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TMI Blog2010 (12) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... yet it also speaks of 'if, any such amount is credited in profit and loss account: Thus, while reading the said clause as a whole, it becomes clear that the amount of income which can be reduced by the Assessing Officer for computing the book profit under clause (ii) of the Explanation to section 115JB(2), it would be the amount which is credited to the profit and loss account and not the amount of income which is claimed by the assessee or determined by the Assessing Officer while assessing the income under the regular provisions of the Incometax Act. - CIT(A) was not justified in enhancing the book profit by disallowing the deduction under Section 10B. - ITA No. 2137/Ahd/2007, ITA No. 2511/Ahd/2007 - - - Dated:- 24-12-2010 - G.D. Agarwal, Mahavir Singh, JJ. S.N. Soparkar for the Appellant Anil Kumar for the Respondent ORDER G.D. Agarwal: These are two appeals - one by the assessee and other by the Revenue against the order of the Commissioner of Income-tax (Appeals)-VIII, Ahmedabad dated 30.03.2007 arising out of the order of the Assessing Officer passed under Section 143(3) of the Income Tax Act, 1961. Since the issues are inter-related, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the set off of carry forward depreciation of earlier year, the resultant total income was declared at NIL. He accepted the book profit disclosed at Rs.4,71,16,061/-. 4. The assessee had filed appeal against certain disallowance made by the AO while computing the total income. On appeal, the CIT(A) made enhancement of book profit by a sum of Rs.8,77,94,182/-. While computing the book profit under Section 115JB, the AO has reduced the net profit as per the Profit and Loss account for deduction under Section 80HHC amounting to Rs.1,63,10,271/- and exemption under Section 10B amounting to Rs.7,14,83,911/-. In the opinion of the CIT(A), both the above deduction should not have been allowed while computing the book profit under Section 115JB. He therefore directed the AO to enhance the book profit by the sum of Rs.8,77,94,182/- (Rs.7,14,83,911/- plus Rs.1,63,10,271/-). 5. The ground nos.1 to 4 of the assessee's appeals are against such enhancement made to the book profit made by the learned CIT(A). It is stated by the learned counsel that the enhancement made by the CIT(A) was on different grounds and reasoning than the findings of the AO. He has stated that the AO had accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly incorrect. He also stated that the Hon'ble Apex Court has considered the powers of the CIT(A) in the case of Commissioner of Income-tax vs Nirbheram Daluram, 224 ITR 610 and Their Lordships have held that the CIT(A) is entitled to direct the enhancement even in respect of the items of the income not considered by the AO. 8. With regard to the merit of the additions, he has stated that before the CIT(A) the assessee himself admitted that the deduction under Section 80HHC was wrongly computed and the assessee furnished revised computation. This fact would be evident from para 14.2 of the order of the CIT(A). He also stated that the CIT(A) has also discussed the issue at length and has arrived at the conclusion that while computing the book profit, the assessee is not entitled to any deduction under Section 80HHC and 10B. Therefore, he directed the AO to re-compute the book profit without allowing any deduction/exemption under Section 80HHC/10B. He therefore submitted that the order of the CIT(A) may be sustained. 9. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the Hon'ble Apex Court examined the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d's circular and case laws, the computation of deduction u/s.80HHC for the purpose of 115JB is done as under: Profit as per Profit and Loss account Rs.13,49,10,243/- Less: i) Exemption u/s.10B Rs.7,14,83,911/- ii) Deduction u/s.80HHC as per assessee's working Rs.1,63,10,271/- Rs.8,77,94,182/- Book profit Rs.4,71,16,061/- From the above, it is clear that the AO has considered the allowability of deduction under Section 80HHC while computing the book profit. He has also allowed the exemption under Section 10B while computing the book profit. Therefore, it cannot be said that the direction of the CIT(A) relating to exemption under Section 10B or deduction under Section 80HHC are the new items not considered by the AO. Both the above items were considered by the AO and the CIT(A) did not agree with the views of the AO taken in this regard. Even otherwise, Hon'ble Apex Court in the case of Nirbharam Daluram (supra) has held that the power of CIT(A) are not confined to matters considered by the AO, he may consider even new source of income. Therefore, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the normal computation process of statutory profit, which has already been overwhelmed by sections 115J, 115JA and 115JB. This reconciles the alleged incompatibility pointed out by the Revenue that the deduction available to an assessee under Chapter VI-A is subject to section 80AB. Therefore, we find that the deduction under section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profit and gains of business or profession". From the above, it is evident that the Hon'ble Apex Court as well as the Special Bench of the ITAT have taken the view that the section 115JB is a selfcontained code and for the purpose of section 115JB deduction is to be computed with reference to the book profit and not with reference to the statutory profit. We also find that the AO himself applied his mind on this aspect and after following the Board circular and other judicial pronouncements, he allowed the deduction under Section 80HHC. The CIT(A) has come to the conclusion that the assessee would not be entitled to deduction under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clerical error while computing deduction under Section 80HHC before the AO and correct deduction permissible under Section 80HHC from the book profit is only Rs.1,01,83,701/-. We therefore direct the AO to allow deduction under section 80HHC at Rs.1,01,83,701/- while computing the book profit under Section 115JB. 12. With regard to deduction under Section 10B, the CIT(A) has observed that after the set off of unabsorbed depreciation, the total income of the assessee would be NIL and therefore no deduction under Section 10B can be allowed even while computing the book profit. We have already considered the issue of set off of the brought forward depreciation while computing the deduction under Section 80HHC for the purpose of the book profit. Our observations above in para-10 and 11 would be squarely applicable for computing the exemption under Section 10B for the purpose of Section 115JB. Moreover, we find that the Delhi Bench of the ITAT has considered the identical issue in the case of Roxy Investments P. Ltd. (supra) wherein Their Lordships held as under: "Under the scheme of provisions of section 115JB, Minimum Alternate Tax (MAT) is levied with reference to the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Special bench of the ITAT in the case of Syncome Formulations (I) Ltd. (supra), we hold that the CIT(A) was not justified in enhancing the book profit by disallowing the deduction under Section 10B. 13. Ground No.5 of the assessee's appeal reads as under: "5. The learned CIT(A) has erred in law and on facts in confirming the action of ld. AO in disallowing the claim of deduction u/s.80HHC of the Act on the current year's profits without set off of unabsorbed brought forward deprecation of prior years." 14. At the time of hearing before us, the learned counsel for the assessee fairly conceded that this issue is covered against the assessee by the decision of the Hon'ble Apex Court in the case of Commissioner of Income-tax v. Shirke Construction Equipment Ltd., 291 ITR 380. We, therefore, respectfully following the above decisions of the Hon'ble Apex Court, reject the ground no.5 of the assessee. 15. Ground Nos.6 to 8 of the assessee's appeal read as under: "6. The ld.CIT(A) has erred in law and on facts in not adjudicating upon the ground in respect of claim of deductionu/s.80HHC of the Act on gross income without reducing the claim of deduction u/s.10B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the time of hearing before us, the learned counsel fairly admitted that this issue is against the assessee by the decision of Third Member of the ITAT in the case of Kanel Oil and exports Ind. Ltd. vs. JCIT, 126 TTJ 158. Respectfully following the above decision of the ITAT, we reject the ground no.11 of the assessee's appeal. 23. Ground No.12 regarding initiation of penalty proceedings under Section 271(1)(c) of the Act, is premature at this juncture, the same is accordingly rejected. ITAT No. 2511/Ahd/2007 (Revenue's appeal) 24. Ground No.1 of the Revenue's appeal reads as under: "1. The ld.CIT(A) erred in law and on the facts of the case in directing the AO to include the other income consisting of Forex Swap at Rs.83,74,012/- and forex-forward at Rs.75,203/- out of total other income of Rs.96,18,561/- for computation of deduction u/s.10B of the IT Act, 1961, ignoring the fact that both these income can never be said to be derived from industrial undertaking as both the said incomes arise due to independent financial arrangements/rearrangements. 25. At the time of hearing before us, it is submitted by the learned counsel that this issue is squarely covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reflected in the shipping bill. Hence, merely because an amount is received in a year subsequent to the year of export by way of exchange rate difference, it does not necessarily always follow that the same is not relatable to the exports made." (emphasis supplied) Though, the above decision is with regard to section 80HHC, however, ratio of the above decision would be squarely applicable for computing deduction under Section 10B of the I.T.Act. It was also stated by the learned counsel that the nature of the income arising from forex swap and forex forward is similar to the income from exchange rate difference. In view of the above, we respectfully following the above decision of the Hon'ble jurisdictional High Court, uphold the order of the CIT(A) on this point and reject ground no.1 of the Revenue's appeal. 27. Ground No.2 of the Revenue's appeal reads as under: 2. The ld.CIT(A) erred in law and on the facts of the case in directing the AO to exclude the excise duty at Rs.1,11,23,432/- from the total turnover, for computing deduction u/s.10B of the Act." 28. We have carefully considered the arguments of both the sides and perused the material placed before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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