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2015 (7) TMI 238 - ITAT AHMEDABAD

2015 (7) TMI 238 - ITAT AHMEDABAD - TMI - Disallowance of loss under section 115JB(2)(iii) as computed by the assessee in its return of income - CIT(A) directing allowed commission - Held that:- CIT(A) directed the AO to allow deduction under section 115JB(3)(iii) as per the working made by the assessee. However, we find that the working made by the assessee has not been brought on record either by any of the lower authorities, or by either of the parties before us. From the order of the CIT(A), .....

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i Special Bench of ITAT in the case of DCIT vs. Syncome Formulations (I) Ltd., [2007 (3) TMI 288 - ITAT BOMBAY-H ] 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 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 .....

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nder 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 C Pipara ORDER Per N. S. Saini, Accountant Member This appeal filed by the Revenue is against the order of the Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad dated 28.1.2011. 2. In .....

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hmedabad Unit and Baramati Unit. The Baramati unit was a hundred percent EOU and therefore, profits were exempt under section 10B of the Act till A.Y.2003-04. 4. From the perusal of the calculation of book profit under section 115JB, the AO found that while determining loss under section 115JB(2)(iii), the assessee-company compared between unabsorbed depreciation and unabsorbed loss of Ahmedabad Unit only, and unabsorbed loss of ₹ 4,23,87,539/- being lesser of the two, was deducted from bo .....

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mined the loss under section 115JB(2)(iii) of the Act at Rs.NIL. The AO calculated and combined the unabsorbed loss and unabsorbed depreciation of both the Baramati Unit (EOU) and Ahmedabad Unit for each of the year starting from Asstt.Year 1999-2000 and ending on Asstt.Year 2002-03, and then compared them, and as a result, there was unabsorbed depreciation, but there was no business loss. By applying the provision of section 115JB(2)(iii), the AO determined the loss at NIL, and thus claim of lo .....

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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 .....

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pplicable to Baramati Unit(100% EOU) of the appellant make it amply clear that while computing the total income of the assessee in computing total income of the assessee of the previous year immediately succeeding the last of the relevant assessment years, no loss as referred to in sub section (1) of Section 72 or subsection 3 of section 74 relating to the undertaking shall be carried forward or set off. Though Section 115JB is a separate code itself and the loss as mentioned in Section 115JB(2) .....

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orders of the lower authorities and material available on record. In the instant case, the assessee while computing its book profit under section 115JB of the Act claimed deduction of ₹ 4,23,87,539/- under section 115JB(2)(iii). The AO at page no.2 of the assessment order worked out that cash loss for the Asstt.Year 1999-2000 to 2002-03 was NIL, and there was only unabsorbed depreciation, and therefore, the assessee was not eligible for any deduction under section 115JB (3) (iii). 8. On a .....

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of CIT(A) for adjudicating the issue afresh by passing a speaking order. Needless to mention, the CIT(A) shall allow reasonable opportunity of hearing to both the parties before passing the order afresh. Thus, this ground of the Revenue is allowed for statistical purpose. 9. In 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 declare .....

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f 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 prepared by the assessee .....

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AO to recompute the deduction u/s 80HHC for the purpose of deduction u/s 115JB(2)(iv) on the basis of book profit declared by the appellant u/s 115JB (1) of the Act. " 12. We have heard rival submissions and perused the orders of the lower authorities and material available on record. According to the AO, the deduction allowable to the assessee under section 80HHC for the purpose of deduction from book profit under section 115JB(2)(iv) is the figure of eligible profit under the normal prov .....

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d by the assessee under section 115JB(1) of the Act. 14. Being aggrieved, the Revenue is in appeal before us. 15. The Ahmedabad Bench of the Tribunal in the case of DCIT Vs. Sun Pharmaceutical Industries Ltd., in ITA nos.363&692/Ahd/2002 for the Asstt.Year 1998-1999 by order dated 7.1.2011 held as under: "16. Ground no.5 in the appeal of the assessee relates to deduction u/s 80HHC of the Act for the purpose of computation of book profits in terms of clause (viii) of the explanation appe .....

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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 80HH .....

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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., 223 CTR (Bom.) 441overruled 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 P .....

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inimum tax by deeming 30% of the book profits computed under the Companies Act, as taxable income, in a case where the total income as computed under the provisions of the 1961 Act, is less than 30% of the book profit. The word "book profit" has been defined in Section 115JA(2) read with the Explanation thereto to mean the net profit as shown in the Profit and Loss Account, as increased by the amount(s) mentioned in clauses (a) to (f), and as reduced by amount(s) covered by clauses (i) .....

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ons 80HHC(4) and 80HHC(4A). 8. By the Finance Act, 2000, Section 115JB was inserted w.e.f. 1.4.2001 providing for levy of MAT on certain companies. Section 115JB, though structured differently, stood inserted to provide for payment of advance tax by MAT companies. Section 115JB is the successor section to Section 115JA. In essence, it is the same except that Section 115JA provided for MAT on companies, so far as it does not deem the book profit as total income. Under ITA nos.363&692/Ahd/02 S .....

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entives. 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 1 .....

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duction is geared to the exports turnover and not to the income. On the other hand, Section 115JB refers to levy of MAT on the deemed income. The above discussion is only to show that Sections 80HHC and 115JB operate in different spheres. Thus, two essential conditions for invoking Section 80HHC(1) are that assessee must be in the business of export and secondly that sale proceeds of such exports should be receivable in India in convertible foreign exchange. Hence, Section 80HHC(1) refers to &qu .....

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arlier 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 it .....

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Adjustments and if so read it becomes clear that clause (iv) covers full export profits of 100% as "eligible profits" and that the same cannot be reduced to 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 M .....

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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 deduction under Section 80HHC as computed under clause(a) or clause(b) or clause(c) of subsection (3) or .....

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find no merit in this argument. If the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then Section 115JB will cease to be a self-contained code. In Section 115JB,as in Section 115JA, it has been clearly stated that the relief will be computed under Section 80HHC(3)/(3A), subject to the conditions under sub-clauses (4) and (4A) of that Section. The conditions are only that the relief should be certified by the Chartered Accountant. .....

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