Section 115JA — Deemed Income Relating to Certain Companies

Section 115JA of the Income-tax Act, 1961, introduced the concept of Minimum Alternate Tax (MAT) for companies. This section applies when a company's total income, as computed under the Income-tax Act, is less than 30% of its book profit. In such cases, the book profit is deemed to be the total income, and the company is required to pay tax on this deemed income at the specified rate. The significance of this section lies in its role in ensuring that companies with substantial book profits do not avoid tax liability through various deductions and exemptions. The statutory test involves computing the book profit as per the company's profit and loss account, prepared in accordance with the Companies Act. The burden of proof lies with the taxpayer to demonstrate that the book profit has been correctly computed. This provision ensures a minimum level of tax contribution from companies, thereby broadening the tax base.

Common Litigation Flashpoints

1. Interpretation of 'book profit' under the Companies Act
2. Adjustments to book profit for MAT calculation
3. Applicability of MAT on foreign companies
4. Discrepancies in profit and loss account preparation

Judgments on Section 115JA — Deemed Income 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.
• Reliance Capital Ltd. vs Dy. Commissioner of Income Tax — ITAT,
  If there are sufficient interest-free funds available, it can be presumed that investments were made from these funds rather than borrowed funds.
• 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.
• 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.