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2016 (10) TMI 400 - HC - Income TaxRelief under Section 80-HHC allowable while arriving at the book profits as per Clause (vii) of Explanation to Section 115-JA(1) - assessee itself had not claimed the deduction under Section 80-HHC in the normal computation - Held that - For the purpose of providing the incentive contemplated under Section 80-HHC the profits earned from the export business which might include in a given case exports carried out of the goods manufactured by the assessee as well as by trading the goods manufactured by others and the lossess sustained in any one of these branches of exports business are liable to be adjusted against the profits earned by the other branch of export business. A reading of the principles enunciated by the Supreme Court in the cases of Ajanta Pharma Ltd. (2010 (9) TMI 8 - SUPREME COURT ) and Jeyar Consultant and Investment Pvt. Ltd. (2015 (4) TMI 195 - SUPREME COURT) it becomes crystal clear that the Tribunal has arrived at an incorrect comprehension of the spheres assigned respectively by Section 80-HHC and Section 115-JA of the Income Tax Act. Therefore the impugned order passed by the Tribunal is not sustainable. Since the assessee-Company has not been provided with an opportunity to demonstrate that they did Return the profits from their export business for the assessment year concerned which profits of export business are set-off against the carry forward lossess sustained in the business as a whole for the previous year resulting in taxable income being Returned as Nil and also for the purpose of computation of book profits under Section 115-JA the extent of profits made by the assessee from the export business has got to be looked into and taken into consideration and since that aspect of the matter has not been dealt with by the Tribunal we set aside the impugned order passed by the Tribunal and remit the matter back to the Tribunal for consideration afresh by it in accordance with law.
Issues:
Interpretation of Section 80-HHC deduction eligibility in computing book profits under Section 115-JA. Analysis: The appeal involved a dispute regarding the eligibility of claiming a deduction under Section 80-HHC while calculating book profits under Section 115-JA of the Income Tax Act. The respondent-assessee had filed a "NIL" return for the assessment year 1998-1999, not claiming any deduction under Section 80-HHC in the normal computation. However, they claimed a deduction under Section 80-HHC while computing book profits under Section 115-JA. The assessing officer disallowed the claim, leading to a demand for tax payment. The Commissioner of Income Tax (Appeals) upheld the decision, but the Income Tax Appellate Tribunal allowed the appeal of the assessee, relying on a previous judgment. The High Court analyzed the Supreme Court judgments in the cases of Ajanta Pharma Ltd. and Jeyar Consultant and Investment Pvt. Ltd. to determine the correct interpretation of Sections 80-HHC and 115-JA. The High Court referred to the Supreme Court's ruling in the Ajanta Pharma Ltd. case, emphasizing the self-contained nature of Section 115-JA and the distinction between eligibility and deductibility of profits under Section 80-HHC. The court highlighted that the relief under Section 80-HHC is subject to compliance conditions, not qualifying conditions. Additionally, the court cited the Jeyar Consultant and Investment Pvt. Ltd. case, which clarified that profits and losses from different branches of export business must be adjusted to determine the eligibility for Section 80-HHC deduction. The court noted that the Tribunal had misunderstood the spheres assigned to Section 80-HHC and Section 115-JA, leading to an incorrect decision. Consequently, the High Court set aside the Tribunal's order and remitted the matter back for reconsideration. The court emphasized the importance of assessing the profits from the export business to determine eligibility for the Section 80-HHC deduction. The High Court's decision highlighted the need to differentiate between eligibility and deductibility of profits while computing book profits, as outlined in the relevant provisions of the Income Tax Act.
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