2011 (9) TMI 238 - HC - Income Tax

Minimum Alternate Tax - Deduction under section 80HHC - reduction of net profit for detemining book profit u/s 115JB - 115JB was inserted w.e.f. 1st April, 2001 providing for levy of MAT on certain companies - two essential conditions for invoking Section. 80HHC(1) are that assessee must be in the business of export and secondly that sale proceeds of such exports should be receivable in India in convertible foreign exchange - In Section 115JB, as in Section 115JA, it has been clearly stated that the relied will be computed under Section 80HHC(3)/3(A), subject to the conditions under sub-cl. (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant - Thus the appeal of Revenue is dismissed

Summary

Issues:
Interpretation of Section 115JB and Section 80HHC for computing book profits and deduction eligibility.

Analysis:
The High Court addressed the issue of determining book profits under Section 115JB concerning the deduction under Section 80HHC. The Tribunal's order, following the Special Bench's judgment in Dy. CIT v. Syncome Formulations (I.) Ltd., directed the Assessing Officer to allow the deduction under Section 80HHC while computing book profit under Section 115JB. The Apex Court's decision in Ajanta Pharma Ltd. v. CIT clarified the interplay between these sections. Section 115JB, introduced by the Finance Act, 2000, imposed Minimum Alternate Tax (MAT) on certain companies, while Section 80HHC provided tax incentives for exporters. The Court emphasized that Sections 80HHC and 115JB operated in distinct spheres, with Section 80HHC focusing on eligibility and Section 115JB on deemed income for MAT purposes.

The Court highlighted that Section 80HHC(1B) phased out the 100% deduction for export profits, reducing it to 80% and subsequently lower percentages. The judgment emphasized the importance of distinguishing between the eligibility and deductibility of profits under these sections. Section 115JB was considered a self-contained code for computing book profits subject to specific conditions, including certification by a chartered accountant. The Court rejected the argument that the last sentence in Explanation to Section 115JB could blur the distinction between eligibility and deductibility of profits. Ultimately, the Court upheld the Tribunal's order based on the Apex Court's interpretation, finding no error warranting interference.

Therefore, the High Court dismissed the appeal, affirming the Tribunal's decision in line with the Apex Court's ruling on the computation of book profits under Section 115JB and the eligibility for deduction under Section 80HHC.