CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
SECTION 115JA — DEEMED INCOME RELATING TO CERTAIN COMPANIES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Historic / Spent Provision — the second-generation Minimum Alternate Tax
Status: HISTORIC / SPENT. Section 115JA was inserted by the Finance (No. 2) Act, 1996, with effect from 1 April 1997, and by its own terms operated only for the assessment years 1997-98, 1998-99, 1999-2000 and 2000-01 (‘the relevant previous year… commencing on or after the 1st day of April, 1997 but before the 1st day of April, 2001’). It is not formally omitted but is spent: it applies to no live assessment year. Tax paid under section 115JA carries MAT credit under section 115JAA.
Life of the provision: Operative for assessment years 1997-98 to 2000-01. Successor to section 115J (assessment years 1988-89 to 1990-91); replaced by the present section 115JB from assessment year 2001-02.
Object: The same anti-avoidance object as section 115J — to subject ‘zero-tax’ / low-tax companies showing healthy book profits to a minimum levy — but with an improved machinery: section 115JA deemed 30 per cent of book profit to be the total income, while section 115JAA (inserted simultaneously) for the first time allowed a tax credit for the MAT so paid, to be carried forward and set off against normal tax in later years.
Finance Act, 2026 impact: None. The Finance Act, 2026 makes no change to section 115JA. The only 2026 change in this Chapter is to section 115JB (extended MAT carve-out for certain non-residents). Section 115JA remains spent.
A. SECTION COMMENTARY
A.1 Where the section sat in the scheme of the Act
After section 115J lapsed in 1990 there was a six-year interval with no minimum-tax. Section 115JA revived the regime for assessment years 1997-98 to 2000-01. It opened with a non obstante clause and applied to an assessee being a company. Where the total income computed under the normal provisions was less than 30 per cent of the company’s book profit, the section deemed the total income chargeable to tax to be an amount equal to 30 per cent of the book profit. Unlike section 115J, section 115JA did not carry the express electricity-company exclusion in its charging words in the same form; instead the scheme was refined and, crucially, paired with the new tax-credit mechanism of section 115JAA.
A.2 How the section worked — the operative scheme (editorial summary)
The following is an editorial summary, given to make the case law intelligible; it is NOT a verbatim reproduction. Sub-section (1) created the 30-per-cent-of-book-profit floor. Sub-section (2) required the profit and loss account to be prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. The Explanation defined ‘book profit’ as the net profit as per that account, increased by specified add-backs (income-tax provision; amounts carried to reserves; provisions for unascertained liabilities; provisions for losses of subsidiary companies; dividends paid or proposed; certain expenditures relatable to exempt incomes, etc.) and reduced by specified deductions (amounts withdrawn from reserves if credited to the profit and loss account; certain exempt incomes; the lower of brought-forward loss or unabsorbed depreciation as per books; profits of a sick industrial company, etc.). Sub-section (4) preserved the normal carry-forward of unabsorbed depreciation, losses, investment allowance and similar allowances — the same structural saving as section 115J(2).
A.3 Core doctrinal themes
Theme (1) — Sanctity of audited accounts (Apollo Tyres): the Assessing Officer accepts the net profit certified under the Companies Act and may make only the Explanation adjustments. This section-115J principle applies in full to section 115JA, the language being in pari materia.
Theme (2) — Add-back of provisions only for ascertained-liability type items: a ‘provision for unascertained liability’ may be added back, but a provision representing the diminution in the value of an asset (e.g. provision for bad and doubtful debts) is not a provision for a liability and could not be added back under the Explanation as it then stood (CIT v. HCL Comnet Systems). Parliament later reversed this by a retrospective amendment (see Theme (5)).
Theme (3) — Advance tax and interest are attracted (Rolta India): section 115JA is a self-contained code; the company is liable to pay advance tax on its book-profit liability, and interest under sections 234B and 234C follows on default — the opposite of the section-115J position in Kwality Biscuits.
Theme (4) — Clause (iv)-type loss/depreciation deduction: ‘loss’ includes depreciation; the deduction is the lower of brought-forward loss or unabsorbed depreciation as per books (Surana Steels, carried over from section 115J).
Theme (5) — Legislative reversal of HCL Comnet: the Finance (No. 2) Act, 2009 inserted, with retrospective effect from 1 April 1998, a clause in the Explanation to section 115JA(2) (mirrored in section 115JB(2) with effect from 1 April 2001) requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. The HCL Comnet result was thereby neutralised prospectively-cum-retrospectively for the affected years; practitioners must read HCL Comnet subject to this amendment.
The defining advance of the section 115JA regime over section 115J was section 115JAA: the excess of MAT over the normal tax for a year became a ‘tax credit’ that could be carried forward and set off against normal tax in subsequent years (originally for a limited number of assessment years). This converted MAT from a final additional burden into, in substance, a timing difference / prepayment of tax. The credit jurisprudence is digested in the section 115JAA file (notably CIT v. Tulsyan NEC Ltd.).
B. STATUTORY POSITION (verbatim heading; operative scheme summarised editorially)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025):
Deemed income relating to certain companies.
115JA. (1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, 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, 1997 but before the 1st day of April, 2001 (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. [Sub-sections (2) to (4) and the Explanation follow in the bare Act; their detailed text is summarised in Part A above and is not reproduced verbatim here.]
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Sanctity of audited accounts (applies via Apollo Tyres)
Apollo Tyres Ltd. v. Commissioner of Income-tax (2002) 255 ITR 273 (SC).
Held / Ratio: Although decided on section 115J, Apollo Tyres governs section 115JA: the Assessing Officer may verify only that the accounts are certified under the Companies Act, and thereafter may make only the increases and reductions specified in the Explanation; he cannot go behind the net profit shown in the audited profit and loss account.
Relevance to this section: The starting point for any section 115JA book-profit dispute. (Full digest in the section 115J file.)
Source: Supreme Court of India · (2002) 255 ITR 273 · verified via Indian Kanoon / itatonline.
Cluster C-2 : Add-backs — provision for bad and doubtful debts / diminution in value of an asset
Commissioner of Income-tax v. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC).
Facts: The assessee, engaged in data-communication and satellite-communication services, debited a provision for doubtful debts of about Rs. 92.15 lakh in its accounts. The Assessing Officer added it back to book profit under clause (c) of the Explanation to section 115JA (provision for unascertained liabilities).
Issue: Whether a provision for bad and doubtful debts can be added back to book profit under clause (c) of the Explanation to section 115JA as a ‘provision for unascertained liability’.
Held: The Supreme Court held that the debt in question is a ‘debt receivable’ by the assessee; a provision for bad and doubtful debts is made to cover the probable diminution in the value of an asset and is not a provision for a liability, because even if the debt is not recovered no liability is fastened on the assessee. It therefore fell outside clause (c) and could not be added back. The Court distinguished a provision for a liability (addable) from a provision for diminution in the value of an asset (not addable under clause (c)).
Ratio / why it matters: Under the Explanation as it then stood, a provision merely reducing the carrying value of an asset was not an add-back; only provisions for liabilities (ascertained or unascertained as specified) were.
Subsequent legislative reversal: The Finance (No. 2) Act, 2009 inserted a clause in the Explanation (to section 115JA(2) with retrospective effect from 1 April 1998, and correspondingly to section 115JB(2) from 1 April 2001) requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. HCL Comnet must be read subject to this retrospective amendment; for years governed by the amended Explanation the provision for doubtful debts is now added back. The CBDT issued a clarification to the same effect.
Relevance to this section: The leading authority construing the add-back clauses of section 115JA; essential reading together with the 2009 amendment.
Source: Supreme Court of India · Civil Appeal No. 5800 of 2008, decided 23 September 2008 · (2008) 305 ITR 409 · verified via itatonline / taxguru. Reversal: Finance (No. 2) Act, 2009 (legislative position, noted candidly).
Cluster C-3 : Advance tax and interest — sections 234B / 234C ARE leviable under section 115JA
Joint Commissioner of Income-tax v. Rolta India Ltd. (2011) 330 ITR 470 (SC).
Facts: The assessee filed a nil return; the assessment under section 143(3) determined nil income under the normal provisions but levied tax on book profit of about Rs. 1.52 crore under section 115JA, and charged interest under section 234B of about Rs. 39.73 lakh. The assessee contended that advance tax was not payable on book-profit income and that interest under sections 234B/234C could not be charged (relying on the Kwality Biscuits line decided under section 115J).
Issue: Whether advance tax is payable on income computed under section 115JA (and section 115JB), and consequently whether interest under sections 234B and 234C is leviable on default.
Held: The Supreme Court held that sections 115JA and 115JB are special, self-contained provisions; for the purpose of advance tax the current income and the assessed income have to be evaluated in terms of the statutory scheme of section 115JA/115JB. All companies are liable to pay advance tax with reference to their book-profit liability, and on default interest under sections 234B and 234C is attracted. The levy of interest was held to be ‘inescapable’.
Ratio / why it matters: Unlike section 115J (Kwality Biscuits — no advance-tax interest), sections 115JA and 115JB attract the full advance-tax regime and the consequential interest under sections 234B/234C. The drafting of the later sections as self-contained codes is the reason for the difference.
Relevance to this section: The governing authority that section 115JA (and 115JB) liability bears advance-tax interest; resolves the long-running 234B/234C controversy for the MAT successors of section 115J.
Source: Supreme Court of India · decided 7 January 2011 · (2011) 330 ITR 470 · verified via Indian Kanoon / itatonline.
Cluster C-4 : Clause (iv)-type deduction — loss includes depreciation (applies via Surana Steels)
Surana Steels (P) Ltd. v. Deputy Commissioner of Income-tax (1999) 237 ITR 777 (SC).
Held / Ratio: ‘Loss’ in the loss/depreciation set-off clause includes depreciation; the deduction is the lower of brought-forward loss or unabsorbed depreciation as per the books. Decided on section 115J but applied to the parallel clause of section 115JA. (Full digest in the section 115J file.)
Relevance to this section: Governs the loss/depreciation reduction in section 115JA book-profit computation.
Source: Supreme Court of India · (1999) 237 ITR 777 · verified via Indian Kanoon / CaseMine.
Cluster C-5 : Export profits and other reductions (read with the 115JB line)
The treatment of section 80HHC export profits in MAT book-profit computation was authoritatively settled (under section 115JB, on language in pari materia with section 115JA) in Ajanta Pharma Ltd. v. CIT (2010) 327 ITR 305 (SC): the full eligible export profit, not the phased/reduced figure under section 80HHC(1B), is the amount to be reduced from book profit. The Special Bench in DCIT v. Syncome Formulations (I) Ltd. (2007) 292 ITR (AT) 144 (Mum.)(SB) had earlier taken the same view, and the Kerala Full Bench in CIT v. Packworth Udyog Ltd. addressed the mode of computation. These authorities, digested in the section 115JB file, apply equally to the corresponding reduction clause of section 115JA.
D. PRACTITIONER NOTES
(1) Section 115JA is spent but its assessments, MAT credits (section 115JAA) and interest disputes still surface. (2) The decisive section-115JA holdings are HCL Comnet (provision for diminution not an add-back — now subject to the 2009 retrospective reversal) and Rolta India (advance-tax interest IS leviable). (3) Apollo Tyres and Surana Steels carry over from section 115J. (4) Tax paid under section 115JA generates credit under section 115JAA — see that file (Tulsyan NEC). (5) Where a citation is marked ‘existence and ratio confirmed’, read the full report before relying on it.
CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
SECTION 115JA — DEEMED INCOME RELATING TO CERTAIN COMPANIES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Historic / Spent Provision — the second-generation Minimum Alternate Tax
Status: HISTORIC / SPENT. Section 115JA was inserted by the Finance (No. 2) Act, 1996, with effect from 1 April 1997, and by its own terms operated only for the assessment years 1997-98, 1998-99, 1999-2000 and 2000-01 (‘the relevant previous year… commencing on or after the 1st day of April, 1997 but before the 1st day of April, 2001’). It is not formally omitted but is spent: it applies to no live assessment year. Tax paid under section 115JA carries MAT credit under section 115JAA.
Life of the provision: Operative for assessment years 1997-98 to 2000-01. Successor to section 115J (assessment years 1988-89 to 1990-91); replaced by the present section 115JB from assessment year 2001-02.
Object: The same anti-avoidance object as section 115J — to subject ‘zero-tax’ / low-tax companies showing healthy book profits to a minimum levy — but with an improved machinery: section 115JA deemed 30 per cent of book profit to be the total income, while section 115JAA (inserted simultaneously) for the first time allowed a tax credit for the MAT so paid, to be carried forward and set off against normal tax in later years.
Finance Act, 2026 impact: None. The Finance Act, 2026 makes no change to section 115JA. The only 2026 change in this Chapter is to section 115JB (extended MAT carve-out for certain non-residents). Section 115JA remains spent.
A. SECTION COMMENTARY
A.1 Where the section sat in the scheme of the Act
After section 115J lapsed in 1990 there was a six-year interval with no minimum-tax. Section 115JA revived the regime for assessment years 1997-98 to 2000-01. It opened with a non obstante clause and applied to an assessee being a company. Where the total income computed under the normal provisions was less than 30 per cent of the company’s book profit, the section deemed the total income chargeable to tax to be an amount equal to 30 per cent of the book profit. Unlike section 115J, section 115JA did not carry the express electricity-company exclusion in its charging words in the same form; instead the scheme was refined and, crucially, paired with the new tax-credit mechanism of section 115JAA.
A.2 How the section worked — the operative scheme (editorial summary)
The following is an editorial summary, given to make the case law intelligible; it is NOT a verbatim reproduction. Sub-section (1) created the 30-per-cent-of-book-profit floor. Sub-section (2) required the profit and loss account to be prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. The Explanation defined ‘book profit’ as the net profit as per that account, increased by specified add-backs (income-tax provision; amounts carried to reserves; provisions for unascertained liabilities; provisions for losses of subsidiary companies; dividends paid or proposed; certain expenditures relatable to exempt incomes, etc.) and reduced by specified deductions (amounts withdrawn from reserves if credited to the profit and loss account; certain exempt incomes; the lower of brought-forward loss or unabsorbed depreciation as per books; profits of a sick industrial company, etc.). Sub-section (4) preserved the normal carry-forward of unabsorbed depreciation, losses, investment allowance and similar allowances — the same structural saving as section 115J(2).
A.3 Core doctrinal themes
Theme (1) — Sanctity of audited accounts (Apollo Tyres): the Assessing Officer accepts the net profit certified under the Companies Act and may make only the Explanation adjustments. This section-115J principle applies in full to section 115JA, the language being in pari materia.
Theme (2) — Add-back of provisions only for ascertained-liability type items: a ‘provision for unascertained liability’ may be added back, but a provision representing the diminution in the value of an asset (e.g. provision for bad and doubtful debts) is not a provision for a liability and could not be added back under the Explanation as it then stood (CIT v. HCL Comnet Systems). Parliament later reversed this by a retrospective amendment (see Theme (5)).
Theme (3) — Advance tax and interest are attracted (Rolta India): section 115JA is a self-contained code; the company is liable to pay advance tax on its book-profit liability, and interest under sections 234B and 234C follows on default — the opposite of the section-115J position in Kwality Biscuits.
Theme (4) — Clause (iv)-type loss/depreciation deduction: ‘loss’ includes depreciation; the deduction is the lower of brought-forward loss or unabsorbed depreciation as per books (Surana Steels, carried over from section 115J).
Theme (5) — Legislative reversal of HCL Comnet: the Finance (No. 2) Act, 2009 inserted, with retrospective effect from 1 April 1998, a clause in the Explanation to section 115JA(2) (mirrored in section 115JB(2) with effect from 1 April 2001) requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. The HCL Comnet result was thereby neutralised prospectively-cum-retrospectively for the affected years; practitioners must read HCL Comnet subject to this amendment.
A.4 The tax-credit innovation (section 115JAA)
The defining advance of the section 115JA regime over section 115J was section 115JAA: the excess of MAT over the normal tax for a year became a ‘tax credit’ that could be carried forward and set off against normal tax in subsequent years (originally for a limited number of assessment years). This converted MAT from a final additional burden into, in substance, a timing difference / prepayment of tax. The credit jurisprudence is digested in the section 115JAA file (notably CIT v. Tulsyan NEC Ltd.).
B. STATUTORY POSITION (verbatim heading; operative scheme summarised editorially)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025):
Deemed income relating to certain companies.
115JA. (1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, 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, 1997 but before the 1st day of April, 2001 (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. [Sub-sections (2) to (4) and the Explanation follow in the bare Act; their detailed text is summarised in Part A above and is not reproduced verbatim here.]
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Sanctity of audited accounts (applies via Apollo Tyres)
Apollo Tyres Ltd. v. Commissioner of Income-tax (2002) 255 ITR 273 (SC).
Held / Ratio: Although decided on section 115J, Apollo Tyres governs section 115JA: the Assessing Officer may verify only that the accounts are certified under the Companies Act, and thereafter may make only the increases and reductions specified in the Explanation; he cannot go behind the net profit shown in the audited profit and loss account.
Relevance to this section: The starting point for any section 115JA book-profit dispute. (Full digest in the section 115J file.)
Source: Supreme Court of India · (2002) 255 ITR 273 · verified via Indian Kanoon / itatonline.
Cluster C-2 : Add-backs — provision for bad and doubtful debts / diminution in value of an asset
Commissioner of Income-tax v. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC).
Facts: The assessee, engaged in data-communication and satellite-communication services, debited a provision for doubtful debts of about Rs. 92.15 lakh in its accounts. The Assessing Officer added it back to book profit under clause (c) of the Explanation to section 115JA (provision for unascertained liabilities).
Issue: Whether a provision for bad and doubtful debts can be added back to book profit under clause (c) of the Explanation to section 115JA as a ‘provision for unascertained liability’.
Held: The Supreme Court held that the debt in question is a ‘debt receivable’ by the assessee; a provision for bad and doubtful debts is made to cover the probable diminution in the value of an asset and is not a provision for a liability, because even if the debt is not recovered no liability is fastened on the assessee. It therefore fell outside clause (c) and could not be added back. The Court distinguished a provision for a liability (addable) from a provision for diminution in the value of an asset (not addable under clause (c)).
Ratio / why it matters: Under the Explanation as it then stood, a provision merely reducing the carrying value of an asset was not an add-back; only provisions for liabilities (ascertained or unascertained as specified) were.
Subsequent legislative reversal: The Finance (No. 2) Act, 2009 inserted a clause in the Explanation (to section 115JA(2) with retrospective effect from 1 April 1998, and correspondingly to section 115JB(2) from 1 April 2001) requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. HCL Comnet must be read subject to this retrospective amendment; for years governed by the amended Explanation the provision for doubtful debts is now added back. The CBDT issued a clarification to the same effect.
Relevance to this section: The leading authority construing the add-back clauses of section 115JA; essential reading together with the 2009 amendment.
Source: Supreme Court of India · Civil Appeal No. 5800 of 2008, decided 23 September 2008 · (2008) 305 ITR 409 · verified via itatonline / taxguru. Reversal: Finance (No. 2) Act, 2009 (legislative position, noted candidly).
Cluster C-3 : Advance tax and interest — sections 234B / 234C ARE leviable under section 115JA
Joint Commissioner of Income-tax v. Rolta India Ltd. (2011) 330 ITR 470 (SC).
Facts: The assessee filed a nil return; the assessment under section 143(3) determined nil income under the normal provisions but levied tax on book profit of about Rs. 1.52 crore under section 115JA, and charged interest under section 234B of about Rs. 39.73 lakh. The assessee contended that advance tax was not payable on book-profit income and that interest under sections 234B/234C could not be charged (relying on the Kwality Biscuits line decided under section 115J).
Issue: Whether advance tax is payable on income computed under section 115JA (and section 115JB), and consequently whether interest under sections 234B and 234C is leviable on default.
Held: The Supreme Court held that sections 115JA and 115JB are special, self-contained provisions; for the purpose of advance tax the current income and the assessed income have to be evaluated in terms of the statutory scheme of section 115JA/115JB. All companies are liable to pay advance tax with reference to their book-profit liability, and on default interest under sections 234B and 234C is attracted. The levy of interest was held to be ‘inescapable’.
Ratio / why it matters: Unlike section 115J (Kwality Biscuits — no advance-tax interest), sections 115JA and 115JB attract the full advance-tax regime and the consequential interest under sections 234B/234C. The drafting of the later sections as self-contained codes is the reason for the difference.
Relevance to this section: The governing authority that section 115JA (and 115JB) liability bears advance-tax interest; resolves the long-running 234B/234C controversy for the MAT successors of section 115J.
Source: Supreme Court of India · decided 7 January 2011 · (2011) 330 ITR 470 · verified via Indian Kanoon / itatonline.
Cluster C-4 : Clause (iv)-type deduction — loss includes depreciation (applies via Surana Steels)
Surana Steels (P) Ltd. v. Deputy Commissioner of Income-tax (1999) 237 ITR 777 (SC).
Held / Ratio: ‘Loss’ in the loss/depreciation set-off clause includes depreciation; the deduction is the lower of brought-forward loss or unabsorbed depreciation as per the books. Decided on section 115J but applied to the parallel clause of section 115JA. (Full digest in the section 115J file.)
Relevance to this section: Governs the loss/depreciation reduction in section 115JA book-profit computation.
Source: Supreme Court of India · (1999) 237 ITR 777 · verified via Indian Kanoon / CaseMine.
Cluster C-5 : Export profits and other reductions (read with the 115JB line)
The treatment of section 80HHC export profits in MAT book-profit computation was authoritatively settled (under section 115JB, on language in pari materia with section 115JA) in Ajanta Pharma Ltd. v. CIT (2010) 327 ITR 305 (SC): the full eligible export profit, not the phased/reduced figure under section 80HHC(1B), is the amount to be reduced from book profit. The Special Bench in DCIT v. Syncome Formulations (I) Ltd. (2007) 292 ITR (AT) 144 (Mum.)(SB) had earlier taken the same view, and the Kerala Full Bench in CIT v. Packworth Udyog Ltd. addressed the mode of computation. These authorities, digested in the section 115JB file, apply equally to the corresponding reduction clause of section 115JA.
D. PRACTITIONER NOTES
(1) Section 115JA is spent but its assessments, MAT credits (section 115JAA) and interest disputes still surface. (2) The decisive section-115JA holdings are HCL Comnet (provision for diminution not an add-back — now subject to the 2009 retrospective reversal) and Rolta India (advance-tax interest IS leviable). (3) Apollo Tyres and Surana Steels carry over from section 115J. (4) Tax paid under section 115JA generates credit under section 115JAA — see that file (Tulsyan NEC). (5) Where a citation is marked ‘existence and ratio confirmed’, read the full report before relying on it.