Section 115J — Special Provisions Relating to Certain Companies

Section 115J of the Income-tax Act, 1961, was introduced to ensure that companies with substantial book profits pay a minimum tax, even if they report low taxable income. This section applies to companies whose total income, as computed under the Act, is less than 30% of their book profits. In such cases, 30% of the book profits is deemed to be the total income, and tax is levied accordingly. This provision was significant in preventing companies from avoiding tax through various deductions and exemptions, ensuring a minimum tax contribution. The statutory test involves comparing the computed total income with 30% of the book profits. The burden of proof lies with the taxpayer to justify the lower taxable income. This section was a precursor to the Minimum Alternate Tax (MAT) regime.

Common Litigation Flashpoints

1. Interpretation of 'book profits' for tax calculation
2. Disputes over allowable deductions in computing book profits
3. Challenges in the applicability of Section 115J to specific companies
4. Controversies regarding adjustments to book profits for tax purposes

Judgments on Section 115J — Special Provisions Relating to Certain Companies

• Income Tax Officer (Exemption) vs Wrestling Federation of India — ITAT,
  The proviso to Section 2(15) does not apply if the receipts are incidental to the fulfillment of the charitable objectives and not used as business receipts.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Apollo Tyres Ltd vs Commissioner of Income Tax — SC,
  The Assessing Officer cannot go behind the net profit shown in the profit and loss account certified under the Companies Act for the purpose of Section 115-J.
• Radhasoami Satsang, Saomi Bagh, Agra vs Commissioner of Income Tax — SC,
  A fundamental aspect permeating through different assessment years, if sustained by not being challenged, should not be changed in a subsequent year without material change.
• Anand Education Society vs Asstt. Director of Income Tax(E) — ITAT,
  The AO must substantiate claims of excessive payments to relatives with evidence of unreasonableness compared to market standards.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.