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Commissioner of Income Tax, Chennai Versus M/s. Three Bags India P. Ltd.

Relief under Section 80-HHC allowable while arriving at the book profits as per Clause (vii) of Explanation to Section 115-JA(1) - assessee itself had not claimed the deduction under Section 80-HHC in the normal computation - Held that:- For the purpose of providing the incentive contemplated under Section 80-HHC, the profits earned from the export business, which might include, in a given case, exports carried out of the goods manufactured by the assessee as well as by trading the goods manufac .....

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es assigned respectively by Section 80-HHC and Section 115-JA of the Income Tax Act. Therefore, the impugned order passed by the Tribunal is not sustainable. - Since the assessee-Company has not been provided with an opportunity to demonstrate that they did Return the profits from their export business for the assessment year concerned, which profits of export business, are set-off against the carry forward lossess sustained in the business, as a whole for the previous year, resulting in tax .....

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:- 27-9-2016 - Nooty Ramamohana Rao And P. Devadass, JJ. For the Appellant : Mr.T.Ravikumar, Senior Standing Counsel for Income Tax For the Respondent: Mr.A.S.Sriraman for Mr.S.Sridhar JUDGMENT ( The Judgment of the Court was delivered by Nooty. Ramamohana Rao, J ) This appeal is preferred by the Revenue under Section 260-A of the Income Tax Act, against the order, dated 11.11.2005 in I.T.A.No.2739/Mds/2004 on the file of the Income Tax Appellate Tribunal, Chennai-B-Bench, Chennai. 2. The appeal .....

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essee-Company has Returned for the assessment year 1998-1999 on 27.11.1998 admitting 'Nil' income under normal computation as well as under Section 115-JA of the Income Tax Act. The Return was processed under Section 143(1)(a) on 20.05.1999. The excess claim of ₹ 24,370/- under Section 80-HHC was disallowed while computing the book profits under Section 115-JA. The assessee preferred appeal before the Commissioner of Income Tax (Appeals), which was allowed on 11.12.2001 on the grou .....

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der the normal computation, since the assessee-Company arrived at 'Nil' income, after setting-off the earlier year losses, it is not entitled to any deduction under Section 80-HHC. In that view of the matter, the assessee-Company was also held to be not eligible to claim the deduction based on Section 80-HHC while computing the book profits for the purpose of Section 115-JA, and hence, the claim was rejected by the assessing officer and demand of tax payable at ₹ 24,568/- was raise .....

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ed on a judgment rendered earlier by the Tribunal in the case of DCIT Vs. Govind Rubber (P) Ltd. (MUM) and faithfully extracted paragraph 16 of the judgment in Govind Rubber (P) Ltd. case thereunder. 4. Heard Mr.T.Ravi Kumar, learned Senior Standing Counsel of the Income Tax, appearing for the appellant/Revenue and Mr.A.S.Sriraman, learned counsel appearing for Mr.S.Sridhar, learned counsel for the respondent/assessee. 5. Learned Senior Standing Counsel appearing for the Revenue brought to our n .....

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"book profit" had been defined in Section 115-JA(2) of the Act, 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 the amount(s) covered by Clauses (i) to (ix) of the Explanation, and such adjustments are now called as "upward and downward adjustments". Hence, the Supreme Court has considered the scheme contained in Section 115-JA as a self-containe .....

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er VI-A of the Act, one needs to keep in mind the upward and downward adjustments, which are required to be made for arriving at the book profits under Section 115-JA together with the Explanation contained therein. In paragraph 10 of the judgment of the Supreme Court, the contention that both eligibility as well deductibility of the profits have to be considered together for working out the deduction as stipulated under Clause (iv) of Explanation to Section 115-JB of the Act, was specifically r .....

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tions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in Cl.(iv) of Explanation to S.115-JB (subject to the conditions specified in sub-cls.(4) and (4-A) of that Section) to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department." Hence, the difference be .....

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R 521 (SC) and also in the case of A.M.Moosa Vs. CIT, reported in 2007 (9) SCR 831 = 2007 (294) ITR 1 (SC), held as under: "18. It stands settled, on the co-joint reading of IPCA and A.M.Moosa, that where there are losses in the export of one type of goods (for example self-manufactured goods) and profits from the export of other type of goods (for example trading goods) then both are to be clubbed together to arrive at net profits or losses for the purpose of applying the provisions of sec .....

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a whole, i.e., including profits earned from the goods or merchandise within India will also be taken into consideration. In this manner, argues the appellant, even if there are lossess in the export business but profits of indigenous business outweigh those lossess and the net result is that there is profit of the business, then the deduction under section 80HHC should be given. However, having regard to the law laid down in IPCA and A.M.Moosa, we cannot agree with the learned counsel for the .....

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total turnover", one may apply the formula stated in clause (b) of sub-section (3) of section 80HHC. However, that would not mean that even if there are lossess in the export business but the profits in respect of business carried out within India are more than the export lossess, the benefit under section 80HHC would still be available. In the present case, since there are lossess in the export business, the question of providing deduction under section 80HHC does not arise and as a conseq .....

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