M/s Safeflex International Ltd. Vs ITO (ITAT Jaipur)
Conclusion: While passing the assessment order u/s 143(3), AO had forgot to invoke the provisions of section 115JB, thus, the matter clearly fell within purview of section 154 and the same could be rectified as mistake apparent from record. AO was justified in bringing book profit u/s 115JB determined to tax inspite of assessee-company eligible for section 10AA benefit as on combined reading of provisions of sub-section (5) and (6) of section 115JB, it was clear that the MAT provisions had been specifically made applicable to assessee company in respect of its income from business carried on in its SEZ Unit for assessment year 2012-13 and onwards.
Held: Assessee had claimed exemption u/s 10AA in respect of its unit situated at M.P which was engaged manufacturing and export of Polyethylene & Polypropylene Bags generally used for transportation of goods. The assessment u/s 143(3) was completed by AO wherein deduction u/s 10AA had been allowed to assessee. Subsequently, notice u/s 154 was issued to assessee stating that on perusal of the assessment records, it revealed that the assessee was liable to pay tax u/s 115JB on book profit which was inadvertently not charged at the time of assessment u/s 143(3). Accordingly, order u/s 143(3) was rectified u/s 154 and book profit u/s 115JB determined was brought to tax, the same being higher than the income assessed under the normal provisions of the Act. Assessee contended that the rectification order being illegal, beyond scope and without any basis and MAT provisions contained in Section 115JB were not applicable to assessee company which was eligible for Section 10AA benefit. It was held In it was not in dispute that assessee carried on its business in an SEZ Unit and its income would therefore be subject to the provisions of Section 115JB. On bare reading of provisions of sub-section (6) to section 115JB, it was crystal clear that provisions of section 115JB would apply to assessee company for the assessment year beginning assessment year 2012-13 onwards. Therefore, while passing the assessment order u/s 143(3), where AO had forgot to invoke the provisions of section 115JB, the matter clearly fell within purview of section 154 and the same could be rectified as mistake apparent from record. On combined reading of provisions of sub-section (5) and (6) of section 115JB, no adjustment could be made to book profits as the MAT provisions had been specifically made applicable to assessee company in respect of its income from business carried on in its SEZ Unit for assessment year 2012-13 and onwards. Therefore, AO was justified in the assessment of income.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of Id. CIT(A)-2, Jaipur dated 26.03.2018 for Assessment Year 2012-13 wherein the assessee has taken the following grounds of appeal:
“1. In the facts and drcumstances of the case and in law, the Id. CIT(A) has erred in, confirming the action of Id. AO of invoking the provisions of section 154, thereby rectifying the assessment order passed u/s 143(3) of Income Tax Act, 1961. The action of Id. CIT(A) is illegal, unjustified, arbitraiy and against the facts of the case. Relief may p/ease be granted by quashing the rectification order being illegal, beyond scope and without any basis.
2. In the facts and drcumstances of the case and in law, the Id. CIT(A) has erred in, confirming the action of Id. AO, in assessing the alleged book profits of Rs. 6,83,86,428/- and applying the MAT provisions u/s 115JB. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts ofthe case. Relief may please be granted by quashing the rectification order applying the MAT provisions u/s 115JB.”
2. Briefly stated, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 9,39,290/- and also claimed exemption u/s 10AA in respect of its unit situated at Pithampur, District. Dhar (M.P) which is engaged manufacturing and export of Polyethylene & Polypropylene Bags which are generally used for transportation of goods. The assessment u/s 143(3) was completed by the Assessing Officer by passing order u/s 143(3) dated 28.02.2015 wherein deduction u/s 10AA amounting to Rs. 5,67,17,090/- has been allowed to the assessee and the total income finally assessed comes to Rs. 15,64,483/-. Subsequently, notice u/s 154 was issued to the assessee on 05.2016 stating that on perusal of the assessment records, it reveals that the assessee was liable to pay tax of Rs. 1,36,82,585/- u/s 115JB on book profit of Rs. 6,83,86,428/- which was inadvertently not charged at the time of assessment u/s 143(3) dated 28.02.2015. Accordingly, order u/s 143(3) was rectified u/s 154 dated 01.06.2016 and book profit u/s 115JB determined at Rs. 6,83,86,428/- was brought to tax, the same being higher than the income assessed under the normal provisions of the Act.
3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). As per ld. CIT(A), with effect from the assessment year 2012-13, the provisions of section 115JB was made applicable to the SEZ unit vide sub section (6) and proviso thereto. It was held that for the relevant assessment year, MAT was chargeable on the appellant company and not tax under normal provisions of the Act and accordingly, the action of the AO in rectifying the assessment order u/s 154 was upheld following the order of the Hon’ble Karnataka High Court in case of CIT vs Sankala Polymers [2012] 20 taxmann.com 378 and the decision of the Coordinate Bench in case of S.I.J Chains (P) ltd vs ACIT, Jalandhar 100 ITD 379 (Asr). Against the said finding of the ld. CIT(A), the assessee is now in appeal before us.
4. During the course of hearing, the ld. AR submitted that the assessee company started its operation in the AY 2008-09 and from the first year claimed exemption u/s 10AA of the IT Act. The year under consideration is, therefore, 5th year of claiming exemption u/s 10AA of the IT Act. The provisions of section 10AA exempts 100% of the profits and Gains derived from exports, in first five years of the claim. Therefore, the income of the assessee company, in the year under consideration is 100% exempt as per the provisions of section 10AAof the ITAct, 1961.
5. It was further submitted that the action of the Lower authorities of bringing the entire income under the purview of provisions of section 115JB, ignoring the provisions of section 115JB(5), is illegal. It is pertinent to mention that prior to insertion of section 115JB, section 115J was in operation which provided for special rate of taxation on the Book Profits. Section 115J did not provide in any of its sub-sections that all the other provisions of the Act shall apply to every assessee company. However, in section 115JA (which was in operation after section 115J), by way of sub-section (4), legislature provided that the other provisions of the Act shall apply and even under the prevailing section i.e. section 115JB, by way of sub-section (5) it has been provided as under:
“Section 115JB(5): Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.”
6. Further, the ld AR placed reliance on the following judicial pronouncements:
