TaxTMI 
TaxTMI 
2003 (7) TMI 283
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....ion 115JA certain adjustments have to be made to the 'Book Profit'. So far as the present appeal is concerned, adjustment contained in clause (vm) of Explanation to section 115JA is relevant. Under this provision, the book profit has to be reduced by the profits eligible for deduction under section 80HHC. The said Explanation to the extent relevant for our purpose reads as under- "Deemed income relating to certain companies. 115JA. (1).......... Provided that......... Provided further that...... Explanation - For the purposes of this section "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) to (/)............ if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by - (i) to (vii)........... (viii) the amount of profits eligible for deduction under section 80HHC, computed under clause (a), (b) or (c) of sub-section (3) or subsection (3A), as the case may be, of that section, and subject to the conditions specified in sub-sections (4) and (4A) of that section; (ix).................. (3)..............
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....ing of the audit report along with the return is not mandatory and assessee had filed the audit report in Form 10CCAC before the completion of the assessment, and so, in terms of the ratio of the decision of the jurisdictional High Court in the case of CIT v. Hemsons Industries[200l] 251 ITR 693, the deduction under section 80HHC cannot be denied. He also pleaded that the Revenue authorities erred in invoking the provisions of section 80A(2) for the purposes of working out the deduction under section 80HHC, in the process of computing the book profits under section 115JA. It is claimed that the provisions of section 80A(2) are relevant only for the purpose of computing the income under the normal provisions of Income Tax Act, and they have no relevance for working out the deduction under section 80HHC for computing the deemed profits under section 115JA of the Act. In support of this plea, he relied upon the decision of the Hon'ble Kerala High Court in the case of CIT v. G.T.N. Textiles Ltd.[2001] 248 ITR 372. On the question of the restriction of the indirect costs in the computation of deduction under section 80HHC, the learned counsel for the assessee explained that the asse....
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....ent, and so, in terms of the ratio of the decision of the jurisdictional High Court in the case of Hemsons Industries, the deduction under section 80HHC cannot be denied, in the process of working out the book profits in terms of section 115JA. On the second issue, viz., applicability of provisions of section 80A(2) in the process of computing the book profit under section 115JA, we find that the provisions of clause (iii) of Explanation to section 115JA considered by the Hon'ble Kerala High Court in the case of G.T.N. Textiles Ltd. are pari materia with the provisions of clause (viii) of Explanation to section 115JA, which are applicable in the present case. We have already reproduced clause (viii) of Explanation to section 115JA herein above. The corresponding provisions considered by the Hon'ble Kerala High Court in the case of G.T.N. Textiles Ltd. read as under- "Special provisions relating to certain companies: 115J(1)................ (1A).............. Explanation.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1 A), as increased by- (a) t....
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....: Export Turnover x Profit computed under the provisions of the Income-tax Act, i.e., after setting off depreciation and investment allowance of current year and the unabsorbed portion of it carried forward from earlier years. Total Turnover The Tribunal accepted the claim of the assessee. On a reference: Held, that the Tribunal was correct in holding that under section 115J, Explanation, clause (iii) of the Act, profit to be taken into consideration was the profit as per the books of account and not as calculated under the Act." 9. It is evident from the above decision that in terms of Explanation to section 115J or section 115JA, the profit to be taken into consideration is the book profit, subject to specified adjustment and not the total income as computed under the normal provisions of the Income-tax Act. Actually, the contention of the Revenue goes against the provisions specified both in section 115J and section 115JA of the Act. Both these provisions levy what is known as the Minimum Alternative Tax, and are applicable to what are known as 'Zero Tax Companies'. These companies have substantial book profit and declare dividend to shareholders, but they do no....
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....eration 1,44,000 Auditors Remuneration 40,000 Conveyance 48,045 Vehicle Maintenance 48,649 Consultancy Charges 89,750 Professional Charges 81,498 Directors Sitting Fee 8,000 Postage & Telegrams 11,879 Printing & Stationery 75,281 Rent 60,000 Subscriptions & Periodicals 15,150 Telephone & Trunk calls 1,24,968 8,10,820 It is explained that the above indirect costs of Rs.8,10,820 relate to the Sales Division of the assessee, and so, the assessee determined the deductible indirect cost at Rs.1,84,471 on the following basis- "Proportionate indirect cost allocable to Export Turnover Indirect Cost x Export Turnover Total Turnover 810820 x 16115941 = 184471..." 70835724 11. It may be observed that the figure of indirect costs of Rs.8,10,820 taken by the assessee has no relationship to the figure of indirect costs reflected in the Profit & Loss Account. In other words, the assessee has artificially ignored the indirect costs relatable to the Manufacturing Division. It is not a case where separate accounts are maintained for the Sales Division. Assessee has filed a consolidated Profit & Loss Account for both the divisions. In the circumstance....