TMI Blog2010 (11) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC (1B). In favour of assessee. - ITA No. 1540/Mum/2008 - - - Dated:- 4-11-2010 - Pramod Kumar, Asha Vijayaraghavan, JJ. A.V. Sonde for the Appellant Naresh Kumar Balodia for the Respondent ORDER Asha Vijayaraghavan: This appeal preferred by the assessee is directed against the order dated 7.12.2007 passed by the ld. CIT(A)-III for the Assessment Year 2002-03. 2. The only issue is against the order of the Commissioner of Income Tax (A) III Mumbai confirming the decision of Deputy Commissioner of Income Tax, Circle 3(3) Mumbai determining, in an order of rectification passed u/s 154 of the I.T. Act, the income u/s 115JB of the Act at Rs.2776,55,83,620/- as against the Returned Income Rs.2429,04,33,473/-. 3. In the order of rectification, the DCIT reduced the relief in respect of export profits deductible in computing the Book profits u/s 115JB, to 70% of the eligible deduction by invoking sub section (1B) of Section 80HHC of the Act. 4. The assessee filed the return of income on 31.10.02 declaring a total income of Rs.2429,04,33,473/- under sec 115JB. The assessment u/s 143(3) was passed on 28.3.2005 determining the income at Rs.475,83, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80HHC while computing of book profit u/s 115JB of the act has been rightly allowed @ 100% without taking cognizance of the sunset clause (1B) to section 80HHC introduced by the Finance Act 2000 with effect from 1.4.2001. It is submitted that no corresponding amendment to give effect to sunset clause has been made in section 115JB of the Act. Section 115JB is a deeming provision and a self contained code for computing an alternative profit which would be liable to tax in absence of the taxable profit under normal provisions of the act. Thus, such provisions u/s 115JB creates a fiction whereby even when there is less profit or loss as compared to the book profit a tax liability has been fastened upon the assessee by computing the income in a partial manner laid down in section 115JB of the Act. The Finance Act, 2000 has introduced sub section (1B) to reduce the deduction in a phased manner available to the assessee under sub section (1) and quantified in the manner laid down in sub section (3) of section 80HHC of the Act. Sub section (1B) thus applies in its entirely to the deduction available u/s 80HHC while computing total income as per the normal provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and has held as follows: "I have perused the arguments of the assessee Company and am not in agreement with the same. The assessee Company itself has submitted that Finance Act 2000 has introduced sub section (1B) to reduce the deduction in a phased manner available to the assessee under sub section (1) and quantified in the manner laid down in sub section (3) of section 80HHC of the Income Tax Act 1961. However, the assessee Company failed to appreciate that under clause (vi) in Explanation to sub section (1) of section 115JB of the Act, it is provided that the amount of profit eligible for deduction u/s 80HHC computed under sub section (3) or (3A) of section 80HHC, shall be reduced from the book profit. The provisions of sub- section (3) of section 80HHC of the Income Tax Act, 1961 lays down the manner in which the deduction u/s 80HHC has to be computed for the various type of exports. The computation of deduction u/s 80HHC under sub section (3) is for the purposes of sub section (1) of section 80HHC. However subsections (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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is also exactly what the appellant had claimed in that appeal. There cannot be any dispute on this issue. Apparently then this argument that appellant is now raising here is only to complicate the issue at hand. The issue then boils down to whether 80HHC(1B) is a condition in terms of section 115JB(2)(iv). The position is very clear. The phrase subject to the conditions specified in that section is preceded by and which is preceded by ","(comma). In this clause, the last portion begins with the phrase and to mean that whatsoever is said in the earlier portion of the clause will have to be superseded with whatsoever is after and. This is normal interpretation of the use of the phrase and within the language of any clause. Also relevant to note is that and is preceded by a comma leaving no scope for this interpretation. The conclusion follows that whatever is computed as eligible for deduction u/s 80HHC has to be given effect to after invoking all conditions specified in section 80HHC. There 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lengthening is a result of frivolous arguments of appellant necessitating discussion. They do not in any way challenge the categorical requirements of the act that all conditions of section 80HHC have to be invoked while giving effect to section 115JB(2)(iv). Section 80HHC (1B) is one such condition. The position of law being crystal clear, it is held that section 154 has been correctly invoked by assessing officer. Ground of appeal No.1 is therefore rejected." 10. Aggrieved the assessee is in appeal before us. They have questioned the jurisdiction of the DCIT in rectifying such a debatable issue u/s 154 as well agitated that the reduction in relief in respect of export profits while computing the Book Profits u/s 115Jb, applying the provisions of sec 80HHC(1B) is erroneous. 11. The first issue is regarding the jurisdiction of the DCIT to make the correction in an order of rectification u/s 154. It is well settled principle that rectification u/s 154 is permissible 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80HHC(1B) it is clear that after the Finance Act 2000, with effect from the assessment year 2001-02 exporters would not get 100 percent, deduction in respect of profits derived from exports but that they would get deduction of 80 percent in the assessment year 2001-02, 70 percent. 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 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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