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TMI Blog2011 (3) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 23-3-2011 - P.M. Jagtap, R.S. Padvekar, JJ. Arvind Sonde for the Appellant Dr. B. Senthil Kumar for the Respondent ORDER Bench: These eight appeals, four by the Assessee and four by the Revenue, are cross appeals, which are directed against four separate orders passed by the learned Commissioner of Income-tax (Appeals)-III, Mumbai. 2. First we shall take up the cross appeals filed for the assessment year 1999-2000, being ITA Nos.191/Mum/2009 and 71/Mum/2009, which are directed against the order of the learned CIT(A)-III, dated 23.10.2008. 3. The relevant facts of the case giving rise to these appeals are that the assessee is a company, which filed its original return of income on 30.12.1999 declaring the total income at 'Nil' computed under the normal provisions of the Act and book profit of Rs. 19,84,37,353/- u/s.115JA of the Act. In the assessment originally completed under section 143(3) vide order dated 28.03.2002, the total income of the assessee was computed by the Assessing Officer at Rs. 10,19,30,410/- under the normal provisions of the Act and at Rs.22,47,70,079/- under section 115JA of the Act. On appeal, the learned CIT(A) allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of MAT assessment is to be worked out on the basis of adjusted book profit and not on the basis of profit computed on regular basis as per law applicable to the computation of profits and gains of business or profession. It was held that sub-section (4B) of section 80HHC has been excluded from the purview of Explanation u/s.115JA. It was contended on behalf of the assessee relying on the said decision of the Special Bench of the I.T.A.T that Explanation (baa) sought to be invoked for rectification u/s.154 is applicable for computing deduction u/s.80HHC under the normal provisions and the same is not applicable for computing book profits u/s.115JA. It was also contended that a clear direction was given by the learned CIT(A) to the Assessing Officer to compute deduction u/s.80HHC out of book profit u/s.115JA only with reference to the profit as per the accounts and not to restrict the same to the amount allowable under the normal provisions of the Act. It was contended that there was thus no mistake in the order passed by the Assessing Officer while giving effect to the appellate order of the learned CIT(A) on this issue. It was also contended that the rectification propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee before him were found acceptable by the learned CIT(A) and he deleted the addition made by the Assessing Officer to the book profit of the assessee by way of rectification order passed under section 154 for the following reasons given in para No. 8.4 of his impugned order passed for the assessment year 1999-2000: "In the normal computation of income explanation (baa) is automatically invoked. As has been detailed in the preceding para of this order, this explanation permits the specified adjustments in profit computed under the head of income 'Profit and gains of Business and profession'. However, when the appellate Commissioner directed that deduction u/s.80HHC be computed in accordance with accounts of the assessee for determining book, the reference to profits under the head 'Profit and gains of Business and Profession' is not possible at all. Therefore, Assessing Officer's contention that there is no bar in the appellate order for invoking explanation (baa) and, therefore, he is invoking explanation (baa) is a highly debatable issue. It is debatable because on the face of it, the adjustments as specified in the explanation can only be made to profits calculated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of both the sides and also perused the relevant material on record. It is observed that while disposing of the appeal of the assessee filed before him for the assessment year 1999-2000 vide an appellate order dated 24.03.2003, the Assessing Officer was directed by the learned CIT(A) to compute the deduction u/s.80HHC for the purpose of determining book profit u/s.115JA only with reference to profit as per the accounts and not to restrict the same to the amount computed and allowed under the normal provisions of the Act. Although this direction was not initially followed by the Assessing officer while giving effect to the order of the learned CIT(A) passed on 31.3.2005, he later on complied with the said direction by passing a rectification order dated 24.7.2006 allowing the application filed by the assessee u/s.154. Thereafter he passed one more order u/s.154 on 09.05.2008 restricting the deduction computed u/s.80HHC while determining the book profits of the assessee on the ground that there was a mistake committed by him in the order dated 24.07.2006 while giving effect to the order of the learned CIT(A) in not reducing the profits of the business by 90% of other income such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted prior to 01.6.2003. We, therefore, set aside the impugned order of the learned CIT(A) on this issue and restore the matter to the file of the Assessing Officer with the direction to ascertain exact date of grant of corresponding refund for the year under consideration and accordingly, decide this issue keeping in view the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Bajaj Hindustan Ltd.(supra). Ground No. 2 of the revenue's appeal is accordingly allowed for statistical purposes. 9. In its appeal filed for the assessment year 1999-2000, the grounds raised by the assessee are relating to its alternative claims. As a result of our decision rendered above upholding the action of the learned CIT(A) in deleting the adjustment made by the Assessing Officer by restricting the deduction u/s.80HHC while computing the book profits of the assessee, the grounds raised by the assessee in this appeal including the additional ground have become infructuous as agreed even by the learned counsel for the assessee. The same are accordingly dismissed as having become infructuous. 10. Now we shall take up the appeal of the Revenue for the assessment year 2000-01 being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer while giving effect to the order of the learned CIT(A) was rectified by him by restricting the deduction u/s.80HHC while determining the book profits of the assessee by reducing 90% of other income, as per Explanation (baa) to section 80HHC. Although, a similar adjustment made by the Assessing Officer by way of rectification u/s.154 in the immediately preceding years i.e. assessment years 1999-2000 and 2000-01 was deleted by the learned CIT(A) holding that the same was beyond the scope of section 154, he took a different view in assessment year 2001-02 and confirmed the said adjustment for the following reasons given in para 6.6 of his order passed in the assessment year 2001-02: "True, he adjustments specified in Explanation (baa) are specified to be with reference to profits under the head of income 'Profits and Gains of Business or Profession'. Those adjustments are conditions to be invoked for making calculation u/s. 80HHC(3). and, section 115JB clause (iv) categorically specifies that all conditions of section 80HHC have to be invoked. In Explanation (baa) the operative part of the condition is the specified adjustments. That the adjustments have to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court in the case of Ajanta Pharma Ltd. V CIT(327 ITR 305)(SC), wherein a similar stand as taken by the learned CIT(A) in his impugned order was sought to be taken by the department, in support its case and the same was not accepted by the Hon'ble Apex Court for the following observations recorded in the judgment: "One of the contentions raised on behalf of the Department was that if clause (iv) of the Explanation to section 115JB is read in entirety including the last line thereof (which reads "subject to the conditions specified in that section"), it becomes clear that the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, is subject to the conditions specified in that section. According to the Department, the assessee herein is trying to read the various provisions of section 80HHC in isolation whereas as per clause (iv) of the Explanation to section 1125JB, it is clears that the book profit shall be reduced by the amount of profits eligible for deduction under section 80HHC as computed under clause (a) or clause (b) or clause (c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misplaced. Moreover, a specific direction was given by the Learned CIT(A) to the Assessing Officer in his appellate order to compute deduction u/s.80HHC for determining the book profit u/s.115JB with reference to the profits as per the accounts and not to restrict the same to the amount computed and allowed as per the provisions of the I.T. Act. Keeping in view this specific direction given by the Ld.CIT(A), we are of the view that it cannot be said that there was any mistake in the order of the Assessing Officer giving effect to the order of the Learned CIT(A) in not reducing profit of the business by 90% of the other income for the purpose of computing deduction u/s.80HHC to determine the book profit u/s.115JB calling for any rectification u/s.154. We, therefore, reverse the impugned order of the Learned CIT(A) on this issue and delete the adjustment made by the A.O. by way of rectification u/s.154. Appeal of the assessee for the assessment year 2001-02 being ITA no. 73/Mum/2009 is accordingly allowed. 18. As regards the appeal of the revenue for the assessment year 2001-02 being ITA No. 193/Mum/2009, it is observed that the solitary issue raised therein relating to levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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