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TMI Blog2014 (11) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... k profit by deduction allowable u/s 80HHC (Export Benefit) - Held that:- Following the decision in Ajanta Pharma Ltd. Versus Commissioner of Income Tax-9, Mumbai [2010 (9) TMI 8 - SUPREME COURT] - the total amount of deduction computed u/s 80HHC is to be deducted from the book profit u/s 115JB - ultimate deduction granted to the assessee u/s 80HHC is not the amount which is to be reduced from the book profit, but the amount originally computed for deduction u/s 80HHC has to be reduced, but after the Finance Act, 2000, the rate of deduction has been reduced in phased manner - the AO is directed to reexamine this aspect and compute the deduction admissible to the assessee while preparing the book profit for the purpose of section 115JB – Decided partly in favour of assessee. - ITA No. 1177/Bang/2012, C. O. No. 46/Bang/2013 - - - Dated:- 14-11-2014 - Shri Rajpal Yadav And Shri Jason P. Boaz,JJ. For the Petitioner : Dr. P. K. Srihari, (DR) For the Respondent : Shri Padam Chand Khincha,CA ORDER Per Rajpal Yadav, J. M. The Revenue is in appeal before us against the order of the learned CIT (A) dated 11.6.2013 passed for assessment year 2004-05. On rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as computed, instead of the entire receipts which has been given for common expenses according to the Circular No.621 issued by the Board. Now dispute arose whether this 90% should be of the gross receipts or of the net receipts. Assessing Officer wants to exclude the gross receipts, whereas the CIT (A) after putting reliance upon the judgment of the Hon'ble Supreme Court held that net of labour charges be reduced by 90%. It was brought to our n otice that this issue has come up before the Tribunal in the assessee s own case and travelled upto the Hon'ble High Court. The Hon'ble High Court has upheld the exclusion of 90% of the net labour charges from the profit of the business. The order of the Hon'ble High Court in ITA No.21 of 2008 in the assessee s own case read as under: Judgment In ITA No.52/09 and in ITA No.903/07 has held that u/s 80HHC 90% of the labour charges have to be deducted and the said deductions should be on the net and not the gross. The questions involved in this appeal is also the same. In that view, in view of the decision referred to above, this appeal is disposed of. The assessee is entitled to deduction of 90% towards the labour cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) the judgment of the Hon'ble Supreme Court has held that provisioning to be an admissible expenses, since a sensible analysis of hirsotical trends enables a robust and reliable estimation of a present obligation which arises out of an obligating event. If such a provision is based on the past experience, containing demonstrable data of the expenses incurred by the assessee for providing warranty, then it would be an ascertained liability. The learned Counsel for the assessee has placed on record the details in tabular form indicting that provision made during this year is to be exhausted in the immediately subsequent year during warranty period, otherwise it would be written back. Considering these details, we are of the view that the learned first appellate authority has rightly allowed the claim of the assessee. We do not find any merit in the additional ground of appeal, it is rejected. 8. In the cross objection, the next grievance of the assessee is that while computing the book profit u/s 115JB, the deduction computed u/s 80HHC is to be allowed as a deduction. The learned Counsel for the assessee submitted that the issue in dispute is squarely covered in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et 100% deduction in respect of profits derived from exports but that they would get deduction of 80% in the assessment year 2001- 02, 70% in the assessment year 2002-03 and so on. Thus, Section 80HHC(1B) deals not with eligibility but with the extent of deduction . As earlier stated, Section 115JB is a self-contained Code. It taxes deemed income. It begins with a nonobstante clause. Section 115JB refers to computation of book profits which have to be computed by making Upward and Downward Adjustments. In the Downward Adjustment, vide clause (iv) it seeks to exclude eligible profits derived from exports. On the other hand, under Section 80HHC(1B) it is the extent of deduction which matters. The word thereof in each of the items under Section 80HHC(1B) is important. Thus, if an assessee earns ₹ 100 crores then for the assessment year 2001-02, the extent of deduction is 80% thereof and so on which means that the principle of proportionality is brought in to scale down the tax incentive in a phased manner. However, for the purposes of computation of book profits which computation is different from normal computation under the 1961 Act/computation under Chapter VIA. We n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountant. Such cnodition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in clause (iv) of Explanation to section 115JB (subject to the conditions specified in subclauses (4) and (4A) of that section) to obliterate the difference between eligibility and deductibility of profits as contended on behalf of the Department. 11. For the above reasons, we set aside the impugned judgment of the High Court and restore the judgment of th Tribunal. Accordingly the Civil appeal of the assessee is allowed with no order as to costs . 9. According to the judgment of the Hon'ble Supreme Court, the total amount of deduction computed u/s 80HHC is to be deducted from the book profit u/s 115JB. Though it has been explained elaborately in the judgment of the Hon'ble Supreme Court indicating that ultimate deduction granted to the assessee u/s 80HHC is not the amount which is to be reduced from the book profit, but the amount originally computed for deduction u/s 80HHC has to be reduced, for example ₹ 100/- was computed as deduction, admissible u/s 80HHC, but after the Finance Act, 2000, the rate of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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