Revenue's appeal partly allowed for statistical purposes, remitting loss allowance matter back for fresh adjudication

The Tribunal partly allowed the Revenue's appeal for statistical purposes, remitting the matter of allowance of loss under section 115JB(2)(iii) back to the CIT(A) for fresh adjudication. The CIT(A)'s decision on the re-computation of deduction under section 80HHC for the purpose of deduction under section 115JB(2)(iv) was confirmed. The order was pronounced on 17.4.2015.

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Issues Involved:
1. Allowance of loss under section 115JB(2)(iii).
2. Re-computation of deduction under section 80HHC for the purpose of deduction under section 115JB(2)(iv).

Detailed Analysis:

1. Allowance of Loss under Section 115JB(2)(iii):
The Revenue's grievance was that the CIT(A) erred in directing to allow the loss under section 115JB(2)(iii) as computed by the assessee in its return of income. The assessee declared book profit under section 115JB at Rs. 3,37,57,883/- and deducted unabsorbed loss of Rs. 4,23,87,539/- from the Ahmedabad Unit while determining the book profit. The AO recomputed the book profit at Rs. 8,36,84,223/- by combining the unabsorbed loss and depreciation of both the Ahmedabad and Baramati Units, resulting in a determination of the loss under section 115JB(2)(iii) at NIL.

On appeal, the CIT(A) held that the income and expenses related to the Baramati Unit (100% EOU) were excluded from the book profit for all relevant years, and thus, the losses from this unit should not be considered for set-off under section 115JB(2)(iii). The CIT(A) directed the AO to allow the loss as computed by the assessee. The Tribunal, however, found that the working made by the assessee was not brought on record and thus set aside the orders of the lower authorities, remitting the matter back to the CIT(A) for fresh adjudication with a speaking order, allowing reasonable opportunity of hearing to both parties.

2. Re-computation of Deduction under Section 80HHC for the Purpose of Deduction under Section 115JB(2)(iv):
The Revenue contended that the CIT(A) erred in directing to recompute the deduction under section 80HHC for the purpose of deduction under section 115JB(2)(iv) on the book profit declared by the assessee. The AO had recomputed the deduction under section 80HHC at NIL by setting off the brought forward loss from the eligible profit under the normal provisions of the Act.

On appeal, the CIT(A) held that section 115JB is a separate code, and the AO should not alter the profit and loss account prepared by the assessee under the Companies Act. The CIT(A) directed the AO to recompute the deduction under section 80HHC based on the book profit declared by the assessee under section 115JB(1).

The Tribunal, referencing the decision in the case of DCIT Vs. Sun Pharmaceutical Industries Ltd., confirmed that the deduction under section 80HHC in a MAT assessment should be worked out on the basis of the adjusted book profits and not the profit computed under the regular provisions of law. This view was supported by the Hon'ble Apex Court in Ajanta Pharma Ltd. vs. CIT and the Hon'ble Madras High Court in Bhari Information Technology System. The Tribunal thus confirmed the CIT(A)'s order on this issue and dismissed the Revenue's ground.

Conclusion:
The appeal of the Revenue was partly allowed for statistical purposes, with the matter of allowance of loss under section 115JB(2)(iii) remitted back to the CIT(A) for fresh adjudication, and the CIT(A)'s decision on the re-computation of deduction under section 80HHC for the purpose of deduction under section 115JB(2)(iv) was confirmed. The order was pronounced in the Court on 17.4.2015.

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