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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 ..... duction under section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profits 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. However, subsequently, Hon'ble Bombay High Court in their aforesaid decision in CIT Vs. Ajanta Pharma Ltd.,(2009 (5) TMI 7 - BOMBAY HIGH COURT) overruled the decision in the case of Syncome Formulations (I) Ltd.(supra). On further appeal by the assessee, Hon'ble Apex Court in the case Ajanta Pharma Ltd. vs. CIT, [2010 (9) TMI 8 - SUPREME COURT] while referring to the relevant provisions of sec. 115JB and sec. 80HHC of the Act upheld the view taken by the Special Bench in the case of Syncome Formulations (I) Ltd.(supra). Thus CIT(A) did not erred in directing to recomputed the deduction under section 80HHC of the Act for the purpose of deduction under section 115JB(2)(iv) on the book profit declared by the assessee.- Decided against revenue. - ITA No. 971/Ahd/2011 - - - Dated:- 17-4-2015 - N. S. Saini, AM And Kul Bharat, JM,JJ. For the Appellant : Shri Nimesh Yadav, Sr. DR For the Respondent : Shri G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. It is pertinent here to note that the text of Section 11JB starts with non obstinate clause meaning thereby that it has overriding effect. On perusal of the provision of Section 115JB it is amply clear that it specifically excludes the income and expense related to such income to which section 10 applies from its ambit Therefore, determination and computation of income to which section 10 applies shall not be governed by the deeming provision of Section 115JB. The income/loss from Baramati unit (100% EOU) have been already excluded from the book profit for all the years starting from A Y 1999-2000 to A Y 2002-03 in respect of which brought forward losses have been set off in the year under consideration. I find with the contention of the AR of the appellant that when these losses were ignored//excluded in their year of origination from the book profit of the respective years u/s 115JB, the same can not be considered for the purpose of set off u/s 115JB(iii) of the Act. Even otherwise, I agree with the AR of the appellant that determination and computation of income to which section 10 applies shall not be governed by the deeming provision of Section 115JB. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground no.2 the grievance of the Revenue is that the CIT(A) erred in directing to recomputed the deduction under section 80HHC of the Act for the purpose of deduction under section 115JB(2)(iv) on the book profit declared by the assessee. 10. The AO vide his order dated 20.8.2010 recomputed deduction under section 80HHC at NIL for the purpose of deduction from book profit under section 115JB(2)(iv) of the Act. The AO deducted brought forward loss from the eligible profit under the normal provisions of the Act, and the resultant figure was NIL. According to the AO, the profit of the business from export, as computed under section 80HHC means profit determined after setting off loss under sections 72, 73 and 74 of the Act. Further, the AO set off unabsorbed loss of both the units i.e. Ahmedabad and Baramati Unit (a hundred percent EOU). 11. On appeal, the CIT(A) held as under: Decision : After considering the legal provision and submission of the appellant, I agree with the contention of the AR of the appellant company. Section 115JB is a separate code in itself. While determining income under section 115JB, the AO is not entitled to touch upon the profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, the learned CIT(A) upheld the findings of the AO. 18. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee contended that the issue is now settled by the decision of the Hon'ble Apex Court in the case of Ajanta Pharma, 327 ITR 305(SC) and by the Hon'ble Madras High Court in Bhari Information Technology System, 328 ITR 380(Mad.).On the other hand, the ld. DR supported the findings of the ld. CIT(A) and contended that only taxable profits computed under the normal provisions have to be considered while determining amount of deduction u/s 80HHC of the Act for the purpose of sec. 115JA of the Act. 19. W e have heard both the parties and gone through the facts of the case as also the decisions relied upon. W e find that while adjudicating the claim for deduction u/s 80HHC of the Act for ITA nos.363 692/Ahd/02 determining the book profits u/s 115JA of the Act ,the Mumbai Special Bench of ITAT in the case of DCIT vs. Syncome Formulations (I) Ltd., 106 ITD 193 held that the deduction under section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profits and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 115JB, however, clause (viii) of Section 115JA is re-numbered as clause (iv). Section 115JB continues to remain a self-contained Code. 9. On the other hand, Section 80HHC(1) inter alia states that where an assessee, who is the Indian resident, is engaged in the business of exports out of India of any goods earns convertible foreign exchange then in computing the total income, a deduction of the profits derived from such exports would be admissible. Thus, Section 80HHC provides for tax incentives. Section 80HHC(1) at one point of time laid down that an amount equal to the amount of deduction claimed should be debited to the P L Account of the previous year in respect of which deduction is to be allowed and credited to the reserve account to be utilized for the business purpose. Section 80HHC(1) concerns eligibility whereas Section 80HHC(3) concerns computation of the quantum of deduction/tax relief. At one point of time prior to the Finance Act, 2000, exporters were allowed 100% deduction in respect of profits derived from export of goods. However, that has now been reduced in a phase-wise manner under Section 80HHC(1B). It may be noted that all assessable entities ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 80% by relying on Section 80HHC(1B). Thus, for computing book profits the Downward Adjustment, in the ITA nos.363 692/Ahd/02 above example, would be ₹ 100 crores and not ₹ 90 crores. The idea being to exclude export profits from computation of book profits under Section 115JB which imposes MAT on deemed income. The above reasoning also gets support from the Memorandum of Explanation to the Finance Bill, 2000. 10. One of the contentions raised on behalf of the Department was that if clause (iv) of Explanation to Section 115JB is read in entirety including the last line thereof (which reads as 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 Explanation to Section 115JB, it is clear that book profit shall be reduced by the amount of profits eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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