BISHNU KRISHNA SHRESTHA AND ANR V. COMMISSIONER OF INCOME TAX AND ORS

CW/18828/2017

AI Insights

The case revolves around a challenge to the provisions of Section 115JB and Section 80IC of the Income Tax Act, 1961, by the petitioners, Bishnu Krishna Shrestha and M/s S.b.l. Private Limited. They argued that the introduction of Section 115JB, which imposes a minimum tax on book profits, undermines the benefits provided under Section 80IC, which offers tax deductions to certain enterprises in special category states like Uttarakhand. The petitioners contended that this led to discriminatory treatment of companies in these states compared to others, violating their rights under Article 14 of the Constitution. The respondents, including the Commissioner of Income Tax Appeals and the Central Board of Direct Taxes, defended the provisions, highlighting their legislative intent and constitutional validity. The court's decision dismissed the petition, affirming the distinct roles and applications of Sections 115JB and 80IC.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 685487 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 10-07-2018
• Assessment Year: misc
• Other Referred Cases: R. S. Raghunath Vs. State of Karnataka, Nagpur Improvement Trust and Ors. Vs. Vithal Rao and Ors., Union of India (UOI) and Ors. Vs. A. Sanyasi Rao and Ors., State of U.P. and Ors. Vs. Deepak Fertilizers and Petrochemical Corporation Ltd, Nand Kishore Vs. State of Punjab, Kusum Ingots and Alloys Ltd. Vs. Union of India (UOI) and Ors., Apollo Tyres Ltd. vs. CIT, Morgan Stanelay Mutual Fund vs. Kartick Das & other connected matter
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: R D RASTOGI; SAMEER JAIN; C S SINHA; DAKSH PAREEK; ARJUN SINGH
• Assessee Lawyers: J P KHAITAN; AGNIBASH SENGUPTA; GUNJAN PATHAK; ISHITA RAWAT
• Keywords: Book profit; Constitutional Validity; Discrimination; Income Tax; Special provisions; Tax liability; Ultravares
• Section: 115JB; 80IC; 80IC

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writs No. 18828/2017 1. Bishnu Krishna Shrestha, S/o Late Shri Ganesh Chand Shrestha , 34, Vasant Marg, Vasant Vihar-1, South West Delhi 2. M/s. S.b.l. Private Limited, Formerly Known As M/s S.b.l Industries Ltd. , Sbl House 2, Commercial Complex, Shrestha Vihar, New Delhi, 11009 Through Gm- Finance And Accounts, Mr. Rajesh Gupta. ----Petitioners Versus 1. Commissioner Of Income Tax Appeals-Iii, Jaipur , Having His Office At Statue Circle, Bhagwan Das Road, C Scheme, Jaipur, Rajasthan 302001 2. Income Tax Officer , Ward 72, Jaipur 3. Income Tax Appellate Tribunal, Jaipur Bench, Jaipur , Having Its Office At Shivaji Nagar, Jaipur - 302007 4. Central Board Of Direct Taxes , Having Its Office At North Block, New Delhi. Through Chairman. 5. Union Of India, Through The Secretary, Ministry Of Finance, Department Of Revenue , Having His Office At The Central Secretariat, North Block, New Delhi ----Respondents For Petitioner(s) : Mr. J.P. Khaitan Senior Counsel with Mr. Agnibash Sengupta, Mr. Gunjan Pathak, Ms. Ishita Rawat For Respondent(s) : Mr. R.D. Rastogi ASG with Mr. Sameer Jain, Mr. C.S. Sinha, Mr. Daksh Pareek, Mr. Arjun Singh HON'BLE MR. JUSTICE KALPESH SATYENDRA JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 10/07/2018 (2 of 24) [CW-18828/2017] 1. By way of this petition, the petitioners herein have challenged the provisions of Section 115JB & 80IC of the Income Tax Act, 1961 to be ultravires inasmuch as the benefits granted under Section 80IC cannot be withdrawn by introduction of provisions of Section 115JB. 2. Counsel for the petitioners has taken us to the provisions of Section 80IC & Section 115JB which reads as under:- “80-IC. Special provisions in respect of certain undertakings or enterprises in certain special category States.—(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise,— (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning— (i)on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Tech- nology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Sikkim; or (ii)on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or (3 of 24) [CW-18828/2017] (iii)on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Techno-logy Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North- Eastern States; (b)which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning— (i)on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii)on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North- Eastern States. (3) The deduction referred to in sub-section (1) shall be— (i)in the case of any undertaking or enterprise referred to in sub-clauses (i) and (iii) of clause (a) or sub-clauses (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year; (ii)in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub- clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains. (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely:— (i)it is not formed by splitting up, or the reconstruc- tion, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result (4 of 24) [CW-18828/2017] of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii)it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.—The provisions of Explanations1and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub- section. (5) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section 10A or section 10B, in relation to the profits and gains of the undertaking or enterprise. (6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. (7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. (8) For the purposes of this section,— (i)\"Industrial Area\" means such areas, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii)\"Industrial Estate\" means such estates, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (iii)\"Industrial Growth Centre\" means such centres, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (iv)\"Industrial Park\" means such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (v)\"Initial assessment year\" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufacture (5 of 24) [CW-18828/2017] or produce articles or things, or commences operation or completes substantial expansion; (vi)\"Integrated Infrastructure Development Centre\" means such centres, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (vii)\"North-Eastern States\" means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura; (viii)\"Software Technology Park\" means any park set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry; (ix)\"substantial expansion\" means increase in the investment in the plant and machinery by at least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken; (x)\"Theme Park\" means such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government.’. ‘115JB. Special provision for payment of tax by certain companies.—(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, 2001, is less than seven and one-half per cent of its book profit, the tax payable for the relevant previous year shall be deemed to be seven and one-half per cent of such book profit. (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 Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956): Provided that while preparing the annual accounts including profit and loss account,— (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, (6 of 24) [CW-18828/2017] shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) : Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,— (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such finan- cial year falling within the relevant previous year. Explanation.—For the purposes of this section, \"book profit\" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by— (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or amounts of expenditure relatable to any income to which section 10 or section 10A or section 10B or section 11 or section 12 apply, if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from (7 of 24) [CW-18828/2017] reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 2001 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of section 10 or section 10A or section 10B or section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation .—For the purposes of this clause, the loss shall not include depreciation; or (iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c ) of sub-section (3) or sub- section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or (vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumu- lated losses. Explanation.—For the purposes of this clause, \"net worth\" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section (8 of 24) [CW-18828/2017] 72 or section 73 or section 74 or sub-section (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form from an accountant as defined in the Explanation below sub- section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142. (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.’. 3. Counsel for the petitioners contended that the Hon’ble Prime Minister of India on 31st March, 2002 announced and promised that fiscal incentives will be provided to attract industrial investment for special category States including State of Uttarakhand. In this regard the office memorandum dated 7th January, 2003 has been filed alongwith petition which reads as under:- “Ministry of Commerce & Industry (Department of Industrial Policy & Promotion) New Delhi, dated 7th January, 2003 Office Memorandum Subject : New Industrial Police and other concessions for the State of Uttaranchal and the State of Himachal Pradesh The Hon’ble Prime Minister, during the visit to Uttarnchal from 29th to 31st March, 2002, had interalia made an announcement that “Fax and Central Excise Concessions to attract investments in the industrial sector will be worked out for the Special Category States including Uttaranchal. The Industries eligible for such incentives will be environment friendly with potential for local employment generation and use of local resources. In pursuance of the above announcement discuss on strategy and action plant for development of industries and generation complement in the States of Uttaranchal and Himachal Pradesh were held with the various related Ministries/agencies on the issue, inter-alia, infrastructure development financial concessions and to provide easy market access. The new initiatives would provide the (9 of 24) [CW-18828/2017] required incentives as well as an enabling environment for industrial development, improve availablility of capital and increase market access to provide a fillip to the private investment in the State According, it has been decided to provide the following package of incentives for the States of Uttaranchal and Himachal Pradesh. 3.1 Fiscal incentives to new industrial units and to existing units on their substantial expansion: New industrial units and existing industrial units on their substantial expansion as defined, set up in Growth Centres, Industrial Infrastructure Development Centres(IIDCs), industrial Estates, Export Processing Zones,Theme Parks (Food Processing Parks, Software Technology Parks, etc.) as stated in Annexure-1 and other areas as notified from time to time by the Central Government are entitled to (I) 100%(hundred per cent) outright excise duty exemption for a period of 10 years from the date of commencement of commercial production. 100% income tax exemption for initial period of five years and therafter 30 % for companies and 25% for other than companies for a further period of five years for the entire states of Uttaranchal and Himachal Pradesh from the date of commencement of commercial production. (ii) All New industries in the notified location would be eligible for-capital investment subsidy @ 15% of their investment in plaint & machinery, subject to a celling of Rs. 30 Lakh. The existing units will also be entitled to this subsidy on their substantial expansion, as defined. (iii) Thrust Sector Industries as mentioned in Annexure-II are entitled to similar concessions as mentioned in para 3(i) &(ii) above in the entire State of Uttaranchal and Himachal Pradesh without any are restrictions. 3.2 Development of Industrial Infrastructure (I) The finding pattern under the Growth Centre Scheme currently envisaging in Central Assistance of Rs. 10 crore per centre is raised to Rs. 15 crore per centre. (ii) The financing pattern of integrated infrastructure Development Centres (IIDC) between Government of India and SIDBI will change from 2:3 to 4:1 and the GOI funds would be in the nature of a grant, so as to provide the required infrastructural support. 3.3 Other incentives: (I) Deendayal Hathkargha Protsahan Yojna and other incentives of Ministry of Textiles : The funding pattern between Government of India and both the States would be changed from 50:50 to (10 of 24) [CW-18828/2017] 90:10 under this Scheme Ministry of Textiles would extend its package of incentives, as notified for North-Eastern States, to the States of Uttarnchal and Himachal Pradesh also (ii) Ministry of Food Processing Industries would include Uttaranchal in difficult areas category. The State of Himachal pradesh is already included in the difficult areas category. (iii) Pradhan mantri Rozgar yojana (PMRY) : Ministry of Agro & Rural Industries would provide for States of Himachal Pradesh and Uttaranchal relaxation under PMRY with respect to Age ( i.e. 18-40 years from 18-35 years) and subsidy @ 15% of the project cost subject to a ceilling of Rs.15,000/- per entrepreneur) 3.4 Ineligible Industries under the Policy: The list of industries excluded from the purview of proposed concessions is at Annexure-III In addition, the Valley Notification S. O. No.102(E) dated 1st February, 1989(Annexure-IV) as amended from time to time, issued by Ministry of Environment & Forests would continue to operate in the Doon Valley area and the industries notified under it are excluded from the proposed concessions, in the State of Uttranchal 3.5 Nodal Agency : The Nodal Agency for routing the subsidies/incentives under various schemes under this policy would be notified separately. 4. Government reserves the right to modify any part of the policy in the interest of public 5. The Ministry of Finance& Company Affairs (Department of Revenue), Ministry of Agro & Rural Industries, Ministry of Textiles, Ministry of Food Processing Industries, Ministry of Small Scale Industries etc, are requested to amend act/ Rules/Notifications etc and issue necessary instructions for giving effect to those decisions.” 4. He has also taken us through the prayers which were claimed before the High Court of Uttarakhand at Nainital which reads as under:- “It is therefore, most respectfully prayed that this Hon’ble Court may be pleased to A Issue a writ order or direction in the nature of Certiorari quashing the order/letter dated 5th June, 2008 (filed as part of Annexure-3) passed by the respondent No.3. B Declare and restrain the respondents from implementing the (11 of 24) [CW-18828/2017] order/letter dated 5th June 2008(filed as part of Annexure-3) passed by the respondent No.3 as the same would be violative of Article 14& 19 of the Constitution of India. C Issue a writ, order or direction in the nature of Mandamus directing the respondents not to apply Section 115JB of Income Tax, Act in the case of the petitioner covered under Section 80-IC of the income Tax Act and also covered under the promise made by the Government of India on 07.01.03(Annexure-4): D. Issue a writ, order or direction in the nature of Mandamus declaring/ holding that Section 80IC of the Income Tax Act has overriding effect over/bypasses the provisions of Section 115B of the Income Tax Act and directing the respondents to provide benefits provided under Section 80IC of the Income Tax Act. E. Pass such further order or orders as this Hon’ble Court amy deem fit and proper in the facts and circumstances of the case.” 5. The said petition was decided by Uttarakhand High Court on 26th November, 2010 holding as under:- “The learned counsel for the petitioners, lastly, cited the judgment of the Hon’ble Supreme Court rendered in the case of R. S. Raghunath Vs. State of karnataka and another reported in AIR 1992 SC 81. In that case too, the Hon’ble Supreme Court was concerned with two enactments. It was held, one of those enactments was special and the other was a general and the non obstante clause, in the general statute, did not affect the special statute. It was contended that since Section 80-IC is a special provision, Section 115JB does not affect the same. Section 115JB, being a part of Chapter XIII-B of the Act, is also a special provision contained in the later part of the statute and, unless the context otherwise requires, should be deemed t control Section 80-IC. Furthermore, as aforesaid, while Section 80-IC, as a special provision, allows deductions, Section 115JB, as a special provision, imposes a tax liability on an (12 of 24) [CW-18828/2017] assessee, being a company, if its tax liability, assessed after grant of such deductions, it is less than what has been provided therein.” 6. Against which SLP was preferred in the Hon’ble Supreme Court being SLP (Civil) 6319/2011 which was decided on 6th January, 2012. The order of the Supreme Court reads as under:- “In our view, the writ petition ought not to have been filed before the High Court by the petitioner and the petitioner ought to have gone by the normal statutory remedy. Be that as it may, liberty is given to the petitioner to argue the points raised in this petition before CIT(A). We are informed that appeal has been filed before CIT (A) and the same is pending CIT(A) will decide the matter uninfluenced by observations made by the High Court in the impugned judgment. Accordingly, the special leave petition stands disposed of. All contentions on both sides are expressly kept open.” 7. Counsel for the petitioners has also taken us to the main ground of appeal namely that there is gross discrimination and in this regard it has been averred as under:- “The petitioners state that any different view would result in invidious discrimination and manifestly unjust and unreasonable consequences, and would render the provisions of section 115JB of the Income Tax Act, 1961 vulnerable to challenge for being violative of Article 14 read with Article 265 and 300A of the Constitution of India. To elaborate- “(a) Section 80-IC is applicable to all categories of assessees, whether they be individuals, firms, companies, etc. The exemption under section 80-IC is meant to be enjoyed by all assessees. (b) Section 115JB is applicable only to a company assessee in whose case the income tax payable on its total income is less than 10% of its book profit. (C) Whereas all assessees, including a company assessee in whose case the income tax payable on the total income is more than 10% of the book profit, would enjoy the exemption under section 80-IC and would not be called upon to pay any income tax, another company assessee having similar undertaking in Uttarakhand would be called (13 of 24) [CW-18828/2017] upon to pay tax under section 115JB merely because the income tax payable on its total income is less than 10% of its book profit. The position with respect to company assessees may be illustrated thus- (I) Company ‘A’ having a manufacturing unit in Uttarakhand has a profit of Rs. 40 lacs which is exempt under section 80-IC. If section 115JB is applied in its case, it will have a pay tax @ 10% on book profit amounting to Rs.4 lacs. “Company ‘B’ having a manufacturing unit in Uttarakhand has a profit of Rs. 40lacs from it and another manufacturing unit elsewhere with a profit of Rs.60 lacs. Rs. 40 lacs is exempt under section 80-IC. Normal tax on Rs.60 lacs @ 30% is Rs. 18 lacs. Tax on book profit of Rs.100 lacs @ 10% under section 115Jb would be Rs. 10 lacs. Company’B’ would only pay normal tax of Rs. 18 lacs on the income of its other unit, namely Rs.60 lacs, and will not pay any tax on the profit of Rs.40 lacs earned by the Uttarakhand unit. Since normal tax of Rs. 18 lacs would be more than 10% of the book profit i.e., Rs.10 lacs, Company ‘B’ will not have to pay any tax under section 115JB even in respect of the income of the Uttarakhand unit. “ 8. Counsel for the petitioners has contended that in view of the various decisions of the Supreme Court, the provisions which has been introduced by the legislation by amendment of Section 115JB is discriminatory of the amount as the persons who are doing business in the two States were granted different deduction who are prepared to pay tax on the income which has been derived by the unit in Uttarakhand and Himachal Pradesh whereas, in other States there is no deduction as conferred under Section 80IC. 9. Counsel for the petitioners has relied upon following decisions of Supreme Court:- 1. Nagpur Improvement Trust and Ors. Vs. Vithal Rao and Ors. (1973) 1 SCC 500 :- 32. It will not be denied that a statute cannot tax some owners of land leaving untaxed others equally situated. If the owners of the land cannot be taxed differently how can some owners be indirectly taxed by way of compulsory acquisition ? It is urged (14 of 24) [CW-18828/2017] that if this were the law it will tie the hands of the State in undertaking social reforms. We do not agree. There is nothing in the Constitution which debars the State from bettering the lot of millions of our citizens. For instance there is nothing to bar the State from taxing unearned increment if the object is to deny owners the full benefit of increase of value due to development of a town. It seems to us, as we have already said, that to accede to the contentions of the appellant and the States would be destructive of the protection afforded by Article 14 of the Constitution. The States would only have to constitute separate acquiring bodies for each city, or Division or indeed to achieve one special public purpose and lay down different principles of compensation. “ 2. Union of India (UOI) and Ors. Vs. A. Sanyasi Rao and Ors. (1996) 3 SCC 465 :- 22. However, the denial of relief provided by Sections 28 to 43C to the particular businesses or trades dealt with in Section 44AC calls for a different consideration. Even according to Revenue, the provisions (Sections 44AC and 206C) are only \"machinery provisions\". If so, why should the normal reliefs afforded to all assesses be denied to such traders? Prima facie, all assessees similarly placed under the Income Tax Act are entitled to equal treatment. In the matter of granting various reliefs provided under Sections 28 to 43C, the assessees carrying on business are similarly placed and should there be a law, negativing such valuable reliefs to a particular trade or business, it should be shown to have some basis and fair and rational. It has not been shown as to why the persons carrying on business in the particular goods specified in Section 44AC are denied the reliefs available to others. No plea is put forward by Revenue that these trades are distinct and different even for the grant of reliefs under Sections 28 to 43C of the Act. The denial of such reliefs to trades specified in Section 44AC, available to other assessees, has no nexus to the object sought to be achieved by the legislature. To this extent it appears to us that the non-obstacle clause in Section 44AC denying such reliefs has no basis and so unfair and arbitrary and equality of treatment is denied to such persons, necessitating grant of appropriate relief (See Royappa v. State of Tamil Nadu MANU/SC/0380/1973 : (1974)ILLJ172SC , Menak Gandhi v. Union of India MANU/SC/0133/1978 : [1978]2SCR621 , Ajay Hasia v. Khalid Mujib Sehravardi.” 3. State of U.P. and Ors. Vs. Deepak Fertilizers and Petrochemical Corporation Ltd (2007) 10 SCC 342 :- 13. From a perusal of the notifications in question, it is evident that other fertilizers of the NPK category i.e. N.P .K. 12:32:16; N.P .K. 15:15:15; N.P .K. 20:20:0; N.P .K. 14:35:14 are included in the exemption list, whereas it is a matter of fact that the NPK 23:23:0 fertilizer is also a fertilizer of the same category, but it is omitted from the list. According to the notification dated 2nd November, 1994, the intention of the State was not to tax the sale of \"potassium phosphatic fertilizers\" but when we go into enquiry of nomenclature of these chemical compounds, we find that the NPK 23:23:0 is a \"nitro-phosphate fertilizer\" which has no potassium (K) ingredient. The Notifications dated 10th April, 1995 and 15th May, 1995 clearly include NPK 20:20:0, which is also a nitro-phosphate fertilizer with zero (15 of 24) [CW-18828/2017] content of potassium (K). This classification made under the notification dated 10th April, 1995 does not hold good on the rational basis and is hence subject to scrutiny. The fact remains stagnant that the notifications include a fertilizer NPK 20:20:0 which is of the same category as that of fertilizer NPK 23:23:0, because both are nitro-phosphate fertilizers. This shows that the state has not classified the two commodities on a rational basis for the purpose of imposing tax. This court in the case of Tata Motors Ltd. v. State of Maharashtra and Ors.MANU/SC/0464/2004 : AIR2004SC3618 , has held: It is no doubt true that the state has enormous powers of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because several fiscal adjustments are to be made by the government depending upon the needs of the revenue and the economic circumstances prevailing in the state. Even so an action taken by the state cannot be irrational and so arbitrary so as to one set of rules for one period and another set of rules for another period by amending the laws in such a manner as to withdraw the benefit that had been given resulting in higher burden so far as the assessee is concerned without any reason. Retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. (Underlining is ours). 15. The learned Counsel appearing for the State relying heavily on the case of Kerala Hotel and Restaurant Association and Ors. v. State of Kerala and Ors. MANU/SC/0170/1990 : [1990]1SCR516 , contended that the State has widest latitude where measures of economic and fiscal regulation are concerned. There is no dispute on this principle of law as enumerated in the aforesaid decision of this Court. However, this same law must not be repugnant to the Article 14 of the Constitution, i.e., it must not violate the right to equality of the people of India, and if such repugnancy prevails then, it shall stand void up to the level of such repugnancy under Article 13(2) of the Constitution of India. Therefore, every law has to pass through the test of constitutionality, which is nothing but a formal name of the test of rationality. We understand that whenever there is to be made any type of law for the purpose of levying taxes on a particular commodity or exempting some other commodity from taxation, a sought of classification is to be made. Certainly, this classification cannot be a product of a blind approach by the administrative authorities on which the responsibility of delegated legislations is vested by the constitution. In a nutshell, the notifications issued by the Trade Tax Department of the State of U.P ., dated 10th April, 1995 and 15th May, 1995 lack the sense of reasonability because it is not able to strike a rational balance of classification between the items of the same category. As a result of this, NPK 23:23:0 is not given exemption from taxation where as all other NPK fertilizers (16 of 24) [CW-18828/2017] of the same category like that of NPK 20:20:0 are provided with the exemption from taxation. 16. The reasonableness of this classification must be examined on the basis, that when the object of the taxing provision is not to tax the sale of certain chemical fertilizers included in the list, which clearly points out that all the fertilizers with the similar compositions must be included without excluding any other chemical fertilizer which has the same elements and compositions. Thus, there is no reasonable nexus of such classification among various chemical fertilizers of the same class by the state. This court in the case of Ayurveda Pharmacy (supra) held that two items of the same category cannot be discriminated and where such a distinction is made between items falling in the same category it should be done on a reasonable basis, in order to save such a classification being in contravention of Article 14 of the Constitution of India.” 4. Nand Kishore Vs. State of Punjab (1995) 6 SCC 614 :- 19. It would then have to be seen the twin play of the notion of deemed constitutionality and bar of constructive res-judicata. Raising the constitutionality of a provision of law, as it appears to us, stands on a different footing than raising a matter on a bare question of law, or mixed question of law and fact or on fact. There is a presumption always in favour of constitutionality of the law. The onus is heavy on the person challenging it. It is by the discharge of onus that the presumption of constitutionality can be crossed over. When a person enters a Court for relief and does not challenge the constitutionality of the law governing the matters directly and substantially in issue, it only means and implies that he goes by the presumption of constitutionality. He cannot on this stance be deemed to have raised the question of constitutionality and the question of constitutionality to have been decided against him and such matter to have been directly and substantially in issue. The constitutionality of the Rule relating to compulsory retirement cannot be deemed to have been questioned and decided against the appellant on the principles of \"might and ought\" or it being \"directly and substantially in issue\". It cannot be taken as a rule that one of the pleas, either by the plaintiff or the defendant, in every suit or proceeding, must of necessity relate to the constitutionality of the law on which the cause is founded or defended in order to obviate the plea of constructive res-judicata being raised in an eventuality. It cannot also be taken as a rule that constitutionality of the law involved is a matter directly and substantially in issue, and if not (17 of 24) [CW-18828/2017] raised renders a mute decision in favour of its constitutionality barring the plea being raised in a subsequent suit. If there be read such a rule in all civil litigation, it would, to our mind, be against public policy vexing and burdening the courts to go into the constitutionality of provisions of law in every case. When under the impugned rule, the Government assumed to itself the power to compulsorily retire a permanent government servant after ten years of qualifying service, the court's act of striking that Rule as unconstitutional is the law which appeared on the scene, not only to break the presumption of constitutionality but to declare it void. In a sense the offending provision was never there and in the other it was henceforth not there. In either event, it would be within the ambit of the emphasised word in Mathura Prasad's case.” 5. Kusum Ingots and Alloys Ltd. Vs. :Union of India (UOI) and Ors. (2004) 6SCC 254 :- 24. Learned counsel for the appellant in support of his argument would contend that situs of framing law or rule would give jurisdiction to Delhi High Court and in support of the said contention relied upon the decisions of this Court in Nasiruddin v. State Transport Appellate Tribunal MANU/SC/0026/1975 : [1976]1SCR505 and U.P . Rashtriya Chini Mill Adhikari Parishad, Lucknow v. State of U.P . and Ors. MANU/SC/0422/1995 : AIR1995SC2148 . So far as the decision of this Court in Nasiruddin v. State Transport Appellate Tribunal (supra) is concerned it is not an authority for the proposition that the situs of legislature of a State or the authority in power to make subordinate legislation or issue a notification would confer power or jurisdiction on the High Court or a bench of the High Court to entertain petition under Article 226 of the Constitution. In fact this Court while construing the provisions of United Provinces High Courts (Amalgamation) Order, 1948 stated the law thus: \"The conclusion as well as the reasoning of the High Court is incorrect. It is unsound because the expression \"cause of action\" in an application under Article 226 would be as the expression is understood and if the cause of action arose because of the appellate order or the revisional order which came to be passed at Lucknow then Lucknow would have jurisdiction though the original order was passed at a place outside the areas in Oudh. It may be that the original order was in favour of the person applying for a writ. In such case an adverse appellate order might be the cause of action. The expression \"cause of action\" is well-known. If the cause of action arises wholly or in part at a place within the specified Oudh areas, the Lucknow Bench will have jurisdiction. If the cause of action arisen wholly within the specified Oudh areas, it is indisputable that the Lucknow Bench would have exclusive jurisdiction in such a matter. If the cause of action arises in part within the (18 of 24) [CW-18828/2017] specified areas in Oudh it would be open to the litigant who is the dominus litis to have his forum conveniens. The litigant has the right to go to a Court ' where part of his cause of action arises. In such cases, it is incorrect to say that the litigant chooses any particular Court. The choice is by reason of the jurisdiction of the Court being attracted by part of cause of action arising within the jurisdiction of the Court. Similarly, if the cause of action can be said to have arisen partly within specified areas in arisen in Oudh and partly outside the specified Oudh areas, the litigant will have the choice to institute proceedings either at Allahabad or Lucknow. The Court will find out in each case whether the jurisdiction of the Court is rightly attracted by the alleged cause of action\" . 25. The said decision is an authority for the proposition that the place from where an appellate order or a revisional order is passed may give rise to a part of cause of action although the original order was at a place outside the said area. When a part of the cause of action arises within one or the other High Court, it will be for the petitioner to choose his forum. 30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. (See Bhagar Singh Bagga v. Dewan Jagbir Sawhany, AIR 1941 Cal; Mandal Jalan v. Madanlal,; Bharat Coking Coal Limited v. Jharia Talkies & Cold Storage Pvt. Ltd.; S.S. Jain & Co. and Anr. v. Union of India and Ors. (1994) CHN 445; New Horizon Ltd. v. Union of India, MANU/DE/0014/1994 : AIR1994Delhi126 ).” 10. He has also contended that the decision of Uttarakhand High Court has nothing to do with the present petition as in both the petitions, the prayers are different. He has also stated that the other case is also on the board today where in view of the observations made by the Supreme Court, they have preferred statutory appeal and both the appeals are admitted in this Court and both are required to be heard together. 11. Counsel for the respondents Mr. R.D. Rastogi Additional Solicitor General has taken us to the provisions of 80IC and 115JB and contended that there is distinction between deduction under Section 80IC subject to Clause-3 and it is not exemption and when the question of exemption arises the same is to be made in (19 of 24) [CW-18828/2017] appropriate case. In support of his submissions, he has relied upon the following decisions:- “1. Bhavesh D. Parish & Ors. vs. Union of India & Anr.; (2000) 5 SCC 471 “30. Before we conclude there is another matter to which we must advert to. It has been brought to our notice that Section 45-S of the Act has been challenged in various High Courts and few of them have granted the stay of provisions of Section 45-S. When considering an application for staying the operation of a piece of legislation, and that to too pertaining to economic reform or change then the courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the courts must show judicial restrain in staying the applicability of the same. Merely because a statute comes up for examination and some arguable point is raised, which persuades the courts to consider the controversy, the legislative will should not normally be put under suspension pending such consideration, it is now well-settled that there is always a presumption in favour of the constitutional validity of any legislation, unless the same is set-aside after final hearing and, therefore, the tendency to grant stay of legislation relating to economic reform, at the interim stage, cannot be understood. The system of checks and balances has to be utilised in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itself.” 2. C.I.T. and Ors. vs. Yokogawa India Ltd. (2017) 2 SCC 1 :- “3. The broad question indicated above may be conveniently dissected into the following specific questions arising in the cases under consideration. (iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption Section and not a deduction section? 15. The difference between the two expressions 'exemption' and 'deduction', though broadly may appear to be the same i.e. immunity from (20 of 24) [CW-18828/2017] taxation, the practical effect of it in the light of the specific provisions contained in different parts of the Act would be wholly different. The above implications cannot be more obvious than from the case of Civil Appeal Nos. 8563/2013, 8564/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible Assessees seeking the benefit of adjustment of losses against profits made by eligible units. 17. From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an Assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the Assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the Assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, The export turnover and the total turnover for the purposes of Sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the Assessee outside these zones or units for the purposes of this provision. 19. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. “ 3.Dharmendra Kirthal vs. State of U.P. and Anr. (2013) 8SCC 368:- “23. In Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar and Ors. MANU/SC/0024/1958 : AIR 1958 SC 538, this Court had ruled that there is always a presumption in favour of the constitutionality of an enactment and the burden is on him who challenges the same to show that there has been a clear transgression of the constitutional principles and it is the duty of the Court to sustain that there is a presumption of (21 of 24) [CW-18828/2017] constitutionality and in doing so, the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of the legislations.” 4. Apollo Tyres Ltd. vs. CIT (SC): 255 ITR 273:- “For deciding this issue, it is necessary for us to examine the object of introducing section 115J in the Income Tax Act which can be easily deduced from the Budget Speech of the then Finance Minister of India made in Parliament while introducing the said section which is as follows (see [1987] 165 ITR (St.) 14): “It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so-called ‘zero-tax’ highly profitable companies deserves attention. In 1983, a new section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not sem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will to have to pay a ‘minimum corporate tax’ on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30 percent of its book profit. In other words, a domestic widely held company will pay tax of at least 15 percent. of its book profit. This measure will yield a revenue gain of approximately Rs. 75 crores.” 12. Then for the purpose of supporting the arguments that the registered office of the company is situated in Uttarakhand, the petition ought to have been filed at Uttarakhand he relied on the case of Morgan Stanelay Mutual Fund vs. Kartick Das & other connected matter; 1994 (4) SCC 225 wherein it has been held as under:- “40. Today the corporate sector is expanding. The disgruntled litigants indulge in adventurism. Though, in this case we have come to the conclusion that the District Consumer Forum will have no power to grant injunction yet in general cases it becomes necessary to evolve certain venue restrictions. (22 of 24) [CW-18828/2017] 41. As to the effect of incorporation it is stated in Halsbury's Law of England (4th Edition, Volume 7, Page 55, para 83) as under: When incorporated, the company is a legal entity or persona distinct from its members, and its property is not the property of the members. The nationality and domicile of a company is determined by its place of registration. A company incorporated in the United Kingdom will normally have both British nationality and English or Scottish domicile, depending upon its place of registration, and it will be unable to change that domicile.... The residence of a company is of great importance in revenue law, and the place of incorporation is not conclusive on this question. In general, residence depends upon the place where the central control and management of the company is located. It follows that if such central control is divided, the company may have more than one residence. The locality of the shares of a company is that of the register of shares. The head office of a company is not, however, necessarily the registered office of the company, but is the place where the substantial business of the company is carried on and its negotiations conducted. Like an individual or a firm, a company can, for the purposes of the Rules of the Supreme Court, carry on business in more places than one.” 13. We have heard counsel for both the sides. 14. Before proceeding with the matter, it will not be out of place to mention that while deciding the vires of statute, we have to look at the object of the special introduction of Section 115JB which falls under Chapter 12B which pertains to special provisions relating to certain companies and keeping in mind, the speech delivered by the Finance Minister referred hereinabove. In our considered opinion, the very purpose of the introduction of this provision is to charge minimum tax on book profit. The distinction between the book profit and the taxable book profit is to match with the minimum tax as shown under the Companies Act by the special Act which was introduced. (23 of 24) [CW-18828/2017] 15. The main argument of the counsel for the petitioners is that there is discrimination and it is violative of Article 14 between individual and company. In our considered view, there is a reasonable classification by way of special provision for the companies, therefore, it will fall in reasonable classification inasmuch as u/s 80IC deals with the deduction for assessee whereas this provision will come into play only in case of company which is an assessee. 15.1. Regarding discrimination in the amount, the company illustration which has been reflected in ground 2 is very clear. It is true that on first point the argument canvassed by counsel for the petitioners is very attractive, however, in view of the purpose of Section 115JB it is clear that it is provided to charge minimum tax from every company where more income from other State and where no exemption is available, if they are paying higher tax and they are matching with the total book profit of the minimum tax then the calculation made therein will not attract Article 14 of the Constitution. The requirement and the purpose of introducing this Section 115JB is to collect minimum tax from both the companies on book profit. 16. In that view of the matter, the argument canvassed by counsel for the petitioners though attractive but in our considered opinion, is devoid of any merit and the taxing statute is to be looked into for the purpose of interpretation of the introduction of the Section. In our considered opinion, the very object was to avoid net tax liability by the company through book profit from the company. In that view of the matter, while interpreting the statute, the court has to be very cautious in holding it to be bad in (24 of 24) [CW-18828/2017] law otherwise the object of introduction of the Section will be frustrated. 17. In our considered opinion, the provisions are in accordance with law and the Government has power to introduce such provisions. Apart from that 80IC deduction which is made is from the gross profit and will apply only on the book profit therefore, Section 115 JB & 80 IC both run in different fields. 18. In that view of the matter, the contention of Section 80IC exemption denied, is devoid of merit and deserves to be rejected. 19. Counsel for the respondents has also stated that earlier in 2017 they have also challenged the same and this is pertaining to assessment year 2007, thus, there is gross delay of 10 years in challenging the provision and appeal was filed in 2015. 20. In view of the above, the petition stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/22 "