KANODIA TECHNOPLAST LTD,DELHI V. ACIT,CENTRAL CIRCLE-15, DELHI

ITA 969/DEL/2025

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Kanodia Technoplast Ltd. appealed against the orders of the CIT(A)-26, New Delhi, which upheld the Assessing Officer's decision to apply MAT under section 115JB for the assessment years 2019-20 and 2020-21. The primary contention was whether MAT should apply to a company that does not pay dividends. The Tribunal examined precedents and the legislative intent behind MAT, concluding that the non-payment of dividends does not exempt a company from MAT. However, the Tribunal also found merit in the assessee's claim for MAT credit, directing a recalculation by the Assessing Officer.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841058 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2020-2021
• Appeal Filed On: 19-02-2025
• Other Referred Cases: BEST TRADING AND AGENCIES LTD. VS. DCIT, SASAMUSA SUGAR WORKS PVT. LTD. VS. DCIT, Distributors (Baroda) Ltd. Vs CIT, Union of India & Anr Vs Raghubir Singh, Sri Agasthayar Trust Vs. CIT, Jai Steel (India), Jodhpur vs. ACIT, JSW Steel Ltd., DCIT Vs. SEW Infrastructure Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISH S. GUPT
• Assessee Lawyers: SAURABH ROHTAGI
• Keywords: Depreciation
• Section: 143(3); 153A; 234B; 115JB; 139(5)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. Manish Agarwal, Accountant Member ITA No.3068/Del/2025 : Asstt. Year: 2019-20 ITA No. 969/Del/2025 : Asstt. Year: 2020-21 Kanodia Technoplast Ltd. A-54, Wazirpur Industrial Area, Delhi-110052 Vs ACIT, Central Circle-19, New Delhi-110055 (APPELLANT) (RESPONDENT) PAN No. AAACK3668F Assessee by : Sh. Saurabh Rohtagi, CA Revenue by : Ms. Amish S. Gupt, CIT-DR Date of Hearing: 29.01.2026 Date of Pronouncement: 27.02.2026 ORDER Per Satbeer Singh Godara, Judicial Member: These assessee’s twin appeals for Assessment Years 2019- 20 and 2020-21 arise against the CIT(A)-26, New Delhi’s DIN & order Nos. ITBA/APL/M/250/2025-26/1075774503(1) and ITBA/APL/M/250/2024-25/1071697016(1) dated 15.04.2025 and 30.12.2024, in proceedings u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”), respectively. 2. Heard both the parties at length. Case files perused. 3. The assessee’s “lead” appeal ITA No. 3068/Del/2025 for assessment year 2019-20 raises the following substantive grounds: “1. Asstt. framed U/s. 153A is unsustainable in law as well as on merits. Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 2 2. That no proper and reasonable opportunity of hearing has been allowed. 3. That under the facts and circumstances of the case, there is no justification in law in computing book profit U/s. 115JB at Rs. 9,30,57,375/-. 4. (A) That the Ld. AO has erred in law as well as on facts in restricting MAT credit to be set off U/s. 115JAA at Rs. 2,11,85,180/- against at Rs. 3,93,30,475/-. (8) That without prejudice, the MAT credit to be allowed U/s. 115JAA is to be allowed before charging of surcharge and Health and Education Cess. 5. That under the facts and circumstances, no interest U/s. 234A, 234B & 234C should have been charged, In any case, the calculations are erroneous and excessive.” 4. We next note that the CIT(A)’s impugned lower appellate discussion has rejected the assessee’s corresponding substantive grounds seeking exemption from section 115JB “MAT” computation; reads as under: 10. Ground no. 8 and 9: These grounds of appeal have been raised against the action of AO in considering the book profit of INR 9,30,57,375/- as the taxable income and levying the applicable tax rate as per section 115JB. The appellant stated that in the return filed in response to notice U/s. 153A has claimed set off of MAT credit of Rs. 3,93,30,475/- U/s. 115JAA. The income has been assessed U/s. 115JB in the assessment order without specifying any reason and only for the reason that the same has been in the intimation U/s. 143(1) issued. Apparently, it shows book profit of INR 9,30,57,375 as per the books of accounts maintained by it for the relevant assessment year. Therefore, the tax liability u/s 115JB of the Act (MAT) would be 15% of such book profit Further, as the tax liability under MAT provisions are higher than that under the normal computation under the income-tax Act, such book profit would be the taxable base as per section 115JB of the Act and the appellant is liable to pay tax at the rate specified under section 115JB of the Act. However, the appellant’s contention is that the appellant company does not pay dividend and therefore, MAT provisions would not be applicable to it. It has relied upon the decisions of BEST TRADING AND AGENCIES LTD. VS. DCIT IN ITA NO. 191 OF 2011 DTD. Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 3 26.08.2020 BY HON’BLE KARNATAKA HIGH COURT, Kolkata ITAT in case of SASAMUSA SUGAR WORKS PVT. LTD. VS. DCIT IN CO. NO. 15/KOL/2017 DTD. 04.07.2022. 10.1 Before going to decide the issue, it is essential to understand, in brief, the evolution of such provision. Income-tax Act generally provides a number of tax relief such as exemptions or deductions including super deduction or accelerated depreciation, etc. as a matter of tax policy to promote certain activities, etc. Accordingly, certain taxpayer, being a company, may not be liable for payment of tax under the provisions of income-tax Act because of tax relief even when it has substantial book profit as per financial statement prepared under the companies Act. This had resulted in substantial increase in the number of zero tax paying companies over a period of time. In order to address this issue, it was proposed to introduce that such zero tax companies should contribute some amount of tax liability if they have positive book profits. This tax liability was known as Minimum Alternative Tax (MAT). MAT was introduced for the first time by the Finance Act, 1987 with effect from assessment year 1988-89. Later on, it was withdrawn by the Finance Act, 1990. The Minimum Alternative Tax provisions were re-introduced vide Finance Act, 1996 and became effective from 01.04.1997. The objective of introduction of MAT is to bring into the tax net “zero tax companies” which in spite of having earned substantial book profits, do not pay any tax due to various tax concessions and incentives provided under the Income-tax Act. As a result, a new section 115J was inserted in the Income-tax Act. This provision is applicable to all the domestic companies. The relevant portion of the memorandum explaining the provision of this new section depicting the legislative intent was as under: “Minimum Alternative Tax (MAT) on companies was introduced by the Finance (No.2) Act, 1996 with effect from 1.4.1997 with a view to ensure that companies with business profits do not regularly avoid paying tax. This was necessary due to rise in the number of zero-tax companies in view of tax preferences granted in the form of exemptions, deductions and high rate of depreciation. The rate of minimum tax was kept at a modest figure by deeming 30% of book profits as total income. This modest amount is likely to go down further with the downward revision of corporate tax rate and abolition of surcharge...” Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 4 Since the introduction of MAT, several changes have been introduced in the provisions of MAT and currently, it is levied on companies as per the provisions of section 115JB. Originally, the MAT provisions compare tax base as per the provisions of Income-tax Act and that determined under the MAT which was 30% of the book profits. The higher of these two tax bases was deemed to be the tax base on which the company was liable to pay tax. However, in subsequent period for assessment year commencing on or after the 1st day of April, 2012, the earlier provision was replaced with a new section 115JB of the Act wherein comparison was made between the tax liability under the provisions of income-tax Act and that under the MAT provisions. As per section 115JB of the Act, every company is required to compute the tax liability under normal computation and also under MAT and the higher of the two would become the tax liability of the company. For the purposes of brevity, the section 115JB is reproduced as under: “Special provision for payment of tax by certain companies. 115JB. (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 eighteen and one-half 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 eighteen and one-half per cent: Provided that for the previous year relevant to the assessment year commencing on or after the 1st day of April, 2020, the provisions of this sub-section shall have effect as if for the words \"eighteen and one-half per cent\" occurring at both the places, the words \"fifteen per cent\" had been substituted. (2) Every assessee,— (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of Schedule III to the Companies Act, 2013 (18 of 2013); or Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 5 (b) being a company, to which the second proviso to sub-section (1) of section 129 of the Companies Act, 2013 (18 of 2013) is applicable, shall, for the purposes of this section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of the Act governing such company: 10.2 As per the MAT provisions under section 115JB of the Act, the tax liability of a company will be higher of tax liability computed as per the normal provisions of the Income-tax Act( normal tax liability) or tax computed @ 15% (plus surcharge and cess as applicable) on book profit (tax liability under MAT) . As per Explanation 1 to section 115JB(2) “book profit” for the purposes of section 115JB means net profit as shown in the statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013 as increased and decreased by certain items prescribed in this regard provided these items are debited or credited respectively. Every company to whom the provisions of section 115JB applies is required to obtain a report from a chartered accountant in Form No. 29B certifying that the book profit has been computed in accordance with the provisions of section 115JB. The report should be obtained before the specified date referred to in Section 44AB. Audit report in Form No. 29B shall be filed electronically. 10.3 In the instant case, the appellant company has a taxable loss under the provisions of the Income-tax Act. Accordingly, it has NIL tax liability under Income-tax Act. However, it has a book profit of INR 9,30,57,375 as per Explanation 1 to section 115JB(2) read with its statement of profit and loss for the relevant previous year prepared in accordance with the provisions of Schedule III to the Companies Act, 2013. There is no dispute to this fact. Under the section 115JB of the Act, the tax liability (MAT liability) would be 15% (plus surcharge and cess as applicable) of such book profit. Apparently, the MAT tax liability would be higher as the tax liability under normal computation is NIL in this case. The provision under section 115JB of the Act requires every eligible assessee as mentioned in sub-section(2) of Section 115JB to compute tax liability under the provisions of income-tax Act and also the tax liability under the provisions of MAT u/s 115JB. As per section 115JB (1) of the Act, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year is less than 15% 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 Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 6 such total income shall be the amount of income-tax at the rate of 15%. 10.4 In view of the aforesaid discussion, the condition of whether the company is a dividend paying or not is immaterial for the purposes of application of MAT provisions under section 115JB of the Act. The only requirement for application of MAT provision is when the tax liability computed under the normal provisions of the Income-tax Act is lower than that computed under section 115JB of the Act, then the book profit as per the financial statement as adjusted as per sub-section (2) of the Section 115JB of the Act is deemed to be the tax base of the company and it is liable to pay tax at the rate prescribed therein. 10.5 Appellant’s reliance on the decision of Hon’ble Karnataka High Court in the case of Best Trading and Agencies Ltd Vs. DCIT In ITA No. 191 of 2011 dated. 26.08.2020, the decision of Kolkata ITAT in case of Sasamusa Sugar Works Pvt. Ltd Vs. DCIT In CO. No. 15/KOL/2017 DTD. 04.07.2022., etc are inapplicable being contrary to provisions of law. In this context, I would like place further reliance on the decision of the Hon’ble Supreme Court in the case of Distributors (Baroda) Ltd. Vs CIT [1985] 155 ITR 120/22 Taxman 49 (SC). The Hon’ble Apex Court held that “to perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience.” This ratio of the Hon’ble Supreme Court has been applied in several cases. Therefore, following the decision of a legally wrong order under the pretext of uniformity and legal consistency is undesirable. The Hon’ble Apex Court in the case of Union of India & Anr Vs Raghubir Singh (178 ITR 548) had reiterated the same principle. It held that, if the previous decision is plainly erroneous, there is a duty of the Court to review it and not perpetuate the mistake i,e. a vital point was not considered or when an relevant statutory provision had not been brought to the notice of the court. Similar view was taken by the Apex Court in the case of Sri Agasthayar Trust Vs. CIT (236 ITR 23). Therefore, this a well settled legal position that an erroneous order does not set any binding precedence. Therefore, the decisions cited above are not applicable to the fact of this case in view of the principle laid down by the Hon’ble Supreme Court in aforesaid cases. 10.6 In the light of above discussions, the action of AO in considering the book profit of INR 9,30,57,375 as taxable income and levying the applicable tax rate as per section 115JB of the Act is upheld and accordingly, this ground of appeal is dismissed.” Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 7 4.1 This is what leaves the assessee aggrieved. 5. It is in this factual backdrop that the assessee inter alia submits that both the learned lower authorities have erred in law and on facts in denying it’s exemption from MAT computation despite the fact that it is not dividend paying company as per Best Trading & Agencies Ltd. Vs. DCIT in ITA No. 191 of 2011 dated 26.08.2020 (Karnataka HC), Sasamusa Sugar Works Pvt. Ltd. Vs. DCIT in CO No. 15/Kol/2017 dated 04.07.2022 and United Provinces Sugar Company Ltd. Vs. ITO ITA No. 1956/Kol/2018 dated 01.04.2021 have also been wrongly distinguished in the department’s favour. 6. The Revenue on the other hand has placed strong reliance on the CIT(A)’ foregoing discussion rejecting the assessee’s claim of exemption from section 115JB MAT computation. 7. We have given our thoughtful consideration to the assessee’s and the Revenue’s foregoing respective vehement submissions. A perusal of the case file indicates that the assessee had filed it’s return on 30.11.2022 u/s 139(5) of the Act stating income of Rs.11,25,52,8870/-. And that the learned departmental authorities in the meantime had received an information of cash seizure involving the assessee and others on 14.05.2020 which made them to issue/execute section 132A warrant on 04.12.2020 in their names. This followed the Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 8 relevant panchnama dated 30.12.2020 as well. The departmental authorities thereafter initiated/issued section 153A notice to the assessee on 18.01.2022 which finally culminated the Assessing Officer’s assessment order dated 29.03.20222 computing it’s income under “MAT” provisions which stands upheld in both the lower appellate proceedings. 8. We have given our thoughtful consideration to the foregoing relevant facts as well as both the party’s respective rival stands. We find no reason to interfere with the learned CIT(A)’s impugned detailed discussion. This is for the precise reason that there is no such stipulation of invoking the impugned “MAT” computation of the learned departmental authorities only in case of company who issues dividend as is the case sought to be projected at the taxpayer’s behest. Coming to hon’ble Karnataka high court decision, we notice that it involved assessment year 2006-07 whereas section 115JB is admittedly applicable from 01.04.2012. We further reiterate at the cost of repetition that till time the legislature has not made dividend issuance/payment as a mandatory condition before section 115JB applicability, the same couldn’t be excluded as mere assumption and presumption. The assessee’s all other judicial precedents (supra) admittedly do not deal with the amended section 115JB of the Act. We thus invoke stricter interpretation in light of Commissioner Vs. Dilip Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 9 Kumar (2018) 9 SSC 1 (SC) to conclude that the CIT(A)’s impugned lower appellate discussion upholding the assessee’s section 115JB deserves to be affirmed. We order accordingly. The assessee failed in it’s first and foremost grievance. 9. Next comes the assessee’s latter ground that it is entitled for “MAT” credit. The Revenue quotes Jai Steel (India), Jodhpur vs. ACIT (2013) 36 taxmann.com 523 (Raj.) to buttress the point that we are in a search assessment wherein the assessee is barred from raising a claim altogether new relief; as the case may be. 10. We find no merit in the Revenue’s stand herein. This is for the precise reason that the impugned assessment year is admittedly an “abated” than “unabated” one wherein the entire assessment is open to be framed afresh in light of incriminating as well as regular books of account in the assessee’s case. Hon’ble Bombay high court in JSW Steel Ltd. (2020) 422 ITR 1 (Bom.) has further settled the issue that such a claim would indeed be raised in an “abated” assessment u/s 153A of the Act. We will indeed be failing in our duty not to further make it clear that this tribunal’s Special Bench in (2024) 167 taxmann.com 446 (Hyd. SB) DCIT Vs. SEW Infrastructure Ltd. has further settled the issue that such an option is not applicable in an instance of an “unabated” than an “abated” Printed from counselvise.com ITA Nos. 3068 & 969/Del/2025 Kanodia Technoplast Ltd. 10 assessment. We thus accept the assessee’s fourth substantive ground herein seeking “MAT” credit in principle and direct the learned Assessing Officer to proceed afresh with the consequential computation as per law. 11. Same order to follow in assessee’s latter appeal ITA No. 969/Del/2025 since involving identical issues. 12. No other ground or argument has been pressed before us. 13. These assessee’s twin appeals ITA Nos. 3068 & 969/Del/2025 are partly allowed for statistical purpose. A copy of this common order be placed in the respective case files. Order Pronounced in the Open Court on 27/02/2026. Sd/- Sd/- (Manish Agarwal) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 27/02/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR Printed from counselvise.com "