2011 (4) TMI 1560

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....allowable u/s. 80 HHC of the Income Tax Act while arriving book profit u/s. 115JB of the Income Tax Act." 2. The assessee is a company engaged in the business of export trading of textiles. The assessment of the assessee for A.Y 2003-04 was completed by the AO under section 143(3) of the Act on 27/3/06. The assessee was entitled to deduction under section 80 HHC of the Income Tax Act, 1961 (the Act). The assessee had computed such deduction at a sum of Rs. 81,53,282/-. While completing the assessment the AO determined the eligible deduction under section 80 HHC of the Act at Rs. 73,63,722/-. The deduction under section 80 HHC was however not allowed because the income under the head business was nil. The income tax payable on the....

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.... Total Tax.............   Rs. 1086793     ===========" 3. The CIT in exercise of his powers under section 263 of the Act was of view that while computing book profits under section 115JB of the Act in terms of clause (iv) to Explanation-1 below section 115JB (2) of the Act the amount of profit eligible for deduction under section 80 HHC, computed under clause (a) or clause (b) or clause (c) of sub- section (3) or sub-section (3A), as the case may be, of that section should be reduced from the profits as per P&L Account. According to the CIT since no deduction under section 80 HHC was allowed under normal provisions of the Act, even while computing book profits under section 115JB of the Act the amount eligible for ....

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.... the book profit would be export profits allowed as deduction u/s. 80 HHC after restricting deduction as per provisions of sub-section (1B) of section 80 HHC and not export profit as calculated as per subsection (3) and (3A) of section 80 HHC before applying restriction contained in subsection (1B) of section 80 HHC. Whether it be 115J/JA/JB, the express language used is Eligible for deduction u/s. 80 HHC and computed under clause (9a) or clause (b) or clauses (c) of sub section (3) or sub section (3A) as the case may be. What it means is that subsections (3) and (3A) provide for the method for computation of profits. Once the profits are worked out, then only the profit which is eligible can be deducted. Section 80 HHC(1) allows deduction ....

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....(i) that section 115JA was a self-contained code and applied notwithstanding any provision in the Act. Section 115JB is the successor section to section 115JA. Section 115JB continues to remain a self contained code. (ii) That all assessable entities were not eligible for deduction under section 80 HHC (1B). similarly, only eligible goods were entitled to such special deduction under section 80HHC(1). Section 80HHC(3) was geared to the exports, whereas the levy under section 115JB was on the deemed income. The idea was to exclude "export profits" from the computation of book profits under section 115JB . (iii) That if the dichotomy between "eligibility" of profits and "deductibility" of profits was not kept in mind section 115JB would c....