Come year 2011 and the MAT provisions under the Income-tax Act, 1961 (‘the Act’) shall complete around two decades of its existence in various forms and with most recent one being Section 115JB of the Act. However, controversies surrounding the interpretation of said provisions fail to die down. Further, with preference of investment-linked deductions to profit-linked incentives, it is envisaged that more and more corporate will be subject to MAT provisions in near future. Out of the tax controversies so created, this Article seeks to discuss about the meaning and scope of ‘net profit’ under MAT provisions of the Act.
Explanation 1 to Section 115JB of the Act defines the word ‘book profit’ to mean ‘net profit’ as shown in the profit and loss account prepared as per Section 115JB(2) of the Act, and as further increased by the amount(s) mentioned in clauses (a) to (i) [Upward Adjustments] and as reduced by amount(s) covered under clauses (i) to (viii) to said Explanation 1 [Downward Adjustments].

The doctrine of judicial precedents, judicial discipline, contempt and Res Judicata have been evolved to ensure stability and certainty in law and deterrent action in case of its violation by subordinate Courts and Tribunals. Otherwise, any judge could take any view on the interpretation of the law resulting in chaos. The subject can be divided into four heads as discussed below:-

I.         Judicial precedents

The subject of judicial precedents can be dealt with under the following heads:–
[1]      What is a precedent?
[2]      What is binding?
[3]      On whom it is binding;
[4]      When it is binding?
[5]      Remedy for curing the error in earlier decision.
[6]     Whether decisions of other courts are binding or only of persuasive value?
[7]      Decisions per incurium.
[8]     Decisions sub silentio.
[9]     Decisions on concession.
[10]    Decisions given exparte.
[11]     Doctrine of stare decisis.
[12]    Effect of retrospective amendment of law or validation statutes.

1.      Introduction

Income-tax Act, 1961 (hereinafter referred to as ‘The Act’) is the only legislation of our country which contain reference to several Central Acts and numerous State Legislations. It becomes very essential therefore, to know the provisions of general law with special reference to Transfer of Property Act, Registration Act, Stamp Act, Development Control Regulations, etc. so as to understand the various taxation issues relating to Real Estate Transactions. Some of the very important taxation issues relating to Real Estate Transactions and implication of s. 50C of the income-tax Act are also discussed in this paper.

2.      Development Rights

2.1    Capital Assets

The term “capital asset” is defined in s. 2 (14) of the Act to mean “property of any kind”, held by the assessee whether or not connected with his business or profession, but specifically excludes ‘stock-in-trade’ and other kinds of specified assets. Therefore, the definition is very wide and any kind of property except those falling in excluded category is a capital asset.

Respected Shri Ashvin Shah, the Chairman of the Convention, Members of the All Gujarat Federation of Tax Consultants and the West Zone of the All India Federation of Tax Practitioners, other dignitaries present, Members of the Bar and the Accountancy profession, ladies and gentlemen:

I consider it a privilege to be invited as the guest of honour for the valedictory session of the National Convention on Taxation – 2011 organised jointly by the All Gujarat Federation of Tax Consultants and the West Zone of the All India Federation of Tax Practitioners. It is nice to be back in Ahmedabad, though for a short period. I like the city for its warmth and hospitality and for the vibrant and good-natured people. During my brief stay here for about 9 months, we felt at home. The city is one of the few cities in India which still retain the old-world charm and welcome everyone cheerfully.

The Income Tax Act 1961 (the Act), as originally enacted, did not contain any special provisions relating to assessment in search cases. For the first time, the legislature enacted special provisions by introducing Chapter XIV-B in the Act by Finance Act 1995 containing sections 158B to 158BH for assessment of search cases where search was initiated on or after 1.7.95. Lot of litigation arose between the tax payers and the revenue authorities. Most of the issues arising from the litigations were settled by various decisions of the Tribunal and the High Courts. However, the legislature, for the reasons best known to it, enacted new provisions by inserting sections 153A to 153C in the Act by Finance Act 2003 for assessment in search cases where search is initiated u/132 or requisition is made u/s 132A on or after 1.6.2003. In order to understand the true scope of the new provisions, it would be appropriate to know the salient features of both the schemes which are being discussed hereafter.

It is true that the law is attired in the language used in the statute. But, it would be sheer folly to assume that this law is bound or self contained in the language only. Law, in its natural state, has a dimension that extends beyond the language used in the statutory provisions. It has capabilities to overflow in to the realm of the unwritten law i.e. the principles of law and its interpretations. Whereas the language used in a statutory provision constitutes the ‘express law’, the legal principles constitute the “implied law.”

Suggestion No. 1:-

Charitable trust/institutions carrying out “any other object of public utility” not to carry on any business etc.

It would be relevant to mention that under the Income Tax Act, 1961 following are the broad principles of law relating to taxation of charitable/religious trusts/institutions:

Income derived from the property held under Trust wholly for charitable or religious purposes is exempt from taxation subject to fulfillment of certain conditions laid down under the Act. The relevant provisions are contained in Section 11 to 13. Section 2 (15) of the Income Tax Act, 1961 is also relevant as it defines” charitable purposes.”

Economic Liberalization in India” started from 1991 which aimed at integration of national economy with “market oriented globalised economy”. The real opening of the economy started with the industrial policy 1991 whereby “continuity with change” was emphasized and main thrust was on relaxation in industrial licensing, foreign investments, transfer of foreign technology, joint ventures etc.

Historically, capital has flown to countries offering better returns, protection and certainty in terms of policies and regulations. Recently, emerging markets are not just experiencing outbound deals; there is also a lot of hindrance by western firms in acquiring targets in these markets. fn “This will be the century of the emerging market”, Goldman Sachs, Chief Financial Officer, David Viniar, told investors. The whole concatenation depicting a shift of economic activities and capital flow constitutes the much talked about abstraction known as “Globalization”. Globalization is one of the serious challenges for tax policy makers, as the consequences of globalization are not restricted by the physical boundaries of countries and domestic legislation. With globalization Indian companies are looking forward to drive cost lower, innovate speedily and increase their international presence, which may help insulate from the vagaries of domestic market and to spread the risk.

Dr. Smt. Kagalkar, Principal of the GLC, Dr. Shivaram, Mr. Arun Sathe, Mr. Patodi, Mr. Dinesh Vyas, Mr. Ranka, Mr. Manmohan, the Vice-President of the Tribunal, my esteemed colleagues, participants in the moot court competition and students of law.

I consider it to be a privilege to deliver the inaugural address of the 7th Palkhivala Moot Court Competition to be held from tomorrow. I am grateful for the opportunity.

It is a fitting tribute to the memory of the legendary Nani Palkhivala that a Moot Court Competition should be held in his city for the benefit of students of law. Though these days there are several avenues open to the new entrants to the legal profession, lawyering as it is traditionally and popularly known has always laid emphasis on the performance in courts which field is now referred to as “litigation”. Dictionaries define an “advocate” as “one who pleads the cause of another, generally in courts of law”. After joining the legal profession, one is expected to take up the client’s brief and plead for him in the courts and the Tribunals. This involves arguments before the judges, legal research, a thorough knowledge of the facts of the case, the law applicable, the precedents bearing on the case, good anticipation of the arguments of the opponent, a deep insight into the strengths and weakness of one’s case and the ability to think on one’s feet. In addition, you are expected to be prepared for the questions coming from the bench. All these are collectively known as skills of advocacy. Nani Palkhivala was widely considered to be the best in court performance and advocacy and every one knows that Justice H. R. Khanna said that the arguments of Mr. Palkhivala in the Supreme Court before the full court of 13 judges constituted to review the Keshavananda Bharati’s case were “rarely equaled and seldom surpassed” in the history of the Supreme Court. A Moot Court Competition affords a platform where you as students of law start honing your skills of advocacy.

Distinguished dignitaries on the dais, my distinguished colleague brothers of the Appellate Tribunal, distinguished invitees and my dear young law students,

I deem it a privilege to be invited as a Guest of Honour on the opening ceremony of the Moot Court Competition being held in memory of late and legendary jurist Mr. Nani Palkhivala. Mr. Patodi, sitting next to me on the dais, has just confided in me the stark reality that most of the brilliant students, produced from reputed Law Colleges – most of their representatives are participating here -, are not choosing to join the profession as Advocates; lured by the high salaries being offered to them by certain big companies/firms.

In the past few decades number of private Law Colleges have been imparting legal education and, probably to attract the students, minimum yard sticks are maintained to award marks thereby such colleges are producing large number of students who are eligible to enter the legal profession. Lawyers are the back bone of this country. Many young and eminent lawyers of the yester years are known to have taken active part in the freedom movement and one should feel proud to belong to such august body rather than being lured by the immediate gains in the form of a fixed monthly remuneration which may initially be attractive but beyond a particular stage the growth is staggered.