9911796707
TMI Blog2006 (3) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ee at Rs. 2,07,675. He also computed the book profits under section 115JB of the Act at Rs. 23,17,154. While doing so, he inter alia, reduced from the book profits an amount of Rs. 1,06,92,643, representing 30 per cent of the profits derived from the exports business, as against the claim of the assessee of Rs. 1,33,65,804. In this connection, the Assessing Officer mentioned in paragraph 9 of his order, that for assessment year 2001-02, only 80 per cent of the export profits was eligible for deduction under section 80HHC(1) read with section 80HHC(1B). For the sake of ready reference, para 9 of his order is reproduced below: "9. In view of the above, it is clear that the assessee's claim of deduction under section 80HHC in its working given above in the para 3 above is excess by 20 per cent and the same is not acceptable. The assessee is entitled for deduction only to the extent of 80 per cent of the profit derived from the export business. The computation of the tax under MAT in view of section 115JB, read with section 80RRC is made as under:- ----------------------------------------------------- Book profit before tax as per books 3,28,11,709 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome was entitled to claim the deduction under section 80HHC of the Income-tax Act, 1961. The appellant has objected to the proposed enhancement stating that the powers of enhancement are not in substitution of the provisions of reassessment and could not be so utilized in a manner that such enhancement proceedings result in overriding or by-passing the definite provisions of reassessment. This is an absurd proposition. The powers and functions of the CIT(A) are quite wide and have not been restricted to decide an appeal only in favour of the appellant. If there are mistakes committed by the Assessing Officer, then it is incumbent rather a duty assigned to a CIT(A) to rectify such mistakes. As per the provisions of the Income-tax Act, 1961 and the judicial pronouncements of the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd., 266 ITR 521, the deduction allowable under sections 80HHC cannot be granted overriding the provisions of sections 80A and 80AB of the Income-tax Act, 1961. In the case under consideration, the gross total income of the appellant would be computed after applying all the provisions of the Act leading up to Chapter VI-A and this includes the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he worked out the adjusted book profits at Rs. 1,56,82,958. The calculation made by him is reproduced below: ----------------------------------------------------- "Book profits before tax as per books Rs.3,28,11,709 Less: Least of unabsorbed depreciation and unabsorbed business losses (as per books) Rs.1,71,28,751 ---------------- Adjusted book profits Rs. 1,56,82,958" ---------------- ----------------------------------------------------- 2.4 Aggrieved by the order of the learned CIT(A) regarding enhancement of adjusted book profits and denial of exemption under section 80HHC under the other provisions of the Act, the assessee filed appeal before the Tribunal. 3. Ground Nos. 1 and 2 of the appeal are in relation to the denial of exemption under section 80HHC in computing the income of the assessee. Ground Nos. 3 and 4 are regarding enhancement of adjusted book profits by holding inter alia that (i) only 80 per cent of the amount computed in accordance with the provisions of section 80HHC is deductible under the aforesaid clause (iv), and (ii) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was to be computed in the manner provided in subsection (3) of section 80HHC but with reference to the book profits and not the income computed under the Act. 4.3 The learned counsel also relied on the decision of ITAT, Mumbai "E" Bench in the case of Dy. CIT v. Govind Rubber (P) Ltd. [2004] 82 TTJ (Mum.) 615, a case decided under section 115J. In this order, the decision of Hon'ble Kerala High Court in the aforesaid case of G.T.N Textile Industries Ltd. was referred to and that decision was followed for the purpose of computing deduction under section 115J(1A)(iii). The case of IPCA Laboratory Ltd. decided by the Hon'ble Supreme Court and Bombay High Court [2002] 253 ITR 568 (sic) and IPCA Laboratories Ltd. v. Dy. CIT (No.1) [2001] 170 CTR (Bom.) 568, were also considered in that decision. In that case, the Hon'ble Bombay High Court had laid down that disclaiming export benefits in favour of supporting manufacturers can be done only when there is a profit. The assessee had shown a net loss from export of goods. Under these circumstances, the Hon'ble Court held that the net result should be profits for the computation of claiming deduction under section 80HHC. As the profit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' the total income chargeable for previous year shall be taken to be 30 per cent of such 'book profits'. This provision took away 100 per cent exemption which was to be allowed in respect of export profits. Since the intention was that 100 per cent profit should be exempt, it was decided that profits, which were exempt under section 80HHC, should be excluded from the purview of section 115J. With a view to obtain this objective clause (iii) was inserted in the Explanation so as to exclude from the book profits, the profits derived from the export of goods, which are eligible for deduction under section 80HHC. The learned counsel also relied on Circular No. 680, dated 21-2-1994, which deals with clause (iii) of the Explanation under section 115J, in which it was clarified that the deduction had to be computed in the manner provided in section 80HHC(3) or section 80HHC(3A). The learned counsel also relied on the Circular No. 794, dated 9-8-2000, being Explanatory Notes on the provisions relating to Direct Tax Acts in Finance Act, 2000. This Circular explains the provisions of section 115JA in paragraph 43. In paragraph 43.5, it is inter alia mentioned that the export profits under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year that the loss cannot be set-off against the income of the subsequent year is not binding on the assessee. 4.8 As against the aforesaid, the learned DR pointed out that issues of allowance of deduction under section 80HHC as well as deduction under the aforesaid clause (iv) were before the Assessing Officer. Therefore, the learned CIT(A) could examine both these issues. If upon examination, the learned CIT(A) came to the conclusion that deduction under one or both sections was excessive, he could withdraw the same in full or in part and thereby enhance the income. It was further pointed out that the provisions of sections 115J and 115JA on one hand and section 115JB on the other hand, insofar as we are concerned, are materially different. Therefore, the decisions of Tribunal or Courts given under section 115J and section 115JA will not be applicable to the provisions contained in section 115JB. In this connection, he referred to the decision of Hon'ble Supreme Court in the case of CIT v. Vadilal Lallubhai and CIT v. Sakarlal Balabhai [1972] 86 ITR 2. The Hon'ble Court pointed out that in order to find out the legislative intent, we have to find out what was the mischi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is substantive in nature for this year inasmuch as the interpretation placed by the Assessing Officer and the learned CIT(A) on clause (iv) of the Explanation enhance the tax liability of the assessee. Therefore, we proceed to deal with this controversy in the first place. 5.2 Broadly speaking section 115JB provides for ascertainment of adjusted book profits. The exercise starts from ascertainment of profits from the Profit Loss a/c prepared in accordance with the provisions of Parts II III of Schedule VI of the Companies Act, 1956. There is no dispute about the profit in this case. Thereafter, adjusted book profits are to be found by increasing net profits by the items mentioned in clauses (a) to (f) of the Explanation. The sum so arrived at has to be reduced by the items mentioned in clauses (i) to (vii) of the Explanation of section 115JB. Clause (iv) of this section reads as under: "(iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-5ection (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section;" At this juncture, it may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which is eligible for deduction under section 80HHC is to be reduced under the aforesaid clause (iv). Thus, it is quite clear that as per the statutory language, only 80 per cent of the amount mentioned in sub-section (1) can be deducted for this year. Therefore, we are of the view that the action of the Assessing Officer in restricting the deduction to 80 per cent of the amount deductible under section 80 HHC(1) was right on the basis of the clear language of the statute. 5.4 The second issue in this case is whether the learned CIT(A) could enhance book profits as well as the total income of the assessee. We find that the matters regarding computation of book profits and computation of total income were before the Assessing Officer and the relevant documents etc. were also there before the Assessing Officer. Section 251(1)(a), dealing with the powers of CIT(A), provides that in disposing of an appeal, he may confirm, reduce, enhance or annul the assessment. Thus, the power of enhancement has been vested in CIT(A) in disposal of an appeal. The learned counsel did not refer to any decision or authority or any special circumstance in his case which mitigated against the power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80HHC. It is also mentioned that the exporters would continue to enjoy exemption from MAT. This sentence has to be seen in the context of provisions of section 115JB and not in the isolation as the words are not the words of statute. If we take this factor into account, it is no doubt true that 100 per cent exporters would be outside the purview of MAT, but in a case of mixed sales, that is where the sales are by way of exports as well as inland sales, the persons cannot be said to be exporters only and, therefore, the question of applicability of provisions of section 80HHC(3) will come into operation by dint of the language of clause (iv). It is also an accepted proposition that the aid in construction of statutes is required only when language of statute as unclear or ambiguous. When the language is clear, there is no reason to invoke any aid for the reason that no such aid is required for arriving at the true meaning of the statute. We are of the view that provisions of clause (iv) are quite clear and can be distinguished from the provisions of clause (iii) of Explanation to section 115J or 115JA. The instant clause clearly provides that what is to be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 32 provides that the unabsorbed depreciation brought forward from earlier years will be taken to be the depreciation of the current year. Therefore, unabsorbed depreciation and the current depreciation will have to be deducted in computing the profits and gains of business. In other words, such deductions will have to be made for computing 'profits of the business' also. We have already seen if only that is done, the income of the assessee under Chapter IV-D becomes nil. In this context, we may also examine the provisions of section 80AB, which read as under: "Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C-Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not possible in respect of computation of total income for the year under consideration in as much that the computation of total income or deduction under section 80HHC were not the subject-matter of appeal. (ii) The learned Assessing Officer had computed the total income of the assessee under the normal provisions of the Act, correctly after the application of mind and the prevalent law and judicial pronouncements. (iii) The appellant before the CIT(A) was for computation of book profit only and not for computation of deduction under section 80HHC nor for total income. (c) Your appellant pray that the order passed by initiating the enhancement proceedings be quashed. This ground is dismissed and we may only add at this juncture that the powers of the learned CIT(A) are co-terminus with the powers of the Assessing Officer and, therefore, on the facts and in the circumstances of the case, he was competent to examine all the matters which the Assessing Officer could have examined. (2) Ground No.2 reads as under: (a) The learned CIT(A) erred in law and in facts in denying the deduction under section 80HHC of the Act by reducing the export profit for the year by amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (iii) of section 115J. Under the new provisions the amount deductible under clause (iv) is the same as the amount deductible under section 80HHC. (4) Ground No.4 reads as under:- (a) The learned CIT(A) erred in law and on facts in not dealing with appeal against the action of the learned Assessing Officer's in increasing the book profit as computed by the appellant by an amount of Rs. 26,73,161 by holding that the deduction adjustment permissible under clause (iv) of Explanation to section 115JB of export profit from book profit was to be allowed at Rs. 1,06,92,643 instead of Rs. 1,33,65,804 as claimed by your appellant. (b) Your appellant submit that: (1) The eligible export profits for purposes of deduction permissible under section 115JB read with clause (iv) of Explanation to the said section is the actual export profit and not the deduction eligible under section 80HHC. (ii) The quantum of deduction by virtue of section 80HHC(1B) is 80 per cent of the export profit for assessment year 2001-02. This has the effect of reducing the quantum of deduction under section 80HHC but not the export profits eligible for deduction under section 115JB. (c) Your appellants pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
