Appeal granted in tax case re: deductions under 80HHC, 80-IA, and 80-IB

The revenue's appeal was allowed for statistical purposes in a case involving the deduction under sections 80HHC and 80-IA while computing book profit under section 115JA. The Tribunal directed the Assessing Officer to calculate the deduction under section 80HHC based on adjusted book profit, following a Special Bench decision. Additionally, the Tribunal instructed a re-computation of book profit and total income considering the eligibility of an industrial undertaking for deduction under section 80-IB. The matter was remanded to the Assessing Officer for proper examination and computation of deductions and book profit.

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Issues Involved:
1. Deduction u/s 80HHC while computing book profit u/s 115JA.
2. Deduction u/s 80-IA while computing book profit u/s 115JA.

Summary:

Issue 1: Deduction u/s 80HHC while computing book profit u/s 115JA

The revenue appealed against the CIT(A)'s order directing the Assessing Officer to allow deduction u/s 80HHC while computing book profit as defined in the Explanation below section 115JA(2). The CIT(A) directed the deduction to be calculated based on book profit, which the Assessing Officer had disallowed since the income computed under normal provisions was negative. The Tribunal referenced the Special Bench's decision in Dy. CIT v. Syncome Formulations (I) Ltd., which held that deduction u/s 80HHC in a MAT scheme should be computed on the adjusted book profit. The Tribunal found that the CIT(A)'s direction was not justified and set aside the order, directing the Assessing Officer to compute the deduction u/s 80HHC on the basis of the adjusted book profit, following the Special Bench's decision.

Issue 2: Deduction u/s 80-IA while computing book profit u/s 115JA

The Assessing Officer did not allow the deduction u/s 80-IA while computing book profits for section 115JA, as it was not claimed in the return of income, which declared a loss. The CIT(A) directed the Assessing Officer to allow the deduction, noting the industrial undertaking's eligibility for deduction u/s 80-IA. However, the revenue argued that the deduction should be u/s 80-IB, as the original section 80-IA was substituted by sections 80-IA and 80-IB by the assessment year 2000-01. The Tribunal noted that the profits derived by an industrial undertaking eligible for 100% deduction u/s 80-IB should be reduced from the net profit to compute book profit u/s 115JA. The Tribunal found that the lower authorities did not properly examine the issue and restored the matter to the Assessing Officer for re-computation of book profit and total income, considering the judgments in Pandian Chemicals Ltd. and Sterling Foods.

Conclusion:

The appeal of the revenue was allowed for statistical purposes, with directions for re-computation of deductions and book profit by the Assessing Officer.

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