Section 80HHE deduction under MAT must be computed on adjusted book profit, not regular business profits.

Section 80HHE deduction is to be computed under the MAT framework by reference to adjusted book profit under Section 115JA, not by applying the regular provisions for business income. The text treats the express reference to Section 80HHE in the Explanation to Section 115JA as decisive and applies the same approach previously used for Chapter VI-A deductions in the Section 115JA context. As a result, the deduction follows the adjusted book profit computation under the MAT regime, rather than the normal taxable profit computation.

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Issues: Whether deduction under Section 80HHE is to be computed on the basis of adjusted book profit under Section 115JA or on the basis of profits computed under the regular provisions of the Income-tax Act, 1961.

Analysis: Section 115JA contains an express reference to Section 80HHE in its Explanation. The Tribunal had applied the principle earlier affirmed in the context of Section 80HHC, namely that where the MAT regime under Section 115JA operates, deductions contemplated by Chapter VI-A are to be worked out with reference to adjusted book profit and not by recourse to the normal computation of business profits. The same reasoning was held applicable to Section 80HHE, since it stands on the same footing for the purpose of the MAT computation.

Conclusion: Deduction under Section 80HHE was required to be worked out on the basis of adjusted book profit under Section 115JA, and not on the basis of regular computed profits; the view in favour of the assessee was upheld.

Ratio Decidendi: Where a Chapter VI-A deduction is specifically linked to the MAT computation scheme, it must be computed with reference to adjusted book profit under Section 115JA and not on the basis of normal taxable profits.

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