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TMI Blog2015 (7) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... of the calculation of book profit under section 115JB, the AO found that while determining loss under section 115JB(2)(iii), the assessee-company compared between unabsorbed depreciation and unabsorbed loss of Ahmedabad Unit only, and unabsorbed loss of Rs. 4,23,87,539/- being lesser of the two, was deducted from book profit. The AO vide his order dated 28.12.006, passed under section 143(3), determined the book profit under section 115JB at Rs. 3,55,85,593/-. Thus, there was a disallowance of Rs. 18,27,710/- made on account of recomputation of deduction under section 80HHC. 5. The AO vide his order dated 20.8.2010 has recomputed the profit u/s.115JB at Rs. 8,36,84,223/-. In the re-assessment proceedings under section 147, the AO determined the book profit at Rs. 8,36,84,223/-. The AO determined the loss under section 115JB(2)(iii) of the Act at Rs.NIL. The AO calculated and combined the unabsorbed loss and unabsorbed depreciation of both the Baramati Unit (EOU) and Ahmedabad Unit for each of the year starting from Asstt.Year 1999-2000 and ending on Asstt.Year 2002-03, and then compared them, and as a result, there was unabsorbed depreciation, but there was no business loss. By ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s computed by the appellant company in its return of income dated 19/10/2005. As a result, this ground is allowed in favor of the appellant." 7. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee while computing its book profit under section 115JB of the Act claimed deduction of Rs. 4,23,87,539/- under section 115JB(2)(iii). The AO at page no.2 of the assessment order worked out that cash loss for the Asstt.Year 1999-2000 to 2002-03 was NIL, and there was only unabsorbed depreciation, and therefore, the assessee was not eligible for any deduction under section 115JB (3) (iii). 8. On appeal, the CIT(A) directed the AO to allow deduction under section 115JB(3)(iii) as per the working made by the assessee. However, we find that the working made by the assessee has not been brought on record either by any of the lower authorities, or by either of the parties before us. From the order of the CIT(A), it is not clear as to how the CIT(A) has verified the working made by the assessee. We, therefore, set aside the orders of the lower authorities, and remit the matter back to the file of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit under section 115JB(2)(iv) is the figure of eligible profit under the normal provisions of the Act, after deducting the brought forward loss therefrom. Since, he computed the deduction as above at NIL, therefore, he held that no deduction was allowable to the assessee under section 115JB(2)(iv) of the Act. 13. On appeal, the CIT(A) held that for the purpose of allowing deduction under section 80HHC from the book profits, the book profit of the assessee from the eligible business was to be considered, and hence directed the AO to allow deduction on the basis of profit declared by the assessee under section 115JB(1) of the Act. 14. Being aggrieved, the Revenue is in appeal before us. 15. The Ahmedabad Bench of the Tribunal in the case of DCIT Vs. Sun Pharmaceutical Industries Ltd., in ITA nos.363&692/Ahd/2002 for the Asstt.Year 1998-1999 by order dated 7.1.2011 held as under: "16. Ground no.5 in the appeal of the assessee relates to deduction u/s 80HHC of the Act for the purpose of computation of book profits in terms of clause (viii) of the explanation appended below the extant sec. 115JA(2) of the Act. The AO while computing book profits in terms of provisions of sec. 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the book profits computed under the Companies Act, as taxable income, in a case where the total income as computed under the provisions of the 1961 Act, is less than 30% of the book profit. The word "book profit" has been defined in Section 115JA(2) read with the Explanation thereto to mean the net profit as shown in the Profit and Loss Account, as increased by the amount(s) mentioned in clauses (a) to (f), and as reduced by amount(s) covered by clauses (i) to (ix) of the Explanation. These may be called for the sake of brevity as "Upward and Downward Adjustments". From the above it is clear that Section 115JA is a self-contained Code and will apply notwithstanding any provisions in the 1961 Act. In this case, we are concerned with Downward Adjustment, particularly clause (viii) which refers to the amount(s) of profits eligible for deduction under Section 80HHC, computed under Section 80HHC(3) but subject to conditions specified in Sections 80HHC(4) and 80HHC(4A). 8. By the Finance Act, 2000, Section 115JB was inserted w.e.f. 1.4.2001 providing for levy of MAT on certain companies. Section 115JB, though structured differently, stood inserted to provide for payment of advance tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2001-02 exporters would not get 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 non-obstante 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The conditions are only that the relief should be certified by the Chartered Accountant. Such condition 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 sub-clauses (4) and (4A) of that Section) to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department." 19.1 Before this, in the case of CIT Vs. Rajnikant Schnelder& Associates P Ltd., 302 ITR 22(Mad), the Hon'ble Madras High Court held that the AO was not entitled to alter the profit and loss account prepared by the assessee under the provisions of the Companies Act while arriving at book profits u/s 115JA of the Act and the book profits so arrived at should be the basis for taxation and computation u/s 80HHC should be limited to the case of profits of eligible category only. This decision has been reiterated in CIT Vs. SPEL Semiconductor Ltd., 323 ITR 488(Mad.), when it was held that the deduction u/s 80HHC of the Act in an assessment u/s 115JA is to be ITA nos.363&692/Ahd/02 worked out on the basis of adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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