S. 115JB: SEZ units continue to be exempt from MAT

Genesys International Corpn. Ltd vs. ACIT (ITAT Mumbai)

The assessee had two undertakings, one of which was a SEZ unit and the other which was a STPI unit. Both units were eligible for deduction u/s 10A. By the Special Economic Zone Act, 2005, s. 10AA was inserted w.e.f. 10.2.2006 to provide deduction in respect of units established in SEZs. By the same Act, sub-sec (6) was inserted in s. 115JB to provide that the profits of an SEZ unit would not be liable to MAT. By the Finance Act, 2007, clause (f) to explanation (1) to s. 115JB (2) was amended w.e.f. 1.4.2008 so as to delete the words “sections 10A or 10B” though sub-sec (6) of s. 115JB was retained. The AO & CIT(A) held that the effect of the deletion of the reference to s. 10A & 10B in s. 115JB meant that the units which were eligible for s. 10A & 10B deduction were no longer exempt from s. 115JB and only units which were eligible for s. 10AA deduction would be exempt from s. 115JB. On appeal by the assessee, HELD allowing the appeal:

S. 115JB (6) does not refer to either s. 10A or s. 10AA but simply provides that the MAT provisions shall not apply to income arising from any business carried on in an unit located in a SEZ. Consequently, despite the fact that an amendment was made in clause (f) of Explanation (1) to s. 115JB(2) to provide that MAT shall apply to units eligible for s. 10A or 10B, a unit which is situated in a SEZ will continue to be exempt from MAT by virtue of s. 115JB(6).