High Court Of Madras
CIT vs. Jumbo Bag Ltd.
Section 80HHC, 115JB, 263
Asst. Year 2001-02, 2002-03
K. Raviraja Pandian & M. M. Sundresh, JJ.
Tax Case Appeal Nos. 6 and 8 of 2009.
30th April, 2009
Counsel Appeared :
J. Narayanasamy, for the appellant
JUDGMENT
K. Raviraja Pandian, J. :
The Revenue is on appeal against the order of the Tribunal, dt. 4th July, 2008, passed in ITA Nos. 354 and 355 /Mad/2008 relating to the asst. yrs. 2001-02 and 2002-03.
2. The assessment in the case of the assessee for the asst. yr. 2001-02 was completed under s. 143(3) r/w s. 147 of the IT Act on 31st Jan., 2005, on the basis of computation of book profit under s. 115JB at Rs. 77,57,105. The original assessment for the asst. yr. 2002-03 was completed under s. 143(3) on 31st Jan., 2005, determining the book profit under s. 115JB at Rs. 81,23,508. While completing the assessment the AO had allowed deductions under s. 80HHC of Rs. 9,19,200 on the book profit under s. 115JB for the asst. yr. 2001-02 and Rs. 18,71,525 on the book profit under s. 115JB for the asst. yr. 2002-03. On perusal of the records relating to the above assessment years, the CIT found that when the taxable income was nil after setting off depreciation for the respective assessment years, no deduction under s. 80HHC was allowable. Hence, a notice under s. 263 was issued calling upon the assessee to submit its explanation as to why the claim of deduction under s. 80HHC should not be withdrawn. The assessee submitted its reply stating that when two views are possible and the AO had followed one view the CIT could not hold that the assessment was erroneous and prejudicial to the interests of the Revenue and take action under s. 263 of the Act. The assessee placed reliance on the decision of the Gujarat High Court in the case of CIT vs. Arvind Jewellers (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 (Guj). The CIT did not accept the assessee’s contention that the AO had consciously followed a particular view. The CIT has recorded a finding that the assessment order clearly showed that the AO had not applied his mind to this issue at all. The CIT also rejected the assessee’s objection that when two views are possible the CIT could not invoke the jurisdiction under s. 263. Thus, the CIT set aside the assessments made by the AO for the asst. yrs. 2001-02 and 2002-03 with a direction to redo the assessments after withdrawing the deduction under s. 80HHC wrongly allowed while computing the book profit under s. 115JB. Aggrieved by the orders of the CIT, the assessee filed appeals before the Tribunal and the Tribunal allowed the appeals in favour of the assessee by following the decision of the Special Bench of the Mumbai Tribunal in the case of Dy. CIT vs. Syncome Formulations (I) Ltd. (2007) 108 TTJ (Mumbai)(SB) 105 : (2007) 292 ITR 144 (Mumbai) (AT) and the decision of the Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC). Aggrieved by the same, the Revenue has filed this appeal by formulating the following question of law :
“Whether on the facts and in the circumstances of the case, the Tribunal was right in cancelling the order of the CIT under s. 263 on the ground that deduction under s. 80HHC was allowable on the basis of book profits and not on the basis of eligible profits under s. 80HHC as, per computation under the normal provisions of the IT Act, while computing the book profits under s. 115JB ?”
3. We have heard the argument of the learned counsel for the Revenue and perused the materials available on record.
4. The issue involved in the present appeals is squarely covered by the decision of a Division Bench of this Court in which one of us (K. Raviraja Pandian J.) was a party in the case of CIT vs. Rajanikant Schnelder & Associates (P) Ltd. (2008) 302 ITR 22 (Mad), wherein it has been observed as follows (p. 24) :
“We are not able to subscribe our view to the grounds taken in the appeal that the deduction under s. 80HHC is allowable only on the profits and gains arrived at under ss. 28 to 44B of the IT Act. In the case on hand, it is the stand of the assessee that the relief under s. 80HHC should be based on the profit ascertained under s. 115JA only but not on income computed under ss. 28 to 44 of the Act. The Tribunal after considering the judgments of the Supreme Court in the case of Surana Steels (P) Ltd. vs. Dy. CIT (1999) 153 CTR (SC) 193 : (1999) 237 ITR 777 (SC) and in the case of Apollo Tyres Ltd. vs. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC) and analysing the order impugned found that the provisions of s. 115J are similar to the provisions of s. 115JA of the Act. In order to come to the conclusion the Tribunal has also taken note of sub-s. (4) of s. 115JA and referred to the dictum laid down by the Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (supra), wherein it was held that the AO while computing the book profits of a company under s. 115J of the IT Act, 1961, has only the power to examine whether such books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The AO thereafter has the limited power of making increases and reductions as provided for in the Explanation to s. 115J. The AO does not have the jurisdiction to go behind the net profits shown in the P&L a/c except to the extent provided in the Explanation. The use of the words ‘in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act’ in s. 115J was made for the limited purpose of empowering the AO to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, the AO has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinised and certified by the statutory auditors and approved by the company in the general meeting and thereafter to be filed before the RoC, who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-s. (1A) of s. 115J does not empower the AO to embark upon a fresh enquiry in regard to the entries made in the books of account of the company.
The AO is not entitled to touch the P&L a/c prepared by the assessee as per the provisions contained in the Companies Act, while arriving at the book profit under s. 115J and the book profit so arrived at should be the basis for taxation and therefore the computation under s. 80HHC should be limited to the case of profits of eligible category only. The Tribunal has also come to the conclusion that in view of the non obstante clause available in s. 115JA it was clear that the provisions is a self-contained one and no other provision would have effect on it and thereby it was to be implemented as contained in the said provision. The Tribunal has also further given a reason to the effect that s. 80HHC is clear about this aspect that profit only is to be taken into account but not income and sub-s. (3) of s. 115JA itself took care of the provisions relating to the adjustment of loss or depreciation and carry forward of the income. The finding arrived at by the Tribunal is correct and followed the decision of the Supreme Court. We are of the view that the conclusion arrived at by the Tribunal cannot be complained of.”
Hence, following the same, the question of law is answered against the Revenue and the appeals are dismissed.
[Citation : 324 ITR 111]
