2012 (1) TMI 345 - HC - Income Tax

Summary

Issues involved:
1. Questioning the order passed by the Income Tax Appellate Tribunal regarding re-assessment proceedings under Section 147/148 of the Income Tax Act, 1961.
2. Computation of book profits under Section 115JB and deduction/exemption under Section 10A and 10B.

Issue 1: Re-assessment proceedings under Section 147/148
The High Court upheld the tribunal's decision to strike down the re-assessment proceedings under Section 147/148 of the Income Tax Act, citing that the jurisdictional pre-conditions were not satisfied. The court found the tribunal's findings on merits to be correct, aligning with the decision of the Supreme Court in CIT versus Bhari Information Tech Systems Private Limited. The court dismissed the appeal by the Revenue with no order as to costs.

Issue 2: Computation of book profits under Section 115JB
The court examined the discrepancy in the computation of book profits under Section 115JB, specifically related to the deduction/exemption under Section 10A and 10B. The difference arose due to the assessee providing depreciation on a straight-line method in the books of accounts but calculating depreciation as per the written down value method for taxable income purposes, as mandated by Section 32. The court referred to the Supreme Court's decision in Bhari Information Tech Systems Private Limited, emphasizing that deductions claimed must be based on adjusted book profit under Section 115JA. The court also discussed the relevant provisions of Explanation 1 to Section 115JB and highlighted the importance of distinguishing between the eligibility and deductibility of profits for computing book profits under Section 115JB.

Separate Judgement:
The court referred to the case of Ajanta Farma Limited versus Commissioner of Income Tax, where the Supreme Court clarified the computation of deductions under different sections of the Income Tax Act. The court emphasized that Section 115JB operates as a self-contained code for taxing deemed income and outlined the specific adjustments required for computing book profits. The court rejected the Department's argument regarding the eligibility and deductibility of profits under Section 80HHC, stating that such distinctions are crucial to maintain the self-contained nature of Section 115JB.

In conclusion, the High Court dismissed the appeal, affirming the tribunal's decision on both issues and finding no substantial question of law for consideration.