TMI Blog2007 (6) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to allow deduction under section 80-IA while computing the book profit for the purpose of section 115JA of the said Act although the Assessing Officer was right in not granting deduction under section 80HHC since the income returned was a loss return under the normal provisions of the Income-tax Act. 3. The appellant prays that the Order of the CIT(A) on the above grounds be set aside and that of the ITO/AC/DC be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 2. With regard to ground No. 1 our attention was invited by the learned counsel for the assessee that this issue is covered by the Order of the Special Bench in the case of Dy. CIT v. Syncome Formulations (I) Ltd. [IT Appeal No. 2711 (Mum.) of 2003] in which it has been held that deduction under section 80HHC in a MAT Scheme from the taxable income which is otherwise adjusted book profit and the deduction under section 80HHC should be computed on the adjusted book profit. Copy of the Order of the Tribunal is placed on record. 3. The learned DR on the other hand has invited our attention to the Order of the CIT(A) in which he has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80HHC can be computed on the basis of the book profit, as directed by the CIT(A). The learned DR further contended that the Special Bench of the Tribunal has not explained in its order as to what would be the adjusted book profit. Whether it is a book profit mentioned in the Explanation below sub-section (2) of section 115JA or it is something else. If it is something else, how it is to be computed. These queries remain unanswered in the Order of the Special Bench. 4. Having carefully examined the issue in dispute, the Order of the lower authorities and Order of the Special Bench of the Tribunal, we find that the Tribunal has adjusted the issue in detail and has finally held that deduction under section 80HHC should be computed on the adjusted book profit. The relevant observation of the Tribunal in its para 6.6 is extracted hereunder for the sake of reference : "The deduction under section 80HHC in a MAT scheme is from the taxable income, which is otherwise the adjusted book profit. If no deduction is available to an assessee, the gross total income itself is the taxable income of the assessee. MAT scheme does not provide for deductions. Therefore, the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80HHC are to be computed and thereafter, it be reduced from the net profit in order to compute the book profit, for the purpose of section 115JA of the Act. Where the figure of book profit has not been worked out, how it can be formed to be the basis for computing a profit eligible for deduction under section 80HHC of the Act. In the light of these facts, we do not find any justification in the direction of the CIT(A). We accordingly set aside the same. This issue was examined by the Special Bench of the Tribunal in the case of Dy. CIT v. Syncome Formulations (I) Ltd. [IT Appeal No. 2711 (Mum.) of 2003] in which they have held that the deduction under section 80HHC is to be computed on the basis of the adjusted book profit. According to the Order of the Special Bench the deduction under section 80HHC are to be computed on the basis of the adjusted book profit. Since the order is passed by Larger Bench, we are bound by it and we, therefore, following the said order, restore the matter to the file of the Assessing Officer with a direction to compute the deduction under section 80HHC on the basis of the adjusted book profit and also to compute the book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80-IB are the profits from the business of industrial undertaking and not the profits derived from the industrial undertaking. The learned DR further contended that the word derived has already been defined by the Apex Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579 and Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 and by the various High Courts through different judgments. The profits derived from the industrial undertaking may be different than the profit eligible for deduction under section 80-IB, as such, the direction of the CIT(A) is not in accordance with the provisions of law. The learned DR has also contended that the Order of the Special Bench of the Tribunal in the case of Dy. CIT v. Syncome Formulations (I) Ltd. [IT Appeal No. 2711 (Mum.) of 2003], cannot be applied here as it was rendered in respect of deduction under section 80HHC. 10. The learned counsel for the assessee on the other hand has contended that this issue is also covered by the Order of the Special Bench of the Tribunal in the case of Dy. CIT v. Syncome Formulations (I) Ltd. [IT Appeal No. 2711 (Mum.) of 2003]. 11. We have carefully examined the Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the word derived in the light of various judicial pronouncements in the cases of CIT v. Sterling Foods [1999] 237 ITR 579 (SC), Pandyan Chemicals Ltd. v. CIT [2003] 262 ITR 278 (SC) and other judgments on this subject. We have also examined the contention of the assessee that the adjusted book profit should be the profit derived from the industrial undertaking and is eligible for 100 per cent deduction under section 80-IB, but, we are not inclined to accept this argument of the assessee, inasmuch as for computing the adjusted book profit, one has to take different aspect under consideration. In fact, the words "adjusted book profit" has not been defined either under section 115JA or anywhere in the Act. Under section 115JA the computation of book profit starts from the net profit shown in the P L account and this net profit may be the profits of the business of the industrial undertaking, but, it cannot be called to be the profits derived by an industrial undertaking, as it includes the profits on receipts from different activities/business of the industrial undertaking, which may not be called to be the profits derived by an industrial undertaking in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the taxable income which is otherwise adjusted book profit. The Tribunal further held that this in turn, means that section 80HHC should be computed on the adjusted book profit. The relevant observation of the Tribunal in this regard is extracted hereunder for the sake of reference : "The deduction under section 80HHC in a MAT scheme is from the taxable income, which is otherwise the adjusted book profit. If no deduction is available to an assessee, the gross total income itself is the taxable income of the assessee. MAT scheme does not provide for deductions. Therefore, the interpretation is that the adjusted book profit of a company itself is the gross total income of that assessee-company. The deduction under section 80HHC is in that way given out of gross total income in a case falling under MAT. This in turn means that section 80HHC should be computed on the adjusted book profit. Sections 115J, 115JA and 115JB came into operation, as the regular profits has been substituted by the book profit. Once the substitution is over, there is no way to go back to the normal computation process of statutory profit, which has already been overwhelmed by sections 115J, 115JA and 115JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties have disallowed the claim of the assessee having realized that under section 80-IB, assessee is not eligible for deduction of the Act. Since the issue was not properly examined and profits derived from the industrial undertaking, is not computed for its reduction from the net profit as shown in the P L account prepared under sub-section (2) of section 115JA, the book profit under section 115JA, cannot be properly computed. We, therefore, are of the view that the matter should go back to the file of the Assessing Officer for calculation of amounts of profit derived by industrial undertaking in the light of judgment of the Apex Court in the cases of Pandian Chemicals Ltd. ( supra ) and Sterling Foods ( supra ) and thereafter to compute the book profit for the purpose of section 115JA of the Act. The Assessing Officer shall also examine as to whether the assessee industrial undertaking is eligible for 100 per cent deduction under section 80-IB of the Act inasmuch as clause ( v ) of Explanation to section 115JA will come in operation when the assessee is entitled for 100 per cent deduction under section 80-IB of the Act. Accordingly, the Order of the CIT(A) is set aside and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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