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TMI Blog2010 (11) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... ,33,473/- under sec 115JB. The assessment u/s 143(3) was passed on 28.3.2005 determining the income at Rs.475,83,23,696/- under normal computation and Rs.3670,41,60,500/- u/s 115JB. Subsequently, in the order dated 24.4.2006, giving effect to the order of the CIT(A), the taxable income was determined at Rs.28,90,94,808/- under the normal provisions of the Act and Rs.2431,60,93,619/- u/s 115JB. The Assessment was reopened u/s 147 of the Act and in the order of reassessment dated 11.12.2006, taxable income was determined at Rs.39,29,39,340/- under the normal provisions of the Act and Rs.2437,60,93,619/- under sec 115JB of the Act. 5. The DCIT issued a Notice u/s 154 dated 11.1.2007 stating that the following mistake apparent from the record in the order dated 24.4.2006 giving effect to the order of the CIT(A) "While passing the order giving effect to CIT(A)'s order dated 24.4.2006, there is a mistake apparent from record, i.e. while computing the book profit for the purpose of section 115JB, the deduction u/s 80HHC was wrongly allowed @ 100% and the book profit was computed at Rs.2431,60,93,619/-. Whereas as per the amended provisions of section 80HHC the deduction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1B) thus applies in its entirely to the deduction available u/s 80HHC while computing total income as per the normal provisions of the Act. However, when income is computed u/s 115JB which is a self contained code, for computing an alternative taxable income, the book profit as per profit and loss account prepared in accordance with paras 11 and 111 if Schedule VI of the Companies Act has to be reduced by "the amount of profits eligible for deduction under section 80HHC. Computed under clause (a), (b), or clause (c) of sub section (3) or sub section (3A) as the case may be, of that section and subject to the conditions specified in that section the book profit is thus required to be reduced by the amount which is "eligible" for deduction u/s 80HHC and the eligible amount has to be computed in the manner laid down sub section (3) or (3A) of section 80HHC. The eligibility criteria are given in sub section (1) and the manner of computation to arrive at the quantum for deduction is given in sub section (3). Hence, while computing the book profit of an assessee u/s 115JB of the Act, the eligible export profit computed in the manner laid down under sub section (3) of 80HHC and includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsections (1) and (1A) of section 80HHC is subject to the new provision as sub section (1B) of section 80HHC introduced by Finance Act, 2000. It is not clear that how the assessee can interpret that they are eligible for deduction u/s 80HHC @ 100% under the provisions of section 115JB of the Income Tax Act, 1961 when the assessee company is not entitled for deduction u/s 80HHC @ 100% under the normal provisions but @ 80% in view of the subsection (1B) of section 80HHC of income tax Act 1961. Section 155JB takes the help of section 80HHC of the Act. Hence any computation of export profit as stated under sub section (iv) of explanation to section 115JB shall only be carried out as provided u/s 80HHC of the Act. The only material issue is the rate at which the deduction u/s 80HHC is to be allowed to the assessee Company is specifically provided in clause (1B) of section 80HHC. Clause (1B) of section 80HHC provides the rate to be 70% at which 80HHC is allowable. Hence it is a mistake apparent from record. The argument of the assessee Company that effect to the sunset clause as per sub section (1B) of section 80HHC is not required to be given while computing book profit u/s 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no scope of doubt in this interpretation. The condition contained in section 1B of section 80HHC therefore automatically gets roped into and has to be given effect to. This is an unambiguous interpretation of clause of section 115JB. The learned counsel of the appellant has objected on the ground that the conditions referred to in clause (iv) of section 115JB(2) are referring only to eligibility conditions for section 80HHC. This contention is not acceptable since the said clause(iv) nowhere specifies conditions to be of eligibility. There is no qualification to the phrase conditions. Moreover the phrase subject to the condition specified in that section is referring to section 80HHC as a whole and not to any portion or sub section thereof thereby automatically incorporating section 80HHC (1B). The ground of appeal No.2 is therefore rejected. The learned counsel of appellant has further objected in ground of appeal No.1 to the invocation of section 154 in the present situation. The main contention is that the issue can be decided only after long drawn arguments on the interplay between section 80HHC and section 115JB. He has claimed that this is an issue whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le only if the mistake is apparent from the records and does not require any investigation of facts or examination or analysis of legal principles. While computing the Book Profits u/s 115JB, deduction is provided in respect of profits attributable to exports under Explanation (iv) to that section, which reads as under: "(iv)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, of that section, and subject to the conditions specified in that section;" 12. Interpretation of this section was subject matter of intense litigation. Initially the issue was whether the relief should be computed on the basis of computation of relief under the normal provisions of the Income tax or on the basis of Book profits. Thereafter there was litigation as to whether the gradual phasing out of relief u/s 80HHC (1B) would also apply to the computation of book profits. Even at the time of rectification the matter stood referred to a special bench in the case of DCIT vs Syncome Formulations (I) Ltd (106 ITD 193 Mum SB) which was pronounced on 14.3.2007. Thereafter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 2001-02 the extent of deduction is 80 percent. 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 VI-A. We need to keep in mind the upward and downward adjustments and if so read it becomes clear that clause (iv) covers full export profits of 100 percent, as eligible profits and that the same cannot be reduced to 80 percent by relying on section 80HHC (1B). Thus for computing book profits he downward adjustment in the above example would be Rs.100 crores and not Rs.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 the Explanation to the Finance Bill,2000." 14. In view of the above, we hold that the order of rectification require to be set aside both on lack of jurisdiction and also on merits. 15. In the result, the appeal filed by the assessee is allowed. O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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