Relief to Infosys: ITAT directs to delete Income Tax Addition of SEZ Book Profits u/s. 115JB [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), directed the Assessing Officer (AO) to delete addition of Special Economic Zone (SEZ) book profits under Section 115JB of the Income Tax Act, 1961, thereby granting relief to M/s. Infosys Ltd.

The Counsel for the assessee, Padamchand Khincha submitted that the AO added the 14A disallowance while computing the book profits of the assessee and further submitted that the disallowance was made towards Section 10AA deduction was also added to the book profits while computing 115JB.

The Counsel also contended that no reasons have been given in the assessment order as to why additions are made. On an appeal before the CIT(A), the taxable income was determined under the normal provisions of the Act. Therefore, the CIT(A) held that the present issue relating to computation of income under the MAT provisions has become academic and the issue does not require any specific adjudication.

The computation of book profits under section 115JB is dealt by Explanation 1 to section 115JB. The computation of book profit starts with net profit as per Profit and loss account. Subsection 6 of section 115JB provides that the provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be.

Subsection 6 of section 115JB was introduced by the Special Zones Act, 2005 with effect from 10.2.2006. Book profits of SEZ unit are exempt from MAT by virtue of section 115JB(6). He also relied on proviso to section 115JB(6) has withdrawn the MAT exemption in respect of profits of SEZ unit with effect from AY 2012-13 onwards.

The Counsel for the assessee hence submitted that the said proviso is not applicable in the present case as the assessment years under consideration are A.Ys 2007-08 to 2009-10.

The Bench comprising Chandra Poojari, Accountant Member and Beena Pillai, Judicial Member observed that “This issue is no longer resintegra and the same stands settled by the decision of the Special Bench of Delhi Tribunal in case of ACIT vs. Vireet Investment (P) Ltd. We accordingly direct the AO to delete the disallowance added while computing book profits.”

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