2002 (8) TMI 858 - AT - Income Tax

Summary

Issues Involved:
1. Non-granting of deduction under section 80-I.
2. Computation of deduction under section 80HHC.
3. Computation of book profit under section 115JA.
4. Levy of interest under section 234A.
5. Levy of interest under section 234B.

Issue-wise Detailed Analysis:

1. Non-granting of deduction under section 80-I:
The first ground of appeal concerned the non-granting of deduction under section 80-I amounting to Rs. 3,26,450. The assessee's counsel did not press for this ground, leading to its dismissal.

2. Computation of deduction under section 80HHC:
The second issue was the computation of deduction under section 80HHC. The assessee contended that the Assessing Officer (AO) erroneously computed the deduction at Rs. 84,91,223 instead of the claimed Rs. 1,34,36,127. The assessee presented a computation showing that the AO deducted 90% of items added to the Profit & Loss Account and export incentives but did not allow the indirect cost of 10% of export incentives. The Tribunal noted that the assessee's claim of Rs. 1,34,36,127 was incorrect and that the correct computation should be Rs. 91,46,913. The Tribunal found that the AO's method of reducing profits by 90% of certain items was appropriate, as the legislature intended to account for 10% as expenditure incurred to earn those profits. However, due to discrepancies in the figures provided, the Tribunal restored the issue to the AO for proper computation, directing the AO to recompute the deduction under section 80HHC afresh after giving the assessee a reasonable opportunity to be heard.

3. Computation of book profit under section 115JA:
The third ground involved the computation of book profit under section 115JA. The assessee argued that the AO did not reduce the book profit by the deduction allowed under section 80HHC. The CIT(A) upheld the AO's computation, stating that clause (viii) of section 115JA, which allows such a reduction, came into effect from 1-4-1998 and could not be applied retrospectively. The Tribunal, however, agreed with the assessee, noting that the intention of the legislature was to exempt export profits from Minimum Alternative Tax (MAT) and that the amendment was curative and declaratory, thus having retrospective effect. The Tribunal cited several judicial precedents supporting this view and directed the AO to compute the book profits under section 115JA by reducing them to the extent of the deduction allowed under section 80HHC.

4. Levy of interest under section 234A:
The fourth ground concerned the levy of interest under section 234A. The assessee argued that since the return of income was filed on time, the question of levying interest under section 234A did not arise. The Tribunal directed the AO to verify whether the return was filed on time and to charge interest only if it was not.

5. Levy of interest under section 234B:
The fifth ground addressed the levy of interest under section 234B. The Tribunal noted that interest is leviable even if the income is determined under section 115JA, as held in a previous Tribunal order. Consequently, the Tribunal dismissed this ground.

Conclusion:
The appeal of the assessee was partly allowed. The Tribunal directed the AO to recompute the deduction under section 80HHC and the book profits under section 115JA, while verifying the timely filing of the return for the levy of interest under section 234A. The levy of interest under section 234B was upheld.