2018 (11) TMI 1659 - HC - Income Tax

Calculation of Section 80HHC Deduction in MAT Assessment Determined by High Court

The High Court held that the deduction under Section 80HHC in a Minimum Alternate Tax (MAT) assessment should be calculated based on adjusted book profits ... Disallowance of deduction u/s 80HHC - whether in a case of MAT assessment is to be worked out on the basis of the adjusted books profits under section 115JB of the Income Tax Act, 1961 is valid? - HELD THAT:- Question of law has been answered against the Revenue in the case of Commissioner of Income Tax vs. Bhari Information Technology Systems Private Limited [2011 (10) TMI 19 - SUPREME COURT] we are concerned with Section 80-HHE which is referred to in the Explanation to Section 115-JA, clause (ix). In our view, the judgment of the Special Bench of the Tribunal in Syncome Formulations squarely applies to the present case. Following the view taken by the Special Bench in Syncome Foundations [2007 (3) TMI 288 - ITAT BOMBAY-H] , the Tribunal in the present case came to the conclusion that deduction claimed by the assessee under Section 80- HHE has to be worked out on the basis of adjusted book profit under Section 115-JA 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. - Decided against revenue. Interest u/s 234-D - where it cannot be levied for period prior to 01.06.2003? - HELD THAT:- This question was considered by this Court in the case of CIT vs. M/s.Brakes India Ltd. [2018 (9) TMI 1247 - MADRAS HIGH COURT] holding that the provision, namely, Section 234D of the Act, though was inserted by the Finance Act, 2003 with effect from 01.06.2003, by virtue of the Explanation 2, which was inserted by the Finance Act, 2012 with retrospective effect from 01.06.2003 and will apply to all pending assessments before 01.06.2003. Therefore, the said substantial question of law are answered in favour of the Revenue. In this regard, reference may be made to the decision of the Hon'ble Supreme Court in CIT V. Reliance Energy Limited [2013 (10) TMI 280 - SUPREME COURT] - Decided in favour of revenue. Issues:1. Interpretation of deduction under Section 80HHC in a case of MAT assessment.2. Levying interest under Section 234-D for the period prior to 01.06.2003.Interpretation of deduction under Section 80HHC in a case of MAT assessment:The High Court examined whether the deduction under Section 80HHC in a case of Minimum Alternate Tax (MAT) assessment should be based on adjusted book profits under Section 115JB of the Income Tax Act, 1961. The Court referred to the case of Commissioner of Income Tax vs. Bhari Information Technology Systems Private Limited, where it was held that the deduction under Section 80HHC needs to be calculated based on adjusted book profits when Section 115JA is applicable. The Court emphasized the distinction between regular income tax profits and adjusted book profits, stating that deductions under Section 80HHC should be computed on the basis of adjusted book profits. The judgment in Bhari Information Technology Systems Private Limited was followed, leading to the conclusion that the deduction under Section 80HHC in a MAT assessment should indeed be worked out based on adjusted book profits.Levying interest under Section 234-D for the period prior to 01.06.2003:The Court also considered the issue of levying interest under Section 234-D of the Income Tax Act for the period before 01.06.2003. In the case of CIT vs. M/s.Brakes India Ltd., it was determined that Section 234D, inserted by the Finance Act, 2003, with effect from 01.06.2003, was applicable to pending assessments before 01.06.2003. The Court referred to the decision of the Supreme Court in CIT v. Reliance Energy Limited, which supported the retrospective application of Section 234D from 01.06.2003. Consequently, the Court ruled in favor of the Revenue, allowing the levying of interest under Section 234-D for the period preceding 01.06.2003.In conclusion, the High Court partially allowed the appeal filed by the Revenue, answering the substantial questions of law in favor of the Revenue based on the interpretations provided in the referenced cases.