2009 (4) TMI 44 - HC - Income Tax

Assessing Officer 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 u/s 115J and the book profit so arrived at should be the basis for taxation and therefore, the computation u/s 80HHC should be limited to the case of profits of eligible category only therefore, Tribunal was right in law in holding that deduction u/s 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted books profits u/s 115JA revenue appeal dismissed

Summary

Issues:
Interpretation of deduction under Section 80 HHC in a MAT assessment.
Disallowance of a sum computed under 80HHC adopting book profit u/s 115JB for export business.

Analysis:
1. The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the assessment year 2002-03. The primary issue revolved around the interpretation of the deduction under Section 80 HHC in a MAT assessment. The Assessing Officer contended that the deduction allowable under Section 80 HHC should be restricted to 70%, but the Tribunal allowed the appeal based on the Mumbai Special Bench judgment. The central question was whether the deduction under Section 80 HHC in a MAT scheme should be calculated based on adjusted book profits under Section 115 JA rather than on the profit computed under regular provisions of law. The Tribunal's decision was supported by the Division Bench's observation and Supreme Court judgments, emphasizing that the deduction should be based on the adjusted book profit, considering the provisions of Sections 115J, 115JA, and 115JB which govern the computation of book profits under MAT.

2. The second issue pertained to the disallowance of a sum computed under 80HHC for export business, without restricting it as provided under Section 80HHC (1B). The Tribunal's decision was upheld based on the reasoning that in a MAT assessment, the adjusted book profit of a company itself constitutes the gross total income, and the deduction under Section 80HHC should be computed on this adjusted book profit. This approach aligns with the statutory provisions and ensures consistency in the computation process, especially when regular profits are substituted by book profits under MAT. The judgment emphasized that once the substitution occurs, there is no scope to revert to the normal computation process, thereby justifying the Tribunal's decision to disallow the sum computed under 80HHC without restriction.

3. The Court dismissed the appeal, affirming the Tribunal's decision on both issues. The judgment underscored that the deduction under Section 80 HHC in a MAT assessment should be based on adjusted book profits under Section 115 JA, in line with the self-contained nature of MAT provisions. The comprehensive analysis provided clarity on the computation methodology for deductions in MAT assessments, ensuring adherence to legal frameworks and judicial precedents.

By thoroughly examining the issues and legal principles involved, the Court's judgment provided a robust framework for interpreting and applying tax laws in the context of MAT assessments, thereby upholding the Tribunal's decision and dismissing the appeal.