TaxTMI 
TaxTMI 
2006 (9) TMI 230
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....on the basis of a decision of Hon'ble Kerala High Court in the case of CIT v. G.T.N. Textile Ltd [2000] 164 CTR (Ker.) 185; and clause (iv) of Explanation given under section 115JB which according to the assessee-company, entitled it to reduce the amount of profits eligible for deduction under section 80HHC from the book profit. Along with a computation of book profit under section 115JB, the assessee-company appended a footnote to that effect. The assessee-company has also filed a report from an Accountant in Form No. 29B in which claim of Rs. 1,11,01,306 for deduction under section 80HHC has been made for arriving at income under section 115JB. The assessee-company has also filed a certificate in Form No. 10CCAC for claiming a deduction under section 80HHC. The Assessing Officer initially allowed this claim of the assessee but subsequently withdrew the same by resorting to the provisions of section 154 of the Act. 3. In the order dated 31-3-2004, passed under section 154 of the Act, the Assessing Officer has observed that the assessee-company has declared 'Nil' income after claiming depreciation of Rs. 9,93,17,254. According to the Assessing Officer, book profit as p....
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....ppeal of the assessee-company. Now, the assessee is before us and has raised the following grounds of appeal: "(1) Under the facts and in the circumstances of the case the ld. CIT(A) has erred in sustaining the order passed by the Assessing Officer under section 154. (2) Under the facts and in the circumstances of the case the ld. CIT(A) has erred in confirming the Assessing Officer action of not allowing the claim of deduction under section 80HHC at Rs. 1,11,01,336 in computing the book profit under section 115JB." 5. We have heard the rival submissions and perused the evidence on record. 6. Evidently, the grounds of appeal are interrelated and intertwined, so these are being disposed of simultaneously. Before we come to the facts of the given case we would like to trace the history and the scope of the relevant provisions of section 115JB of Act, inter alia. Section 115JB was brought on the statute by Finance Act, 2000, with effect from 1-4-2001. This provides for a special provision for payment of tax by certain Companies. Prior to insertion of this section, section 115JA provided for the deemed income relating to certain Companies. This provision was relevant in respect o....
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....ions of the Income-tax Act. Secondly, the book profit is to be worked out in accordance with the Explanation to section 115J(1) and it is to be seen whether the income determined under the first process is less than 30 per cent of the book profit. Section 115J would be invoked if the income determined under the first process is less than 30 per cent of the book profit. The Explanation to sub-section (1) of section 115J gives the definition of the "book profit" by incorporating the requirement of section 205 of the Companies Act in the computation of the book profit. Brought forward losses or unabsorbed depreciation, whichever is less, would be reduced in arriving at the book profits. Sub-section (2), however, provides that the application of this provision would not affect to carry forward of unabsorbed depreciation, unabsorbed investment allowance, business losses to the extent not set-off, and deduction under section 80J to the extent not set off as computed under the Income-tax Act. 8. A plain reading of section 115J shows that if the assessee is a company and its total income determined under the Income-tax Act, in respect of previous year, is less than 30 per cent of its book....
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....110 per cent of the profits and gains under section 80-IA(5) [(with effect from 1-4-2000) profits and gains under section 80-IB(4) or section 80-IB(5)]; or (vi) the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility as defined in section 80-IA(12), and subject to fulfilling the conditions laid down in section 80-IA(SA) [(with effect from 1-4-2000) in the Explanation to section 80-IA(4), and subject to fulfilling the conditions laid down in that section 80-IA(SA)]; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), and ending with assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. It is clarified that, for the purposes of this clause (vii), 'net worth' shall have the meaning assigned to it in section 3(1)(ga) of Act 1 of 1986. For such definition, reference may ....
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....e conditions specified in sub-sections (4) and 4(A) of that section." 12. This Claim has two parts:- (i) the amount of profits eligible for deduction under section 80HHC; and (ii) computed under Clause (a), (b) or (c) of sub-section (3) or (3A) of section 80HHC. 13. Obviously, the first part simply refers to the export a profit, which is the part of the net profit as shown in the profit and loss account of the company, and the second part refers to the manner of computation. Here it would be relevant to understand the scheme provided by the law to compute the book profit for the purpose of section 115JB. The Explanation to sub-section (2) of section 115JB reads as under: "Explanation. - For the purpose 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 (f) if any amount referred to in clauses (a) to (f) is debited to the profit & loss account, and as reduced by - (i)... (ii)... ... (vii) accumulated losses." The very reading of these provisions and the nature of all the adjustments referred suggest that the adjustments have to be made....
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.... 80HHD, should be excluded from the purview of section 115J...." The above discussion clarifies the legislative intend to exclude the export profits from the purview of MAT under section 115JA. 14. Further, Hon'ble High Court of Kerala in G.T.N. Textile Ltd. 's case has resolved the issue for computing book profit as per section 115J(1A) in the case supra in which the High Court has given the following findings: "Para 5: Section 115J begins with non obstante clause. According to this clause, book profit is to be treated as net profit. Section 80HHC(3) and (3A) give concession to the exporters and...... Originally, section 115J of the Act did not take into account the deductions under section 80HHC and ........ It was only included subsequently, as it was found that non-inclusion of the provision under section 80HHC and ....... will cause great hardship to the assessee. If the profits is to be computed on the basis of the profits and gains of business or profession that will go against the very object of section 115J of the Act. Section 115J(1A)(iv) says that the amount of loss or the amount of depreciation which would be required be set off against the profit of the rel....
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.... companies have substantial book profit and declares dividend to shareholders, but they do not pay Income-tax, by availing various deductions and exemptions which are available under the normal provisions of the Act. So, under both section 115J and section 115JA, tax is levied on the basis of the book profit subject to certain adjustment section these provisions come into picture when the total income of the assessee chargeable to tax under the provisions of the Act is nil or less than the specified percentages of the book profit. So, the invocation of section 115J and section 115JA implies two distinct procedures - (1) determination of income under the normal provisions of the Act, which include section 80A(2) and section 80B(5) relied on by the revenue, and (2) determination of the book profit subject to the specified adjustments and a comparison of the two results obtained by the two procedures. So, we are of the view that section 80A(2) and section 80B(5) which are applicable only in the first procedure, have no role to play in working out the deduction under section 80HHC eligible for being reduced for arriving at the book profit in terms of clause (iii) of Explanation to sect....
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.... also under section 154 of the Income-tax Act, 1961 deals with the order for rectification of mistakes in the order or an intimation made by the Assessing Officer, which are apparent on records. From the plain reading of the section it is very clear that only the mistakes, which are apparent on the record can be rectified under this section. Further, it is a well settled law that where a issue on which a rectification is proposed is one which involves a debatable point of law or where it involves a statutory provision and there is a reasonable scope for more than one kind of interpretation being placed on the provision in question, the remedy of rectification cannot be available in this section. In the present case assessee had claimed the deduction on the basis of Kerala High Court decision in G.T.N. Textile Ltd. 's case. Hence now holding that the assessee has wrongly claimed the deduction is apparently a debatable issue, which cannot be said to be a mistake apparent on the records. Such a debatable issue cannot be the subject-matter of order under section 154. A 'mistake apparent' is a mistake that is manifest, plain or obvious, a mistake that can be realized without....