Case Note & Summary
The case involves an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 against an order of the Income Tax Appellate Tribunal for Assessment Year 2003-04. The respondent-assessee, engaged in manufacture and processing of meat products, filed a return declaring nil income after setting off unabsorbed depreciation. For computing book profits under Section 115JB, the assessee computed deduction under Section 80HHC at Rs. 2.14 Crores using adjusted profit of business of Rs. 2,69,71,336. The Assessing Officer adopted a higher adjusted profit of Rs. 4,00,75,199, resulting in a lower deduction. The Tribunal upheld the assessee's computation. The Revenue appealed, arguing that the deduction under Section 80HHC for book profits must be computed with reference to the profits as per accounts adjusted under Section 115JB, not the normal computation under Chapter IV-D. The court admitted the appeal on the substantial question of law and, with consent, heard it finally. The court set aside the Tribunal's order and restored the matter to the Tribunal for fresh consideration, directing the Tribunal to decide the issue in accordance with law and the observations in the judgment.
Headnote
A) Income Tax - Book Profits - Section 115JB, Explanation (iv) - Deduction under Section 80HHC - The issue was whether the deduction under Section 80HHC for computing book profits under Section 115JB should be quantified with reference to profits as per accounts adjusted under Section 115JB or with reference to normal computation under Chapter IV-D. The court held that the deduction must be computed with reference to the book profits as per the accounts adjusted under Section 115JB, not the normal computation under Chapter IV-D. (Paras 1-5)
Issue of Consideration
Whether the deduction under Section 80HHC for computing book profits under Section 115JB should be quantified with reference to profits as per accounts adjusted under Section 115JB or with reference to normal computation under Chapter IV-D
Final Decision
Appeal allowed; order of Tribunal set aside; matter restored to Tribunal for fresh consideration in accordance with law and observations in the judgment
Law Points
- Computation of deduction under Section 80HHC for purposes of Section 115JB must be based on book profits as per Explanation (iv) to Section 115JB(2)
- not on normal computation under Chapter IV-D
Case Details
2010 LawText (BOM) (07) 96
Income Tax Appeal No.2619 of 2010
Dr. D.Y. Chandrachud, J.P. Devadhar
Mr. Suresh Kumar with Mr.P.S. Sahadevan i/b Mr.Vimal Gupta for the Appellant, Mr. R. Murlidhar with Mr. Balasaheb G. Yewale with Mr. Rajesh Shah i/b Rajesh Shah & Co. for the Respondent
The Commissioner of Income Tax-2
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Nature of Litigation
Appeal by Revenue against order of Income Tax Appellate Tribunal regarding computation of deduction under Section 80HHC for book profits under Section 115JB
Remedy Sought
Revenue sought to set aside Tribunal's order and restore Assessing Officer's computation
Filing Reason
Dispute over quantification of deduction under Section 80HHC for computing book profits under Section 115JB
Previous Decisions
Assessing Officer computed deduction at lower amount; Tribunal upheld assessee's computation
Issues
Whether deduction under Section 80HHC for book profits under Section 115JB should be quantified with reference to profits as per accounts adjusted under Section 115JB or normal computation under Chapter IV-D
Submissions/Arguments
Revenue argued that deduction must be computed with reference to book profits as per accounts adjusted under Section 115JB
Assessee contended that deduction should be based on normal computation under Chapter IV-D
Ratio Decidendi
The deduction under Section 80HHC for computing book profits under Section 115JB must be quantified with reference to the profits as per accounts duly adjusted under various clauses to the Explanation of Section 115JB, and not with reference to the normal computation under Chapter IV-D
Judgment Excerpts
The question of law is whether the Tribunal was justified in holding that the deduction admissible vide Explanation (iv) to section 115JB(2) towards profit exempt u/s. 80HHC has to be quantified with reference to the profits as per accounts duly adjusted under various clauses to the Explanation of Section 115JB and not with reference to the normal computation under the chapter 'Profits and Gains of Business or Profession'?
Procedural History
Assessee filed return for AY 2003-04; Assessing Officer computed deduction under Section 80HHC differently; CIT(A) upheld assessee's computation; ITAT upheld CIT(A) order; Revenue appealed to High Court under Section 260A
Acts & Sections
- Income Tax Act, 1961: 260A, 115JB, 80HHC
