(197.3 KiB, 704 DLs)

S. 80HHC deduction is allowable for s. 115JB even if there are no normal profits despite Ajanta Pharma 223 CTR 441 (Bom)

The assessee’s income was computed u/s 115JB as it had no income under the normal provisions of the Act. The assessee claimed that despite the absence of normal profits, it was eligible for deduction u/s 80HHC in computing the book profits under Expl. (iv) of s. 115JB in accordance with the judgement of the Special Bench in Syncome Formulations 106 ITD 193 (Mum) (SB) and that the judgement of the Bombay High Court in Ajanta Pharma 223 CTR 441 (Bom) (which held that Syncome Formulations was overruled) was not applicable. HELD upholding the assessee’s plea:

In Syncome Formulations, the Special Bench had to consider two questions i.e. (a) method of computation of deduction u/s 80HHC and (b) percentage of deduction allowable in each year. As regards the percentage of deduction, the Special Bench held that the assessee would be entitled to 100% deduction. This view was overruled by the High Court in Ajanta Pharma where it was held that in view of s. 80HHC (1B), deduction was only allowable as per the limits set out therein. However, the first issue as to the method of deduction u/s 80HHC was not before the High Court. As per Sun Engineering 198 ITR 297, the observations of a Court have to be read in context. Consequently, the judgement of the Special Bench on this aspect still held good and the assessee was entitled to deduction u/s 80HHC even though there were no normal profits.