Section 115JA

Section 115JA — the law in short

What the courts have decided on section 115JA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• JCIT v Rolta India Ltd Supreme CourtHelps department
  My company paid no advance tax because we only knew we would fall under MAT once the accounts were audited — is interest under sections 234B and 234C still chargeable on the tax on book profit?
  Yes. The Supreme Court held on 7 January 2011 that interest under sections 234B and 234C is payable on failure to pay advance tax in respect of tax payable under section 115JA or section 115JB. Neither interest section makes any exception for the minimum alternate tax, and assessed tax means the tax determined on regular assessment, which is the tax determined by applying those provisions. Both sections 115JA and 115JB expressly say that all other provisions of the Act apply to a MAT company, and the Finance Acts provided for advance tax on them. Circular No. 13/2001 therefore has no application.
• CIT v Tulsyan NEC Ltd Supreme CourtHelps taxpayer
  The Assessing Officer computed interest under s.234B and s.234C first and only then gave me credit for MAT under s.115JAA. My refund has turned into a demand. Is that the right order?
  No. MAT credit admissible under s.115JAA must be set off against the tax payable before interest under s.234B and s.234C is calculated, not after. The right to the set-off crystallises when the tax under s.115JA (now s.115JB) is paid and does not depend on any determination by the Assessing Officer, so an assessee may take the credit into account even when estimating advance tax on its current income.
• CIT v HCL Comnet Systems & Services Ltd Supreme CourtHelps taxpayerSuperseded by amendment
  The officer added back my provision for doubtful debts in computing book profit, calling it a provision for an unascertained liability. Is that right?
  No, on the Explanation as it then stood. The Supreme Court dismissed the Revenue's appeal and held that clause (c) of the Explanation to section 115JA was not attracted to a provision for doubtful debts of Rs 92,15,187. Clause (c) covers amounts set aside as provision for meeting liabilities other than ascertained liabilities, and every ingredient must be satisfied. A debt receivable is an asset, not a liability: a provision against its irrecoverability covers a probable diminution in the value of an asset, and no liability is fastened on the assessee even if the debt is never recovered. The Assessing Officer was therefore not justified in adding it back.
• Pacific Energy Private Limited v ITO High CourtHelps taxpayerNo later treatment found
  The reassessment cannot increase my tax at all because I am assessed on book profit anyway. Is there anything in the Act that lets me have the proceedings dropped rather than fight them?
  Yes — s.152(2). Where an assessment is reopened under s.147, an assessee who has not impugned any part of the original assessment order under ss.246 to 248 or s.264 may claim that the proceedings be dropped on showing that he has been assessed on an amount not lower than what he would rightly be liable for even if the income said to have escaped had been taken into account. On that footing the Bombay High Court held the officer had no jurisdiction to reopen and quashed the notice and the order rejecting the objections.
• CIT-LTU v Union Bank of India (Bombay High Court) — section 115JB did not apply to a banking company before the Finance Act 2012, because the machinery in sub-section (2) was unworkable for it High CourtHelps taxpayerNo later treatment found
  The Assessing Officer has raised a MAT demand on my client bank for an assessment year before 2013-14. Can section 115JB apply at all to a company whose accounts are prepared under the Banking Regulation Act?
  Not for a year before the Finance Act 2012 amendment. The Bombay High Court held that section 115JB as it stood before that amendment would not be applicable to a banking company, because sub-section (2) required the profit and loss account to be prepared under Parts II and III of Schedule VI to the Companies Act 1956 while its first proviso required the same accounting policies, accounting standards and depreciation method and rates as were used for the accounts laid before the annual general meeting — accounts which a bank necessarily prepares under the Banking Regulation Act 1949. A bank could satisfy one requirement or the other but not both, so the machinery provision failed, and on the principle in B.C. Srinivasa Setty a case in which the computation provision cannot apply was not intended to fall within the charging section. All the Revenue's appeals were dismissed.
• M/s Gie Jewells v PCIT High CourtHelps departmentNo later treatment found
  My client is a firm, not a company. It paid alternate minimum tax under s.115JC when it filed its return, along with the accountant's report. The Assessing Officer has charged interest under s.234B for not paying that tax as advance tax. Can advance tax provisions apply to AMT?
  Yes, on this Court's view. The Rajasthan High Court dismissed the assessee's appeals, holding that having retained the amount which was supposed to be paid under s.115JC, s.234B was rightly invoked, and that no substantial question of law arose from the Tribunal's treatment of s.115JC on the same footing as s.115JA and s.115JB for the purpose of the advance-tax obligation under s.208.
• CIT v Vodafone Essar Gujarat Ltd (Full Bench) — clause (i) catches a provision for doubtful debts but not an actual write-off High CourtCuts both ways
  The Assessing Officer has added our provision for bad and doubtful debts to book profit under clause (i) of Explanation 1, relying on the retrospective 2009 amendment. We reduced the provision from sundry debtors on the asset side. Does that make a difference?
  It does. After the retrospective insertion of clause (i) by the Finance (No.2) Act 2009 from 1 April 2001, a provision for diminution in the value of any asset — which is what a provision for doubtful debts is — must be added back, and the earlier line based on HCL Comnet under clause (c) no longer helps. But if the assessee simultaneously obliterates the provision by reducing the corresponding amount from loans and advances or debtors on the asset side, so that the balance sheet shows those figures net of the provision, that is an actual write-off and clause (i) is not attracted.
• Niko Resources Ltd v CIT Advance RulingHelps departmentSuperseded by amendment
  We are a foreign oil and gas exploration company entitled to the special deductions in s.42. Can we take those deductions before working out book profit for minimum alternate tax?
  No. The Authority ruled that Niko Resources Ltd, a Canadian company exploring and developing oil and gas fields in India with Gujarat State Petrochemical Corporation Ltd under a contract with the Central Government, could not claim the special s.42 deductions in the calculation of book profit under s.115JA. Section 42 operates only when business income is computed under Chapter IV-D; s.115JA is a self-contained code that applies notwithstanding anything else in the Act, and neither s.42 nor s.293A cuts it down. The provisions of s.115JA applied to the applicant. The ruling binds only the applicant.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.