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2007 (9) TMI 225 - HC - Income TaxDeduction u/s 80HHC disallowed by AO on ground that book profit income computed u/s 115JA was negative held that AO is not entitled to alter the profit & loss account prepared by assessee while arriving at the book profit in view of non-obstante clause in sec. 115JA, it is clear that provision is a self-contained & no other provision would have effect on it computation u/s80HHC should be limited to the case of profits of eligible category only revenue appeal dismissed
Issues:
1. Interpretation of eligibility for deduction under section 80HHC based on book profits under section 115J. 2. Disallowance of claim under section 80HHC by Assessing Officer. 3. Confirmation of assessment order by Commissioner of Income-tax (Appeals). 4. Tribunal's decision allowing the appeal regarding deduction under section 80HHC. 5. Jurisdiction of Assessing Officer in computing book profits under section 115J. 6. Applicability of non obstante clause in section 115JA. 7. Tax effect in relation to Central Board of Direct Taxes Circular. Issue 1 - Interpretation of eligibility for deduction under section 80HHC based on book profits under section 115J: The main issue in this case revolved around the interpretation of eligibility for deduction under section 80HHC based on book profits under section 115J. The Tribunal held that the relief under section 80HHC should be based on the profit ascertained under section 115JA and not on income computed under other sections of the Income-tax Act. The Tribunal referred to relevant Supreme Court judgments and concluded that the computation under section 80HHC should be limited to profits of the eligible category only. Issue 2 - Disallowance of claim under section 80HHC by Assessing Officer: The Assessing Officer disallowed the claim of the assessee in respect of the deduction under section 80HHC for the assessment year 1998-99, citing that the book profit income computed under section 115JA was negative. This disallowance led to the appeal by the assessee against the order of the Assessing Officer. Issue 3 - Confirmation of assessment order by Commissioner of Income-tax (Appeals): The Commissioner of Income-tax (Appeals) confirmed the assessment order disallowing the deduction under section 80HHC, stating that the assessee did not have any profit or gain from the business under relevant sections of the Act. This confirmation by the Commissioner led to further appeals by the assessee. Issue 4 - Tribunal's decision allowing the appeal regarding deduction under section 80HHC: The Income-tax Appellate Tribunal allowed the appeal filed by the assessee against the disallowance of deduction under section 80HHC. The Tribunal's decision was based on the interpretation that the relief under section 80HHC should be based on the profit ascertained under section 115JA, not on income computed under other sections. Issue 5 - Jurisdiction of Assessing Officer in computing book profits under section 115J: The Tribunal emphasized that the Assessing Officer does not have the authority to touch the profit and loss account prepared by the assessee as per the provisions of the Companies Act while arriving at the book profit under section 115J. The Tribunal clarified that the book profit so arrived at should be the basis for taxation. Issue 6 - Applicability of non obstante clause in section 115JA: The Tribunal highlighted the presence of a non obstante clause in section 115JA, indicating that the provision is self-contained and should be implemented as contained in the said provision. This clause played a significant role in the Tribunal's decision regarding the eligibility for deduction under section 80HHC. Issue 7 - Tax effect in relation to Central Board of Direct Taxes Circular: The judgment also addressed the tax effect in this case, noting that it was less than what was provided in the Central Board of Direct Taxes Circular. Based on this, the appeal filed by the Revenue was deemed legally not maintainable, leading to the dismissal of the appeal. In conclusion, the judgment delved into various issues related to the eligibility for deduction under section 80HHC, the roles of different authorities in the assessment process, the jurisdiction of the Assessing Officer, and the interpretation of relevant provisions of the Income-tax Act, ultimately leading to the dismissal of the appeal based on the abovementioned considerations.
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