2006 (3) TMI 300 - AT - Income Tax

Summary

Issues Involved:
1. Charging of interest under sections 234B and 234C.
2. Deduction under section 80HHC in computing total income.
3. Enhancement of adjusted book profits under section 115JB.
4. Deduction of export profits under clause (iv) of Explanation to section 115JB.
5. Powers of CIT(A) to enhance the assessment.

Issue-Wise Detailed Analysis:

1. Charging of Interest under Sections 234B and 234C:
The assessee withdrew the ground challenging the charging of interest under sections 234B and 234C during the hearing. The tribunal noted that the provisions of section 115JB explicitly state that all other provisions of the Act apply unless otherwise specified, thus confirming the applicability of sections 234B and 234C.

2. Deduction under Section 80HHC in Computing Total Income:
The Assessing Officer allowed only 80% of the export profits as a deduction under section 80HHC, which was further reduced by the CIT(A). The CIT(A) relied on the Supreme Court's decision in IPCA Laboratory Ltd. v. Dy. CIT, which held that the deduction under section 80HHC is controlled by sections 80A and 80AB. Consequently, the assessee was not entitled to any deduction under section 80HHC due to unabsorbed depreciation and carried forward business losses exceeding the gross total income.

The tribunal upheld the CIT(A)'s decision, emphasizing that the gross total income, after accounting for unabsorbed depreciation and business losses, was nil, thus nullifying any deduction under section 80HHC.

3. Enhancement of Adjusted Book Profits under Section 115JB:
The CIT(A) enhanced the adjusted book profits by denying the deduction under section 80HHC, which was upheld by the tribunal. The tribunal clarified that section 115JB's clause (iv) allows only the amount of profits eligible for deduction under section 80HHC, computed per sub-sections (3) or (3A), subject to the conditions specified therein. For the assessment year 2001-02, only 80% of the export profits were deductible, and since the gross total income was nil, no deduction was permissible.

4. Deduction of Export Profits under Clause (iv) of Explanation to Section 115JB:
The tribunal noted that the language of clause (iv) of section 115JB is distinct from clause (iii) of section 115J. Under section 115JB, the amount deductible is the same as the amount deductible under section 80HHC, subject to the conditions specified. Given that the gross total income was nil, the tribunal upheld the CIT(A)'s decision that no deduction was allowable under clause (iv).

5. Powers of CIT(A) to Enhance the Assessment:
The tribunal confirmed that the CIT(A) has the power to enhance the assessment under section 251(1)(a), which includes confirming, reducing, enhancing, or annulling the assessment. The tribunal dismissed the assessee's contention that the CIT(A) could not enhance the assessment, stating that the CIT(A)'s powers are co-terminus with those of the Assessing Officer.

Conclusion:
The tribunal dismissed the appeal of the assessee, upholding the CIT(A)'s decisions on all grounds. The tribunal confirmed the applicability of sections 234B and 234C, denied the deduction under section 80HHC due to nil gross total income, validated the enhancement of adjusted book profits under section 115JB, and affirmed the CIT(A)'s power to enhance the assessment.