TMI Blog2002 (8) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 234A based on tax on the total income assessed under section 115JA in confirming the same. It is submitted that same is leviable on tax on total income as returned or at the most on tax on total income assessed under normal provisions. It is submitted that same be computed accordingly. 4. CIT(A) erred in confirming that interest under section 234B is payable on total income arrived at under the provisions of section 115JA of the Income-tax Act. It is submitted that as total income as normally computed, based on the return of income furnished is NIL, no interest is leviable under section 234B. Alternatively, same be levied on total income assumed under normal provisions. 2. The assessee is a company carrying on business of manufacturing and trading dyes and dye-products. The first ground of appeal taken up by the assessee is regarding the non-granting of deduction under section 80-I of ₹ 3,26,450. The learned counsel for the assessee did not press for this ground and the same is, therefore, dismissed. 3. The second ground of appeal is regarding the computation of deduction under section 80HHC. According to the assessee, the Assessing Officer has erroneously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) thereby allowing 10% expenditure of such profits. Therefore, in our opinion, the assessee is making double claim of 10% of export incentive by reducing it from the indirect cost as per para 6(iii) on page 14 of compilation. However, after going through the figures given in para 3 and para 6 of computation, we are unable to find out how the assessee has arrived at the figure of ₹ 2,10,26,229 being 10% of export incentives. The learned counsel was also unable to explain the same. Under the circumstances, both the parties agreed that this issue should be restored back to the file of the Assessing Officer for making proper computation. Accordingly, this issue is restored back to the file of the Assessing Officer with the directions to recompute the deduction under section 80HHC afresh keeping in view our findings given above after giving reasonable opportunity of being heard to the assessee. 4. The third ground of appeal is regarding the computation of book profit under section 115JA. According to the assessee, the Assessing Officer has erroneously arrived at the computation without reducing the same to the extent of deduction allowed under section 115JA being 30% of book p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel, this circular also refers to book profits on which minimum tax is leviable. According to him, book profits do not include the business profits on which deduction under section 80HHC is available. The learned counsel also took us through Circular No. 559 dated 4-5-1990 pertaining to the Explanation of the provisions of amended section with effect from 1-4-1989. He specially referred to clause 9.3 of the circular wherein it has been clearly mentioned that the profits exempt under sections 80HHC and 80HHD have to be excluded from the purview of section 115J. Thus, according to the learned counsel, the provisions of section 115J before the same was replaced by the new section 115JA with effect from 1-4-1997 were in favour of the assessee and the profits and gains were to be determined for the Minimum Alternative Tax after excluding the profits pertaining to the business, the profits from which are eligible for deduction under section 80HHC or 80HHD. The learned counsel thus pointed out that section 80HHC of the Act provides for a 100% deduction in respect of export profits earned by the exports. Thus, this section seeks to encourage export related industry for augmenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 115JB as per clause (iv) of the Explanation. The learned counsel, thus, contended that the assessment year 1997-98 was only exemption where this specific provision has not been made. The law was amended with effect from 1-4-1998 by introducing clause (viii) to the Explanation to section 115JA by which the profits which are exempt under section 80HHC were excluded from the purview of section 115JA. Thus, the learned counsel contended that introduction of clause (viii) to the Explanation to section 115JA with effect from 1-4-1998 was only a curative action by the Legislature and, therefore, the same is declaratory and retrospective. The learned counsel placed reliance on the following court cases :- (1)Bhagwan Dass Khanna Enterprises (P.) Ltd. v. Asstt. CIT [2001] 78 ITD 151 (Delhi) (2) CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 6251 (SC) (3)Allied Motors (P.) Ltd. s case (supra) (4)CIT v. Kantilal Chhotalal [2000] 246 ITR 439 (Bom.) (5)GKW Ltd. v. Joint CIT [2000] 74 ITD 161 (Cal). 7. The learned departmental representative placed his reliance on the findings of the lower authorities. 8. We have carefully considered the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits were to be reduced as per sub clause (iii) of Explanation to section 115J. However, the provisions of section 115J were severally criticised and, in fact, gave rise to endless litigation and, therefore, section 115JA was introduced with effect from 1-4-1987 with a view that certain companies should pay a minimum tax on the basis of ability to pay . Section 115J was amended to exclude from its purview the companies which were having income subject to relief under section 80HHC or 80HHD by Direct Tax Laws (Amendment) Act, 1989. But such exception has not been made in the present section for the assessment year 1997-98. As this was likely to adversely affect the export earning, i.e., the earning in convertible foreign exchange, an amendment was inserted by the Finance Act, 1997 with effect from 1-4-1998 wherein clause (viii) to Explanation to section 115JA was brought on the statute. As per this clause, the amount of profit eligible for deduction under section 80HHC were to be reduced from the book profits in order to determine the profits and gains for the purpose of levy of Minimum Alternative Tax under section 115JA of the Act. This deduction continued even under the amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain the intention of the Legislature to remove omission and to clear the doubts which happened after the Finance (Amendment) Act, 1997. Therefore, the amendment to Explanation to section 115JA in the form of clause (viii) is curative in nature and was merely declaratory of the previous law. Therefore, this law was declaratory and retrospective operation was intended by the Legislature. 10. In Circular No. 559 dated 4-5-1990, export profits have been excluded from the purview of section 115 J. In this connection, the budget speech of Finance Minister for the assessment year 1997-98 [224 ITR (St.) 22] is also very relevant where while referring to the provisions introduced in the earlier year accepted that there is a case for review and the manner in which the tax is charged and collected, I, therefore, propose to make the following clauses in the provisions of MAT : (i) Export profits will be exempt from MAT and will be eligible for full deduction under section 80HHC... Thus, it is also quite obvious from the speech of the Finance Minister that the introduction of clause (viii) of Explanation to section 115JA was curative nature, hence the same was intended to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of deduction allowed under section 80HHC of the Act. The findings of the learned CIT(A) are, therefore, reversed. 13. Ground Nos. 4 5 are regarding the levy of interest under sections 234A and 234B of the Act. The learned counsel for the assessee brought to our notice that the return of income was filed in time, therefore, the question of levying any interest under section 234A does not arise. Under the circumstances, the Assessing Officer is directed to varify whether the return was filed in time or not and charge interest only if the return was not filed in time. So far as the charging of interest under section 234B is concerned, the issue remains only of academic interest in view of our specific findings in ground No. 3 (supra). The interest is leviable even if the income is determined under section 115JA of the Act as has been held by the Tribunal in their order dated 8-6-2001 in ITA No. 8833/Bom./1992 in the case of Dy. CIT v. Vickers Systems International Ltd. for assessment year 1989-90. Accordingly, while ground No. 4 of the assessee is treated as allowed for statistical purpose, ground No. 5 is dismissed. 14. In the result, appeal of the assessee is partly allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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