Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TDS :: cpt :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: form 3cd :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: VAT Audit :: articles on VAT and GST in India :: TAX RATES - GOODS TAXABLE @ 4%
News Headlines »
 Here's why you must always check Form 26AS before filing tax return
 Want to file your income tax return after June 30? Having Aadhaar card is a must
 Timeline for filing of tax returns extended by two months
 Top 5 common mistakes to avoid while filing your income tax returns
 GST rollout on July 1: Deadline for filing tax returns extended
 What is GST?
 Income-tax (15th Amendment) Rules, 2017?
 Banks get a breather as GST Council extends deadline for tax filing
 Income Tax filing: Your easy guide in 7 steps
 E-filing income tax return: How individuals can upload any ITR using excel utility
 Top 10 common mistakes to avoid when e-filing your income tax return

Book profit bonanza
July, 29th 2006


Tax under Section 115J can be determined only after the end of the relevant year.

Indian corporate houses were aghast when book profits tax a levy on zero-tax companies was introduced. When the total income of a company, as computed under the Income-Tax Act, is less than 30 per cent of its book profit, the total income chargeable to tax shall be deemed to be an amount equal to 30 per cent of such book profits.

Section 115JB of the Income-Tax Act defines book profits. The law requires zero tax companies to pay advance tax on the book profits. If such advance tax is not paid, Section 234B seeks to levy interest up to 90 per cent of the tax liability on assessed income before the end of the previous year. Such levy was challenged in several High Courts on the ground that MAT liability gets crystallised only when the accounts are audited and that can be only after the end of the accounting year.

The Bombay High Court agreed with the views of the Madhya Pradesh and Gauhati High Courts and ruled that Sections 234B and 234C are automatically attracted when there is non-payment or short payment of advance tax. It was pointed out that interest is only compensatory in nature and there was no element of penalty involved.

The Madras High Court took the same view in CIT vs Holiday Travels (P) Ltd (263 ITR 307). The Punjab and Haryana High Court also upheld the charging of interest in CIT vs Upper India Steel Manufacturing and Engineering Company Ltd (279 ITR 123).

However, there is one ruling of the Karnataka High Court, in Kwality Biscuits Ltd vs CIT (243 ITR 519), is in favour of the tax-paying company. The court pointed out that determination of tax under Section 115J is only after the end of the relevant year and Sections 207, 208, 209 and 210 cannot be made applicable unless and until the accounts are audited and the balance-sheet is prepared, because till then even the company may not known whether Section 115J would be applicable or not.

The words "for the purposes of this section" in the Explanation to Section 115J (1A) are relevant and cannot be construed to extend beyond the computation of tax liability. Hence, interest cannot be charged under Sections 234B and 234C.

And now comes the bonanza from the Supreme Court. The Revenue took up the matter in appeal in CIT vs Kwality Biscuits Ltd (284 ITR 434), which the Supreme Court recently dismissed. This means that the solitary Karnataka view prevails ultimately and the decisions of all the other High Court stand overruled.

The present Section 115JB does not merely refer to the income base as was the case with Sections 115J and 115JA. It levies a tax on book profits.

It must however be pointed out that even under this section, book profits form only an alternate base not recognised in Sections 207 to 210, which require computation of advance tax. Tax on current income for advance tax purposes has still to be on the total income. Interest cannot be charged under Sections 234B and 234C even under the present law.

T. C. A. Ramanujam
(The author is a former Chief Commissioner of Income-Tax.)

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Outsourcing Test Solutions Software Testing Software Bug Testing Software Issues Tracking Software Issue Fix Software Code Optimization Database Design Optimization

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions