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TMI Blog2007 (11) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... is preferred against the order of the CIT(A) on a solitary ground that the CIT(A) has erred in holding that the profit earned from exports as computed in cls. (a) to (c) of s. 80HHC(3) is eligible for reduction under cl. (iv) of Explanation to s. 115JB of the IT Act and thereby directing the AO to allow reduction of Rs. 6,64,25,939 as profit from export while computing the book profit under S. 115JB of the IT Act, 1961. 2. The facts in brief on the impugned issue are that the assessee company is engaged in manufacturing and sale of pharmaceutical products. During the assessment proceedings the AO recomputed the book profit under s. 115JB of the Act at Rs. 1,33,66,209 as against Rs. 81,021 disclosed by the assessee. The AO has observed in the assessment order that s. 80HHC(1) allows deduction to the extent of profits, referred to in sub-s. (1B). In view of this, only 80 per cent of export profit would be eligible for reduction. 3. Assessee preferred an appeal before the CIT(A) with the submission that s. 115JB is a specific charging section wherein the company is required to pay Minimum Alternate Tax (MAT) on its book profits. Such book profit is calculated in accordance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 80HHC and as computed under cls. (a) to (c) of s. 80HHC(3)/(3A) are required to be reduced for computing the book profit under s. 115JB of IT Act, 1961. It does not put any restriction of reducing the amount deductible in phased out manner. Further the CBDT Circular No. 794 dt. 9th Aug., 2000 [reported in (2000) 162 CTR (St) 9 : (2000) 244 ITR (St) 21,52] at para No. 43.5 refers that The export profits under ss. 10A, 10B, 80HHC, 80HHE and 80HHF are kept out of the purview of this provision as these are being phased out.' 7. The provisions of cl. (iv) of Explanation to s. 115JB do not require the reduction in the manner specified under s. 80HHC(1B) but allows the reduction to the extent of profits computed under ss. 80HHC(3)(a) to (c) of the Act. It takes support in the decision of Mumbai Tribunal in the case of Dy. CIT vs. Govind Rubber (P) Ltd. (2004) 82 TTJ (Mumbai) 615 and by Kerala High Court in the case of CIT vs. G.T.N. Textiles Ltd. (2000) 164 CTR (Ker) 185 : (2001) 248 ITR 372 (Ker). 8. Further, the intention of the legislation can be drawn from the Speech given by Hon'ble Finance Minister while presenting Union Budget, 2000 which reads that 'I would add that expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has also placed reliance upon the Speech of the Finance Minister delivered on presentation of the Union Budget 2000, while phasing out the tax concessions. The relevant portion of the Speech is also quoted hereunder: "To begin with, I am withdrawing these concessions by 20 per cent from the financial year 2000-01, and by 20 per cent each subsequent year till they reach a zero level. I would add that exporters would continue to enjoy exemption from MAT till the full phase out." 6. The learned counsel for the assessee further placed reliance upon the order of the Tribunal in the cases of Starchik Specialities Ltd. vs. Dy. CIT (2004) 90 TTJ (Hyd) 546 : (2004) 90 ITD 34 (Hyd) and Smruthi Organics Ltd. vs. Dy. CIT (2006) 103 TTJ (Pune) 546 : (2006) 101 ITD 205 (Pune) in support of his contention. He further placed reliance upon the order of the Tribunal in the case of Dy. CIT vs. Govind Rubber (P) Ltd. (2004) 82 TTJ (Mumbai) 615 in which it has been held that while determining the book profit for the purpose of s. 115J the profit eligible for deduction under s. 80HHC computed as per the provisions of s. 80HHC(3) was allowed as deduction under Explanation (iii) to s. 115J even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e real interpretation of this clause we extract it as under: "115JB....... Explanation-For the purposes of this section, 'book profit' means the net profit as shown in the P L a/c for the relevant previous year prepared under sub-s. (2), as increased by- ....... (if any amount referred to in cls. (a) to (g) is debited to the P L a/c, and as reduced by- ....... (iv) the amount of profits eligible for deduction under s. 80HHC, computed under cl. (a) or cl. (b) or cl. (c) of sub-s. (3) or sub-s. (3A), as the case may be, of that section, and subject to the conditions specified in that section; or" 9. On careful perusal of s. 80HHC we find that as per cl. (1) deduction to the extent of profits referred in sub-s. (1B) derived by the assessee from export of such goods is to be allowed in computing the total income of the assessee; Meaning thereby the profits derived by the assessee from the export of such goods is onething and the deduction to be allowed in computation of total income of the assessee under s. 80HHC is a different thing. After introduction of sub-s. (1B) to s. 80HHC by the Finance Act, 2000 w.e.f. 1st April, 2001 the entire profit derived from the export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of sub-ss. (1) and (1A), the extent of deduction of the profits, shall be an amount equal to- (i) eighty per cent thereof for an assessment year beginning on the 1st day of April, 2001; (ii) seventy per cent thereof for an assessment year beginning on the 1st day of April, 2002; (iii) fifty per cent thereof for an assessment year beginning on the 1st day of April, 2003; (iv) thirty per cent thereof for an assessment year beginning on the 1st day of April, 2004, and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year." 10. In sub-s. (1B) the legislature has again used the words 'the extent of deduction of profit shall be an amount equal to'; Meaning thereby for quantification of deduction the legislature has used the words 'deduction to the extent of profit or the extent of deduction of the profit', but for determining the profits eligible for deduction this type of terminology was not used by the legislature; Meaning thereby the amount of profit eligible for deduction is an amount of export profit which is eligible for deduction irrespective of the fact that the entire amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were reintroduced and substituted later, the same object was declared by the Finance Minister in the Parliament which again reflected in similar terms of the relevant circulars and Notes on Clauses and the Memorandum explaining the objects of amending the provisions. In the case of s. 115JB, the Finance Act has made it dear that the deduction under s. 80HHC would be available in its entirety to an assessee even if the relief under s. 80HHC is being eliminated in a phased manner. The relevance of Finance Minister's Speech appreciating the objective of a fiscal statute was considered by the Supreme Court in the case of Kerala State Industrial Development Corporation Ltd. vs. CIT (2003) 180 CTR (SC) 192 : (2003) 259 ITR 51 (SC). The Court held that Finance Minister's Speech before Parliament could be relied upon to throw light on the object and purpose of particular provisions. It was considered in the context of interpretation of Interest-tax Act, 1991. In fact, the Supreme Court was following its own earlier decision in the case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC)." 11. We have also examined the order of the Tribunal in the case of Dy. CIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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