S.C : Claim for deduction was rejected by Assessing Officer on ground that since in normal computation there was no profit after carry forward loss of earlier years, deduction under section 80HHE for computing book profit under section 115JA was not admissible

Supreme Court Of India

CIT vs. Bhari Information Technology Systems (P.) Ltd.

Assessment Year : 2000-01

Section : 115JA, 80HHE

S.H. Kapadia, CJ.

K.S. Radhakrishnan And Swatanter Kumar, JJ.

Special Leave Petition No. 33750 Of 2009

October 20, 2011

ORDER

1. Assessee filed its return of income for asst. yr. 2000-01. Assessee claimed deduction under s. 80HHE to the extent of Rs. 1,56,33,719 against net profit as per P&L a/c amounting to Rs. 3,07,84,105 to arrive at the book profit of Rs. 1,51,50,386 under s. 115JA of the IT Act, 1961 (See : Vol. R/1 of I.A. paper book—p. 6).

2. This claim for deduction made by the assessee was rejected by the AO saying that since in normal computation there is no profit after carry forward loss/deduction under s. 80HHE to the extent of Rs. 1,56,33,719 for computing book profit under s. 115JA was not admissible.

According to the AO since in the present case in normal computation no net profit was left after the brought forward losses of the earlier years got adjusted against the current year’s profit, the assessee was not entitled to deduction under s. 80HHE to the extent of Rs. 1,56,33,719.

3. In appeal, the CIT(A) upheld the order of the AO. The assessee went in appeal, against the order of the CIT(A), before the Tribunal which, following the judgment of the Special Bench of the Tribunal in the case of Dy. CIT v. Syncome Formulations (I) Ltd. [2007] 106 ITD 193/ 13 SOT 414 (Mum.) took the view that the MAT scheme which includes s. 115JA did not take away the benefits given under s. 80HHE.

The said judgment of the Special Bench was with regard to computation of deduction under s. 80HHC which, like s. 80HHE, falls under Chapter VI-A of the IT Act, 1961. In the said judgment of Special Bench, which squarely applies to the facts of the present case, the Tribunal held that the deduction under s. 80HHC (s. 80HHE also falls in Chapter VI-A) 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 under s. 115JA is clearly brought out. The Tribunal in the said judgment rightly held that in s. 115JA relief has to be computed under s. 80HHC(3)/(3A).

According to the Tribunal, 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. [See : para 61 of the judgment of the Tribunal in Syncome Formulations (supra)].

4. In the present case we are concerned with s. 80HHE which is referred to in the Explanation to s. 115JA, cl. (ix). In our view, the judgment of the Special Bench of the Tribunal in Syncome Formulations (I) Ltd. (supra) squarely applies to the present case. Following the view taken by the Special Bench in Syncome Formulations (I) Ltd. (supra), the Tribunal in the present case came to the conclusion that Reduction claimed by the assessee under s. 80HHE has to be worked out on the basis of adjusted book profit under 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. The judgment of the Tribunal has been upheld by the High Court.

5. We see no reason to interfere with .the impugned judgment. We agree with the view taken by the Special Bench of the Tribunal in the case of Syncome Formulations (I) Ltd. (supra) vide para 61 of the judgment. Accordingly, the special leave petition filed by the Department stands dismissed with no order as to costs.

[Citation : 340 ITR 593]

Leave a Reply

Your email address will not be published. Required fields are marked *