warrant it. I consider this a fit case to decline a ruling on the questions as sought for by the applicant. The application is hence disposed of by refusing to give a ruling on the questions now posed.
