MAT Exemption Not Available Once Company Ceases to Be Sick | ITAT

Case Details: Supertex Industries Ltd. vs. Deputy Commissioner of Income-tax - [2025] 179 taxmann.com 677 (Mumbai-Trib.)

Judiciary and Counsel Details

• Justice C.V. Bhadang, President & Ms Padmavathy S., Accountant Member
• Dharan Gandhi for the Appellant.
• Swapnil Choudhary, Sr AR for the Respondent.

Facts of the Case

The assessee was a sick company and was declared as such by the Board for Industrial and Financial Reconstruction (BIFR). The company’s net worth became positive as per the Audited Balance Sheet (ABS) for the assessment year 2009-10. The assessee requested BIFR to discharge it from the purview of SICA/BIFR. Accordingly, vide order dated June 16, 2010, the BIFR held that the company ceased to be a sick industrial company and that the revival of the company was sustainable.

During the assessment proceedings, the Assessing Officer (AO) computed the book profits of the assessee under section 115JB and levied tax accordingly. The assessee contended that it was exempt from the provisions of Section 115JB as it was a sick company and its accumulated losses had not yet been recouped.

The CIT(A) dismissed the assessee’s appeal. The aggrieved assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the scheme of revival of the assessee was sanctioned by BIFR on 08.09.2008 (SS-08) and the assessee was discharged from the provisions of BIFR vide order dated 16.06.2010. Thus, the company was in financial distress from September 8, 2008, to June 16, 2010.

Clause 20E of SS-08, read in conjunction with the directions issued by BIFR vide para 4.4(b), would mean that after the assessee’s discharge from SICA/BIFR, the department is obliged to consider exemption under Section 115JB. All that the scheme directed the department was to consider “exemption”.

The scheme did not provide any binding directions regarding exemption from section 115JB after the company was discharged from SICA/BIFR. The exemption from provisions of section 115JB is “to be considered”; then it would not be correct to exclude the profits of the year under consideration while computing book profits, since the net worth of the assessee has become positive.

Accordingly, the assessee was not entitled to the exemption from section 115JB.

List of Cases Reviewed

• DIT vs. Board for Industrial & Financial Reconstruction [WP(C) Nos. 1940, 1942, 1943, 1945, 1946, 1948-1958 of 2011, dated 23-3-2011][Para 21] – distinguished.

List of Cases Referred to

• Supertex Industries Ltd. v. DCIT [IT Appeal No. 4649(Mum) of 2018, dated 20-9-2022] (para 8)
• DIT vs. Board for Industrial & Financial Reconstruction [WP(C) Nos. 1940, 1942, 1943, 1945, 1946, 1948-1958 of 2011, dated 23-3-2011] (para 8).