Section 115JAA

Section 115JAA — the law in short

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

• 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 Saint Gobain Glass India Ltd High CourtHelps taxpayer
  CPC has computed my MAT credit on income-tax alone and left out the surcharge and the education cess in both the MAT and the normal computation. That has cut the credit down. Is the Department right?
  No. The Madras High Court held that MAT credit under s.115JAA includes surcharge and education cess and is not confined to income-tax stripped of them, following its own earlier judgment in PCIT v. Scope International Pvt. Ltd. and the Supreme Court's construction of 'income tax' in CIT v. K. Srinivasan. The Revenue's appeal was dismissed and the substantial question answered against it.
• ITO v Western Developers Private Limited — once the s.115BAA option stands, s.115JB has no application at all ITATHelps taxpayerNo later treatment found
  CPC has processed our return under s.143(1), rejected the s.115BAA option because Form 10-IC was late, and raised a demand by computing book profit under s.115JB. Can it do both?
  No. Sub-section (5A) of s.115JB says in terms that the section shall not apply to a person who has exercised the option under s.115BAA or s.115BAB. Once the option is held good, the MAT provisions cease to apply and the tax liability must be computed under s.115BAA without invoking s.115JB — and here the option was held good because it had been accepted for three earlier years on a Form 10-IC filed in March 2021.
• ACIT v Lahari Holiday Homes (P) Ltd — the s.115BAA option can be exercised in a revised return, and the MAT credit then goes ITATHelps taxpayer
  We filed the original return under MAT claiming MAT credit, then filed a revised return within the due date opting for s.115BAA. The Assessing Officer says that is a prohibited withdrawal of the option. Is it, and what happens to the MAT credit and our brought-forward losses?
  It is not a withdrawal. A revised return under s.139(5) substitutes the original return and assumes the character of a return under s.139(1), so an option exercised for the first time in a revised return filed within the due date is a valid first exercise — there was no earlier exercise capable of being withdrawn. But once the concessional regime is allowed, no MAT credit can be claimed for that year; and s.115BAA(2) bars set-off only of losses attributable to the deductions it specifies, not of ordinary brought-forward business and capital losses.
• Brahmos Realty Private Limited v ITO ITATHelps taxpayerNo later treatment found
  My staff filed Form 10-IC by mistake, then I filed the return under the normal provisions and set off my brought-forward MAT credit. CPC has taxed me under s.115BAA and wiped the credit out. Section 115BAA says the option cannot be withdrawn. Am I stuck?
  Not necessarily. The Tribunal held that the option cannot be WITHDRAWN, but it can FAIL: because s.115JAA(8) bars MAT credit to a company that has exercised the s.115BAA option, a company that claims MAT credit in its return has not satisfied the conditions in s.115BAA(2), and the proviso to s.115BAA(1) then makes the option invalid as if it had never been exercised. The Form 10-IC was construed as invalidated and the matter was restored to the CIT(A) to compute the tax under the old regime and allow the legitimate MAT credit.
• CBDT Circular No. 29/2019 — MAT credit on opting into s.115BAA CBDT Circulars & InstructionsHelps department
  My client company has a large MAT credit and wants the 22 per cent rate under s.115BAA. Does the credit survive the switch?
  No. The Board has clarified that because s.115JB itself ceases to apply to a domestic company that exercises the s.115BAA option, 'the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option'. The same circular carries the answer to the problem: since there is no time limit for exercising the option, a company holding MAT credit may exercise it after utilising the credit against regular tax under the pre-Ordinance regime.

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.