2009 (4) TMI 41 - HC - Income Tax

Assessing Officer held that the assessee is not entitled to any deduction under section 80HHC while determining the taxable income on the basis of the book profit under Section 115JA since the computation of business income under the regular provisions resulted in nil figure for each of the assessment years held that AO is not entitled to touch the profit and loss account prepared by the assessee as per the provisions contained in the Companies Act while arriving at the book profit under Section 115J and the book profit so arrived at should be the basis for taxation and therefore the computation under Section 80HHC should be limited to the case of profits of eligible category only

Summary

Issues:
- Deduction under section 80HHC while computing book profit under Section 115JA.

Analysis:
1. The appellant, a domestic company engaged in the manufacture and export of polymers, filed returns for the assessment years 1998-99 to 2001-02 showing a loss under the head "business." The company claimed a deduction under section 80HHC while computing the profit under section 115JB. However, the Assessing Officer disallowed the deduction under section 80HHC, stating that since the regular provisions resulted in a nil figure for business income, the company was not entitled to the deduction.

2. The Commissioner of Income Tax (Appeals) reversed the Assessing Officer's decision, stating that for computing book profit under Section 115JA, the relief under section 80HHC should be based on book profits rather than the normal computation of income. This decision was upheld by the Tribunal on appeal by the revenue.

3. The revenue challenged the Tribunal's decision before the High Court, questioning whether the deduction under section 80HHC should be allowed based on book profits under Section 115JB or on eligible profits under normal computation. The High Court referred to a previous Division Bench decision and emphasized that the relief under section 80HHC should be based on the profit ascertained under Section 115JA, not on income computed under other sections of the Income Tax Act.

4. The High Court cited judgments of the Supreme Court, highlighting that the Assessing Officer's power in computing book profits is limited to examining whether the accounts are certified as per the Companies Act. The Court emphasized that the Assessing Officer cannot go behind the net profits shown in the profit and loss account except as provided in the Explanation. It clarified that the computation under Section 80HHC should be limited to profits of the eligible category only.

5. The High Court concluded that the provisions of Section 115JA are self-contained, and the relief under section 80HHC should be based on book profits under Section 115JA. The Court upheld the Tribunal's decision, stating that the conclusion cannot be challenged. Consequently, the High Court dismissed the appeals and connected miscellaneous petitions.

This detailed analysis of the judgment clarifies the issues involved and the reasoning behind the High Court's decision regarding the deduction under section 80HHC while computing book profit under Section 115JA.