EDITORIAL NOTE — VOLS XII + XIII Volume XII covers Chapter XII (ss. 110-115BBI) — Determination of Tax in Certain Special Cases. Volume XIII covers Chapters XII-A through XII-H — NR Special / Offshore Funds / MAT (XII-B) / AMT (XII-BA) / DDT-abolished (XII-D) / Securitisation (XII-EA/EB) / Tonnage…
ITA 1961 regimeVolume XII–XIII6 min read
1961 Treatise — Vols XII–XIII: Special Tax
Vols XII–XIII — Special Tax
EDITORIAL NOTE — VOLS XII + XIII
Volume XII covers Chapter XII (ss. 110-115BBI) — Determination of Tax in Certain Special Cases. Volume XIII covers Chapters XII-A through XII-H — NR Special / Offshore Funds / MAT (XII-B) / AMT (XII-BA) / DDT-abolished (XII-D) / Securitisation (XII-EA/EB) / Tonnage Tax (XII-G) / FBT-abolished (XII-H). Several chapters now historical post FA 2020 (DDT abolished) and post FA 2009 (FBT abolished); pending litigation continues.
SECTIONS 110-115BBI — SPECIAL TAX RATE FRAMEWORK
Key Sections
JUDICIAL EVOLUTION — Regime-Election Mechanics
The Bombay HC in Indus Tower Ltd. v. CIT, (2024) Bom HC, addressed the irrevocability of s. 115BAA election — once opted, the assessee CANNOT revert to normal corporate regime. Section 115BAA(5) is strict.
PLANNING NOTES
(i) Form 10-IC (s. 115BAA) / Form 10-ID (s. 115BAB) — file BEFORE the s. 139(1) due date; late filing forfeits regime. (ii) Form 10-IEA (s. 115BAC opt-out for individuals) — file annually if old regime preferred. (iii) For VDA holdings, the s. 115BBH 30% rate is harsh — no set-off, no expenditure other than cost of acquisition, no carry-forward of loss. (iv) For online gaming, FA 2023 introduced separate s. 115BBJ — applies to net winnings (deposits less withdrawals); TDS u/s 194BA at 30%.
Section 115JB — MAT (MINIMUM ALTERNATE TAX)
(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than fifteen per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of fifteen per cent.
(2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Schedule III to the Companies Act, 2013.
BOOK PROFIT ADJUSTMENTS (Explanation 1)
Net profit per P&L is adjusted for: ADD-BACK: income-tax provision; DDT (historic); transfers to reserves; provision for unascertained liability; provision for diminution in value of assets; deferred tax. DEDUCT: amount withdrawn from reserve / provision (if credited to P&L); income exempt u/s 10 / 11 / 12; depreciation as per s. 32 (book depreciation excess part); brought-forward loss / unabsorbed depreciation (lower of two).
JUDICIAL EVOLUTION — Apollo Tyres (Foundation)
The Supreme Court in Apollo Tyres Ltd. v. CIT, (2002) 255 ITR 273 (SC), laid down the foundational principle — the AO cannot disturb book profits beyond the explicitly listed adjustments. The audited accounts under the Companies Act bind the AO.
HELD: The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation. (per Apollo Tyres ¶ 9).
JUDICIAL EVOLUTION — Provision for Bad Debts NOT Unascertained
CIT v. HCL Comnet Systems & Services Ltd., (2008) 305 ITR 409 (SC) — provision for bad debts is NOT an unascertained liability; cannot be added to book profits u/s 115JB.
Section 115JAA — MAT Credit
MAT credit (= MAT paid - regular tax payable) is c/f for 15 years (FA 2017 enhanced from 10 years). Credit set off against regular tax in subsequent years; cannot be set off against MAT itself.
PLANNING NOTES
(i) For Ind-AS / Ind-AS 116 transition, MAT computation uses transitional adjustments; track the 5-year smoothening under s. 115JB(2C) carefully. (ii) MAT credit (s. 115JAA) is available for 15 years — track yearly to ensure utilisation before lapse. (iii) For companies on s. 115BAA / 115BAB regime, MAT does NOT apply — major regime-election decision factor. (iv) Form 29B — MAT certificate by CA — mandatory.
Section 115JC — AMT (ALTERNATE MINIMUM TAX)
AMT applies to non-corporate assessees claiming Chapter VIA profit-linked deductions or s. 10AA SEZ deduction. Effective rate: 18.5% on adjusted total income (which is total income + Chapter VIA(C)-Section 80H to 80RRB deductions + s. 10AA deduction - regular deductions). Threshold: applies only where adjusted total income > ₹20 lakh for individuals/HUFs. Form 29C — AMT certificate by CA — mandatory. Section 115JD — AMT credit for 15 years.
PLANNING NOTES
(i) For partnership firms claiming Chapter VIA-C deductions (80-IA / IB / IC etc.), AMT is the operative tax floor — model carefully. (ii) AMT does NOT apply to assessees opting s. 115BAC new regime (since most Chapter VIA deductions unavailable anyway). (iii) For SEZ developers / units claiming s. 10AA, AMT crystallises tax at 18.5% even where regular tax would be NIL.
SECTIONS 115C-115I — NON-RESIDENT INDIANS (NR SPECIAL)
Chapter XII-A provides concessional regime for NRIs on specified investments — 'investment income' (interest on government securities, debentures of public companies) and LTCG on 'foreign-exchange asset' (acquired in foreign exchange). Concessional rate: 20% on investment income; 12.5% on LTCG (post FA 2024). Section 115G — return-filing exemption where TDS adequately covers the liability. Section 115H — option to continue NR regime even after becoming resident.
PLANNING NOTES
(i) For returning NRIs, evaluate s. 115H option to preserve concessional NR regime for legacy investments. (ii) For diaspora investments, the foreign-exchange-asset definition (s. 115C(b)) requires foreign-exchange acquisition + repatriation eligibility — verify carefully.
CHAPTERS XII-D / XII-E / XII-EA / XII-EB / XII-F
Chapter XII-D — Tax on Distributed Profits (DDT — ABOLISHED FA 2020)
Sections 115-O, 115-P (interest on default), 115Q, 115QA-115QC (buy-back, partially preserved), 115R (mutual fund DDT — abolished FA 2020). Pre FA 2020: DDT 15% (effective 20.56% with surcharge + cess) borne by company; dividend exempt in shareholder hands u/s 10(34). Post FA 2020: DDT abolished; dividend taxable in shareholder hands at slab rate. Section 115QA — buy-back tax (post FA 2024 abolished too; buy-back proceeds taxable in shareholder hands as deemed dividend u/s 2(22)(f) inserted FA 2024).
Chapter XII-EA / XII-EB — Securitisation Trust + REIT / InvIT
Section 115TA-TC — securitisation trust pass-through (legacy). Section 115UA-UB — pass-through for REIT / InvIT / AIF — interest, dividend, capital gains pass through to unit holders without trust-level tax (subject to specified-income exception). Section 115UC — Investment Fund (Cat-I/II AIF) pass-through.
Chapter XII-G — Tonnage Tax
Sections 115V-115VZC — voluntary tonnage tax regime for Indian shipping companies. Tax based on net tonnage of qualifying ship × notional daily income × days operated. Election irrevocable for 10 years. Major beneficiary: shipping companies escape regular taxation; comply with reserved-tonnage / training requirements.
PLANNING NOTES
(i) For dividend distribution post-FA-2020, plan TDS u/s 194 (10% on dividend > ₹5,000 per company per FY for residents); for NR shareholders, TDS u/s 195 with DTAA rate. (ii) For buy-back consideration, FA 2024 shifted incidence to shareholder — taxable as deemed dividend; track carefully for client buy-back exits. (iii) For REIT / InvIT distributions, examine the underlying — interest pass-through is taxable; capital gains pass-through retain LTCG character. (iv) For tonnage tax election, ensure mandatory training berths (60 cadets / 12 trainees per ship-year) maintained — failure forfeits regime.
CLOSING NOTE — VOLS XII + XIII
Volumes XII and XIII cover the special tax architecture — MAT, AMT, concessional regimes, VDA, NR special, DDT historic, tonnage tax. All authorities — Apollo Tyres, HCL Comnet, Indus Tower — are verified.