2021 (11) TMI 635 - HC - Income Tax

MAT Computation of book profit u/s 115JB - Whether deduction u/s 80HHC is to be computed as per MAT provisions and not as per the normal provisions of the Income Tax Act, 1961? - HELD THAT - Substantial question Nos.1 and 2 are covered in favour of the assessee by the reported judgments of the Apex Court in Ajanta Pharma Ltd. 2010 (9) TMI 8 - SUPREME COURT - Hence the questions are answered by following the principle laid down in Ajanta Pharma in favour of the assessee and against the revenue. Disputed central excise demand raised against the assessee - denial of writing back benefit to the assessee - Recompute the 'book profit' for the purpose of levy of tax u/s 115JB by reducing the entire provision written back from the net profit in terms of clause (i) of the Explanation in Section 115JB - HELD THAT - The argument that the assessee gets double advantage by allowing it to write back the provision now is equally incorrect for the Tribunal has rightly found that proper working is not reflected in the respective assessment orders or the record cannot lead to the conclusion that AO has not considered the applicability of special provision as well. The assessment order, in our view, has the presumption of having been made in accordance with the requirements of law and obligations fastened on the A.O. It cannot now be gain said that the AO failed to discharge the statutory obligation while computing the income of assessee for the assessment years in which the provision towards disputed excise duty was made by the assessee. The first and foremost objection of revenue on actual verification of provision made in respective assessment years is that the Tribunal presumed and pre-supposed that the contemperaneous effect would have been given in the books of accounts without material on record. The argument is contrary to the orders made by the AO in this behalf. The contention at the first blush though appears to be persuasive. With the help and assistance of learned counsel appearing for revenue and assessee, we have verified the assessment orders for the years 1997-98; 1998-99 and 1999-2000 and the assessment order in which the present appeal arises and we are of the view that the primary and first appellate authority have, as matter of fact, presumed a circumstance against assessee which is not in the control of assessee. We appreciate and accept the conclusion recorded by the Tribunal by taking note of the fact that the assessee was subjected to the slab rate of 30% for the assessment years 1997-1998 and 1998-1999 and computed the tax payable thereon under normal provisions. The denial of writing back benefit to the assessee in these assessment years are illegal and the finding recorded by the Tribunal is valid and correct in the circumstances of this case. Hence the reframed question is answered in favour of the assessee and against the revenue.

Summary

Issues Involved
1. Computation of book profit under Section 115JB and deduction under Section 80HHC.
2. Consideration of clause (c) of Explanation to Section 115JA by the Assessing Officer in previous assessment years.
3. Directions to the Assessing Officer regarding reduction of net profit by the provision written back.

Detailed Analysis

Issue 1: Computation of Book Profit under Section 115JB and Deduction under Section 80HHC
The Tribunal held that while computing the book profit under Section 115JB, the deduction under Section 80HHC should be computed as per the MAT provisions and not as per the normal provisions of the Income Tax Act, 1961. This decision was in alignment with the Supreme Court's judgment in Ajanta Pharma Ltd. v Commissioner of Income-Tax [2010] 327 ITR 305 (SC). Consequently, this question was answered in favor of the assessee and against the revenue.

Issue 2: Consideration of Clause (c) of Explanation to Section 115JA by the Assessing Officer
The Tribunal presumed that the Assessing Officer had considered clause (c) of Explanation to Section 115JA in the assessment years 1997-98 and 1998-99. The Tribunal reasoned that merely because proper working was not available on record, it could not be concluded that the Assessing Officer had not considered the same. This approach was challenged by the revenue as being perverse, arbitrary, and illegal. However, the Tribunal's presumption was based on the statutory obligation of the Assessing Officer to consider the said provisions.

Issue 3: Directions to the Assessing Officer Regarding Reduction of Net Profit by the Provision Written Back
The Tribunal directed the Assessing Officer to reduce the net profit by the sum of ?3,29,27,056/- instead of ?1,42,02,335/-. This direction was based on the Tribunal's finding that the provisions of Section 115JB were applicable, and the Assessing Officer was under a statutory obligation to consider the same. The Tribunal noted that the provision for excise duty was made during the assessment years 1997-98, 1998-99, and 1999-2000, and was subsequently written back when the assessee succeeded in its appeal before the CESTAT. The Tribunal concluded that the Assessing Officer's disallowance of the claim was unjustified.

Conclusion
The High Court upheld the Tribunal's decision, emphasizing that the Assessing Officer's omission to refer to special provisions under Section 115JA/115JB should not deny the writing back provision available under the second proviso to sub-section 2 of Section 115JB. The Court found that the Tribunal's conclusion was valid and correct, and the appeal by the revenue was dismissed. The Court also noted that the primary and first appellate authorities had presumed circumstances against the assessee without sufficient material on record. The appeal was dismissed with no order as to costs.