2018 (7) TMI 1845 - HC - Income Tax

Entitled to deduction under 80HHC on the book profits u/s 115JA/JB - MAT computation - Held that - Hon ble Supreme Court in the case of Ajanta Pharma Ltd. v. Commissioner of Income Tax 2010 (9) TMI 8 - SUPREME COURT held that clause (iv) of Explanation to Section 115JB covers full export profits of 100% as eligible profits and the same cannot be reduced to 80% by relying on section 80 HHC(1B) and the argument of the Department that both eligibility as well as deductibility of the profit have to be considered together for working out the deduction as mentioned in clause (iv) of Explanation to Section 115JB is devoid of merits. As in Ajanta Pharma Ltd. 2010 (9) TMI 8 - SUPREME COURT applies to the case on hand as identical question has been framed for consideration. Further, we note that the decision of the said fact in Syncome Formulations (I) Ltd. 2007 (3) TMI 288 - ITAT BOMBAY-H was considered by the Hon ble Supreme Court along with other decisions and the decision of the Tribunal was confirmed in the case of Commissioner of Income Tax v. Bhari informations Technology System (P) Limited 2011 (10) TMI 19 - SUPREME COURT OF INDIA . Substantial questions of law, which have been framed for consideration is answered against the Revenue.

Summary

Issues:
1. Interpretation of deduction under BOHHC on book profits under section 115JA/JB.
2. Application of Special provisions of section 115JA/JB for assessment year 1999-2000.

Analysis:
1. The appeal by the Revenue challenged the order of the Income Tax Appellate Tribunal regarding the entitlement to deduction under BOHHC on book profits under section 115JA/JB. The Tribunal ruled in favor of the assessee, citing the decision of the Special Bench of the Mumbai Tribunal in DCIT v. Syncome Formulations (I) Ltd. The Mumbai Tribunal held that computation should be based on book profits, not normal computation.

2. The legal issue was further examined by the Supreme Court in Ajanta Pharma Ltd. v. Commissioner of Income Tax. The Court clarified that full export profits of 100% are considered "eligible profits" under clause (iv) of Explanation to Section 115JB, and cannot be reduced to 80% based on section 80HHC(1B). The Court rejected the argument that both "eligibility" and "deductibility" of the profit must be considered together for deduction calculation. This ruling was deemed applicable to the current case, as the issue was identical.

3. The decision in Syncome Formulations (I) Ltd. was upheld by the Supreme Court in Commissioner of Income Tax v. Bhari Informations Technology System (P) Limited. Considering these precedents, the substantial questions of law framed against the Revenue were answered against them. Consequently, the Tax Case Appeal was dismissed with no costs incurred.