|DATE:||(Date of pronouncement)|
|DATE:||November 3, 2011 (Date of publication)|
|Click here to download the judgement (bhari_115JB_MAT.pdf)|
For s. 115JA/JB s. 80HHC deduction to be computed as per P&L Profits & not normal provisions
The assessee had a loss as per the normal computation though it had a profit as per the P&L A/c. In computing the book profits u/s 115JA, the assessee claimed deduction u/s 80HHE. The AO rejected the claim on the basis that as the assessee had no income under the regular provisions of the Act, it was not eligible for s. 80HHE deduction in computing the s. 115JA book profits. This was upheld by the CIT (A) though the Tribunal gave relief by following the judgement of the Special Bench of the Tribunal in DCIT vs. Syncome Formulations 106 ITD 193. This was upheld by the High Court. On appeal by the department, HELD dismissing the appeal:
In DCIT vs. Syncome Formulations 106 ITD 193 the Special Bench held in the context of s. 80HHC that the deduction is to be worked out not on the basis of regular income tax profits but it has to be worked out on the basis of the adjusted book profits in a case where s. 115JA is applicable. In the said judgment, the dichotomy between regular income tax profits and adjusted book profits u/s 115JA was clearly brought out and it was rightly held that in s. 115JA relief has to be computed u/s 80HHC(3)/(3A). It was held that once the law itself declares that the adjusted book profit is amenable for further deductions on specified grounds, in a case where s. 80HHC (80HHE in the present case) is operational, it becomes clear that computation for the deduction under those sections needs to be worked out on the basis of the adjusted book profit. Accordingly, the deduction claimed by the assessee u/s 80HHC & 80HHE has to be worked out on the basis of adjusted book profit u/s 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. We agree with the view taken by the Special Bench of the Tribunal.
Note: Al-Kabeer Exports 233 CTR 443 (Bom) & CIT vs. Packworth Udyog (Ker) (FB) are impliedly overruled