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TMI Blog2006 (9) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... g obvious or self-evident mistake. The Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros.[ 1971 (8) TMI 3 - SUPREME COURT] has held that a mistake apparent on record must be an obvious and patent mistake and not something which can be establish by a long drawn process of reasoning on points on which there are conceivably be two opinions. It is also evident from the submissions of the ld. A.R., that department itself is taking different view in different assessment years. In assessment year 1998-99, the Assessing Officer allowed the claim of the assessee after considering the decision of Hon ble Kerala High Court. For assessment year 2002-03, the appeal of the assessee is allowed by the CIT(A) on this issue. Since the disallowance made by the Assessing Officer is not a mistake apparent from the record as envisaged by law, the order passed u/s 154 is liable to be quashed. Consequently, we quash the impugned order passed u/s 154 of the Act. In the result, the appeal stands allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed at Rs. 1,11,01,316 under section 80HHC. Hence, the Assessing Officer issued notice under section 154 of the Act, to the assessee-company on 9-9-2003. The assessee explained vide its letter dated 22-9-2003, that for the purpose of computing income under section 115JB it has claimed deduction under section 80HHC at Rs. 1,11,01,306 out of the book profit on the basis of the decision of Kerala High Court and clause (iv) of Explanation given under section 115JB which entitles it to reduce the amount of profits eligible for deduction under section 80HHC from book-profit. According to the ld. Assessing Officer, as per the provisions of section 115JB book profit is computed after making some adjustments as prescribed in the Explanation to second proviso to section 155JB(2). The Assessing Officer stated that one of the adjustments is regarding deduction on account of export profit under section 80HHC. According to the Assessing Officer, the eligible deduction under section 80HHC has to be computed on the basis of profit of business computed under the head "Profits and gains of business or profession", under clause (1)(b) or (c) of sub-section (3) or (3A) of section 80HHC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also declaring substantial dividends, were managing their affairs in such a way as to avoid payment of income-tax. Accordingly, as a measure of equity, section 115JB was introduced that in case of a company whose total income as computed under the provisions of the Income-tax Act, is less than 30 per cent of the book profit as computed under the section, the total income chargeable to tax will be 30 per cent of the book profit, as computed. For this purpose book profit was to be the net profit as shown in the profit and loss account prepared in accordance with the provisions of the Sixth Schedule to the Companies Act, 1956, after certain adjustments. The net profit as above will be increased by the income-tax paid or payable or the provision thereof, amount carried to any reserve, provision made for liabilities other than ascertained liabilities, provisions for losses of subsidiary companies etc., if the amounts are debited to the profit and loss account. The amount so arrived at is to be reduced by : "(i) amounts withdrawn from reserves, if any, such amount is credited to the profit and loss account; (ii) the amount of income to which any of the provision of Chapter il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit and loss account of the company for the relevant previous year shall have to be prepared under section 115J(1A) in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. This book profit shall be suitably adjusted so as to satisfy the requirements of clauses (a) to (ha) of the Explanation to section 115J(1A) and be reduced by the amounts mentioned under clauses (i) to (iv) of this Explanation. Amounts by which the 'net profit' has to be reduced are given under:- "(i) the amount withdrawn from any reserves or provisions if any such amount is credited to the profit and loss account. It is also provided that, where section 115JA is applicable to an assessee in any previous year (including the relevant previous year), the amount, withdrawn from reserves created or provisions made in previous year relevant to the assessment year 1997-98 or any subsequent assessment year shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under the Explanation to section 115JA (2); or (ii) the amount of income to which any of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction under section 80HHE, computed under section 80HHE(3)." 9. Now, section 115JB which provided special provisions for payment of tax by certain companies has been inserted by Finance Act, 2000, with effect from 1-4-2001, as has already been mentioned. This section reads as under:- "(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after 1-4-2001, is less than seven and one-half per cent. Of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent. (2) Every assessee, being, a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and ill of Schedule VI to the Companies Act, 1956 (1 of 1956):" 10. From the reading of sections 115JA and 115JB, it seems that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f book profit. This logical interpretation is supported by the legislative intent. The above clause is same to the clause (viii) similarly embedded in the provisions of section 115JA. This same clause (viii) in Explanation to section 115JA by the Finance Act, 1997, with effect from 1st April, 1998, i.e. a year later than the enactment of the provisions of section 115JA, which were brought into the statute book with effect from 1st April, 1997. The object of insertion of the said clause (viii), as per the speech of the Finance Minister is to exempt the export profit from MAT. The relevant extract of para 99 of the Budget Speech is as under: "I, therefore, propose to make the following changes in the provisions of MAT:- (i) Export profits will be exempt from MAT and will be eligible for full deduction under section 80HHC." In the Notes on Clauses, the following was mentioned: "It is proposed to exempt the export profits which are eligible for deduction under section 80HHC from the purview of this section." Further, the following is the para 27 of the Speech of Finance Minister in Lok Sabha on 7-5-1997 : "Clause 37 proposes to amend section 115JA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit as computed under the head "Profits and gains of business or profession" that is to be applied, According to us, instead of words "profits and gains of business or profession" occurred in sub-sections (3) and (3A) of section 80HHC or....., the word profit that is mentioned in section 115J has to be applied. Para 6, last sub-paragraph: Clause (ii) of section 115J does not say that section 80HHC of the Act is made applicable to the extent only for calculating the deduction. Para 7: Hence, we are of the view that the Tribunal was correct in interpreting that under section 115J(1A)(iii) of the Act, profits will be taken into consideration as profit as per the books of account and not calculated under the Act." In view of above findings of the High Court of Kerala, it is clear that the profit should be taken as net profit credited in profit & loss account after making additions and deductions as required to be made in accordance with the Explanation to section 115JB. If not so, the very purpose of the legislation would he defeated in the situation like facing by the assessee where though on one hand assessee is having export profit eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, and so, section 80A(2) and section 80B(5) are also applicable for the purpose of determining the book profit under section 115JA. We find no force in this contention. Section 115JA(4) itself makes it clear that other provisions apply only when it is not otherwise provided in the section. We find that the language of section 115JA(1) and Explanation thereto rules out applicability of section 80A(3) and section 80B(5). At any rate, this issue is covered in favour of the assessee by the decision of the Kerala High Court discussed above, and no contrary decision has been brought to our notice. We accordingly decide this aspect of the matter in favour of the assessee." 16. Hon'ble ITAT Pune Bench, maintaining judicial proprietary, has followed this decision in the case of Smruthi Organics Ltd. v. Dy. CIT [2006] 101 ITD 205. "In the present case assessee is having the profits eligible for deduction under section 80HHC but due to the carry forward of losses as per the Income-tax Act the deduction under section 80HHC is nil Section 115JB is a separate, independent and complete code for computation of tax which starts with a non obstante clause. Section 115JB by its leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; only when it is glaring obvious or self-evident mistake. The Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 has held that a mistake apparent on record must be an obvious and patent mistake and not something which can be establish by a long drawn process of reasoning on points on which there are conceivably be two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Reliance can also be placed on the following decisions: * CIT v. Maharaja Shri Umaid Mills Ltd [1987] 164 ITR 268 (Raj.) * CIT v. Udaipur Distillery Co. Ltd. [2003] 133 Taxman 383 (Raj.) * CIT v. Jayana Cold Storage & Ice Factory [2003] 260 ITR 430 (All.) * CIT v. Bimetal Bearings Ltd. [1998] 232 ITR 542 (Mad.) * Satishchandra & Co. v. CIT[1998] 234 ITR 70 (Kar.). It is also evident from the submissions of the ld. A.R., that department itself is taking different view in different assessment years. In assessment year 1998-99, the Assessing Officer allowed the claim of the assessee after considering the decision of Hon'ble Kerala High Court. For assessment year 2002-03, the appeal of the assessee is allowed by the CIT(A) on this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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