TMI Blog1993 (6) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... termining the business income at nil after setting off the unabsorbed business loss and unabsorbed depreciation of the earlier years. Further the capital gains and income from other sources of the current year were also set off against the balance unabsorbed depreciation and investment allowance. There was no positive income on which tax was payable. The Assessing Officer again initiated proceedings under section 154 and in this 154 order he determined the book profits of the assessee under section 115J at Rs. 59,60,176 and on this amount a tax of Rs. 17,88,952 was levied. it is this order dated 8-1-1992 that has given rise to this appeal. 3. It is contended on behalf of the assessee that the order passed by the Assessing Officer under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding, after appreciating the reasons for making section 115J as a part of the statute, that even capital gains have to be kept in wraps. When such is the position the fact that no deduction under section 80HHC has been allowed to the assessee for want of gross total income cannot be relied upon by the Assessing Officer for levying the additional tax. A plain reading of sub-clause (iii) of the Explanation to section 115J(1A) would also indicate that the profits as determined under Parts II III of Schedule VI of the Companies Act have to be reduced by an amount to which the assessee would otherwise be eligible for deduction in terms of the provisions of section 80HHC. Elaborating further it is submitted that what is required to be done i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the book profits would be totally unjustified, especially in an order passed by him under section 154 of the Act. Our attention in this connection is also invited to the Circular No. 559 dated 4-5-1990 issued by the Central Board of Direct Taxes explaining the scope and effect of the newly inserted sub-clause (iii) of Explanation to section 115J(1A) of the Act. After admitting that if an adjustment is not made that would result in dilution of the provisions of section 80HHC, which have an important role to play in the promotion of exports, the Board has advised that the profits, which would be exempt under sections 80HHC and 80HHD should be excluded from the purview of section 115J of the IT Act. The Board also explained that the sub-clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code by itself and one does not have to go beyond that code for the purpose of determining the tax liability of an assessee, and further what could be rectified under section 154 is a glaring and patent mistake. However, the claim of the assessee that whether deductions under section 80HHC have to be allowed before set off of unabsorbed depreciation and unabsorbed loss is not free from doubt has to be rejected. This issue stands squarely concluded by the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and a later decision in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120. The Apex Court had held that a deduction under Chapter VIA of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and computed in the manner laid down under sub-section (3) or sub-section (3A) of that section. There would be no justification to read something which has not been incorporated in the Circular, namely that what the Board intended was the exclusion of the amount eligible for deduction under section 80HHC even though the same could not be allowed in the assessment made under any of the provisions of the Act. It is inconceivable that where a deduction under section 80HHC is not allowable to the assessee the same would have to be taken into consideration for reducing its liability under section 115J of the Act. Neither the Circular relied upon by the assessee nor the decisions adverted to in the course of arguments in any way advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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