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2011 (10) TMI 19 - SC - Income TaxComputation of Book Profit - Minimum Alternate Tax (MAT) - Claim of deduction u/s 80HHE rejected by AO saying that since in normal computation there is no profit after carry-forward loss, deduction under Section 80HHE to the extent of Rs.1,56,33,719/- for computing book profit under Section 115JA was not admissible. - Held that - Following the view taken by the Special Bench in Syncome Formulations (2007 -TMI - 59552 - ITAT BOMBAY-H ), the Tribunal in the present case came to the conclusion that deduction claimed by the assessee under Section 80HHE has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. The judgment of the Tribunal has been upheld by the High Court. - Decided in favor of assesseee.
Issues:
1. Deduction under Section 80HHE for computing book profit under Section 115JA. 2. Applicability of deduction under Section 80HHE on the basis of adjusted book profit under Section 115JA. 3. Interpretation of the judgment of the Special Bench of the Tribunal in Syncome Formulations. 4. Upholding the Tribunal's decision by the High Court and the Supreme Court. Analysis: 1. The assessee claimed a deduction under Section 80HHE against the net profit to compute the book profit under Section 115JA for the assessment year 2000-01. The Assessing Officer (A.O.) rejected this claim, stating that as there was no net profit left after adjusting brought-forward losses against the current year's profit, the deduction under Section 80HHE was not admissible. The CIT (A) and the Tribunal upheld the A.O.'s decision. However, the Tribunal, following the judgment of the Special Bench in Syncome Formulations, held that benefits under Section 80HHE were not negated by the Minimum Alternate Tax (MAT) scheme, including Section 115JA. The Tribunal clarified that deductions under Section 80HHE had to be computed based on adjusted book profits under Section 115JA, not regular income tax profits. 2. Section 80HHE, as referenced in the Explanation to Section 115JA, was the focal point of the case. The Tribunal's decision in the present case aligned with the Special Bench's ruling in Syncome Formulations, emphasizing that deductions under Section 80HHE should be calculated based on adjusted book profits under Section 115JA, rather than regular profit computation methods. The High Court upheld the Tribunal's decision, affirming the importance of computing deductions in accordance with the adjusted book profit under Section 115JA. 3. The Supreme Court concurred with the Tribunal's interpretation of the Special Bench's judgment in Syncome Formulations. The Court found no grounds to interfere with the impugned judgment, agreeing with the rationale presented in the Tribunal's decision. The Court dismissed the special leave petition filed by the Department, emphasizing the consistency in the application of the law as established in Syncome Formulations. 4. The High Court's affirmation of the Tribunal's decision was upheld by the Supreme Court, indicating a unified stance on the computation of deductions under Section 80HHE based on adjusted book profits under Section 115JA. The Supreme Court's dismissal of the Department's petition without costs signified the finality of the decision, reinforcing the precedence set by the Special Bench's judgment and its application in the present case.
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