{"id":2040,"date":"2010-09-10T18:45:28","date_gmt":"2010-09-10T13:15:28","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=2040"},"modified":"2010-09-10T18:45:28","modified_gmt":"2010-09-10T13:15:28","slug":"ajanta-pharma-vs-cit-supreme-court-for-s-115jb-book-profits-have-to-be-reduced-by-eligible-s-80hhc-deduction-not-actual-deduction","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/ajanta-pharma-vs-cit-supreme-court-for-s-115jb-book-profits-have-to-be-reduced-by-eligible-s-80hhc-deduction-not-actual-deduction\/","title":{"rendered":"Ajanta Pharma vs. CIT (Supreme Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (ajanta_115JB_80HHC.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n

S. 115JB \u201cbook profits\u201d have to be reduced by deduction \u201celigible<\/em>\u201d u\/s. 80HHC & not \u201cactual<\/em>\u201d deduction <\/strong><\/p>\n

In respect of AY 2001-2002, the assessee claimed that though s. 80HHC (1B) limited the deduction to 80% of the profits eligible for deduction u\/s 80HHC, this limitation did not apply for purposes of \u201cbook profits\u201d u\/s 115JB and that 100% of the 80HHC profits were deductible. The Tribunal allowed the claim by relying on the Special Bench judgement in Syncome Formulations<\/strong> 106 ITD 193 (Mum) (SB). On appeal by the Revenue, the High Court (318 ITR 252)<\/a> reversed the Tribunal. On appeal by the assessee HELD, reversing the High Court: <\/p>\n

(i) The question of law is \u201cwhether for determining the \u201cbook profits\u201d in terms of s. 115JB, the net profits as shown in the P&L Account have to be reduced by the amount of profits eligible for deduction under Section 80HHC or by the amount of deduction under s. 80HHC<\/em>?\u201d<\/p>\n

(ii) S. 115JB is a self-contained Code and taxes deemed income. S. 115JB begins with a non-obstante clause and requires vide clause (iv) for the \u201celigible\u201d profits derived from exports to be excluded from the \u201cbook profits\u201d<\/strong>. S. 80HHC operates in a different sphere<\/strong>. S. 80HHC(1B) is concerned with the \u201cextent of deduction<\/strong>\u201d;<\/p>\n

(iii) If an assessee earns Rs.100 crores then while for AY 2001-02, the extent of deduction is 80% thereof, for purposes of computation of book profits, 100% of the profits are \u201celigible profits\u201d and cannot be reduced to 80% by relying on s. 80HHC(1B)<\/strong>. The idea is to exclude \u201cexport profits\u201d from computation of book profits under s. 115JB which imposes MAT on deemed income;<\/p>\n

(iv) The argument of the department that because clause (iv) of Explanation to s. 115JB provides that the deduction is \u201csubject to the conditions specified in s. 80HHC\u201d, both \u201celigibility\u201d as well as \u201cdeductibility\u201d of the profit has to be considered together has no merit. If the dichotomy between \u201celigibility\u201d of profit and \u201cdeductibility\u201d of profit is not kept in mind then s. 115JB will cease to be a self-contained code<\/strong>. One cannot rely upon the last sentence in clause (iv) of Explanation to s. 115JB to obliterate the difference between \u201celigibility\u201d and \u201cdeductibility\u201d of profits<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

If an assessee earns Rs.100 crores then while for AY 2001-02, the extent of deduction is 80% thereof, for purposes of computation of book profits, 100% of the profits are \u201celigible profits\u201d and cannot be reduced to 80% by relying on s. 80HHC(1B)<\/strong>. The idea is to exclude \u201cexport profits\u201d from computation of book profits under s. 115JB which imposes MAT on deemed income<\/p>\n

Read more ›<\/a><\/div>\n

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