K.G. Bansal, A.M.: ITA Nos. 1268 to 1270/Pune/2004 arise out of three orders of CIT(A)-III, Pune, passed on 7th June, 2004. corresponding orders of assessment were passed by Dy. CIT, Circle-I, Solapur, on 30th Jan., 2004 under provisions of s. 143(3) r/w s. 148 of IT Act, 1961. assessee has taken identical grounds of appeal in all these three appeals. appeals were also argued in consolidated manner. Therefore, consolidated order is passed. We may refer to grounds of appeal taken up in appeal filed for asst. yr. 1998-99. assessee has taken two grounds of appeal. First ground of appeal is against finding of learned CIT(A) that assessments were validly reopened under s. 147 of IT Act. second ground of appeal is against finding of learned CIT(A) that deduction under Expln. (viii) below s. 115JA of Act has to be computed in accordance with provision of s. 80HHC and not on basis of book profits. In course of hearing before us, first ground of appeal was not pressed by learned counsel of assessee. Therefore, we are left with issue of computation of deduction under Expln. (viii) only. Controversy has been set out by learned CIT(A) in various sub- paragraphs of para 3 of impugned order. It is mentioned that gross total income of assessee was computed at loss of Rs. 86,98,281. Therefore, in normal computation of income, deduction under s. 80HHC was not claimed by it. However, while coming to computation of income under s. 115JA, assessee deducted amount of Rs. 2,91,725 from book profits as deduction under Expln. (viii) and computed income at Rs. 1,24,139, being 30 per cent of adjusted book profits of Rs. 4,13,796. AO was of view that since gross total income of assessee was loss, it was not entitled to any deduction under s. 80HHC from book profits. However, case of assessee was it was entitled to aforesaid deduction on book profits computed in manner laid down in sub-ss. (3), (3A), (4) and (4A) of s. 80HHC. learned CIT(A) considered various submissions made before him in this regard and came to conclusion that assessee was not entitled to any deduction under s. 80HHC from book profits. Aggrieved by this order, assessee is in appeal before us. learned counsel pointed out that provisions of s. 115J as well as s. 115JA were brought on statute book in order to force companies, which had book profits and declared dividends, to pay tax. Such companies came to be known as "zero tax companies". provisions of s. 115JA were inserted by Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997. Before that similar provisions existed on statute books in form of s. 115J regarding "special provisions relating to certain companies". Those provisions remained in force for asst. yrs. 1988-89 to 1990-91. provisions of s. 115JA did not initially contain cl. (viii) of Explanation below this section. This provision was inserted by Finance Act (1997) w.e.f. 1st April, 1998. intent and purpose of introducing this provision was to grant benefit to even zero tax companies of deduction under s. 80HHC. For sake of convenience, provision contained in this clause of Explanation may be reproduced here. It reads that "the amount of profits eligible for deduction under s. 80HHC, computed under cl. (a), (b) or (c) of sub-s. (3) or sub-s. (3A), as case may be of that section, and subject to conditions specified in sub-ss. (4) and (4A) of that section". case of learned counsel was that s. 115JA is code unto itself and it prescribes method of computation of profits for purpose of levy of what may be termed as minimum alternate tax (MAT). This section contains non obstante clause as it starts with words "notwithstanding anything contained in any other provisions of this Act ". It provides for alternative method for computation of profits in case of assessee-company whose total income computed under this Act is less than 30 per cent of its book profits. In such case, assessee-company will have to prepare its P&L a/c in accordance with provisions of Parts II, III of Sch. VI of Companies Act, 1956. book profits as computed in P&L a/c shall be increased by amounts referred to in cls. (a) to (f) of Explanation below this section. amount so arrived at shall be reduced by amounts mentioned in cls. (i) to (ix) of Explanation. sum so arrived at shall be book profit and 30 per cent thereof shall be deemed to be total income of assessee for purpose of taxation. On basis of these provisions, learned counsel claimed that while computing deduction under s. 80HHC, and while giving effect to provision contained in aforesaid cl. (viii), provisions of ss. 80A(2) and 80B(5) will have no application. In this connection, he referred to Circular Nos. 762 dt. 18th Feb., 1998 [(1998) 145 CTR (St) 5], 763 dt. 18th Feb., 1998 [(1998) 145 CTR (St) 38] and 559, dt. 4th May, 1990 [(1990) 85 CTR (St) 1]. He also referred to decision of Tribunal Hyderabad Bench B in case of Starchik Specialities Ltd. vs. Dy. CIT (2004) 90 TTJ (Hyd) 546: (2004) 90 ITD 34 (Hyd). In particular, our attention was drawn to para 9 of this order, which deals with controversy at hand. We will revert to circulars and decision shortly. As against arguments of learned counsel, learned Departmental Representative relied on orders of AO and learned CIT(A). It was pointed out that under sub-s. (2) of s. 115JA, book profits ascertained in accordance with Parts II and III of Sch. VI of Companies Act, 1956, had to be increased and decreased as stated earlier. In doing so, one has to examine whether assessee is at all entitled to any deduction under cl. (viii). He referred to decision of Hon ble Kerala High Court in case of CIT vs. Fertilizers & Chemicals Travancore Ltd. (2002) 178 CTR (Ker) 461: (2003) 261 ITR 484 (Ker). On basis of this decision, it was argued that AO has to examine first whether assessee was at all entitled to deduction under s. 80HHC. deduction will have to be worked out in accordance with provisions contained in that section. If assessee is not entitled to any deduction under that section, no such deduction can be made under cl. (viii) of Explanation. In this case, gross total income was loss. Therefore, assessee is not at all entitled to deduction under s. 80HHC and, therefore, no deduction can be allowed under cl. (viii) of Explanation to assessee. In rejoinder, learned counsel of assessee pointed out that reference to various sub-sections of s. 80HHC in cl. (viii) of Explanation was only made to prescribe formula for computation of deduction. However, deduction had to be computed with reference to book profits. We have considered facts of case and rival submissions carefully. learned counsel of assessee had relied on Board Circular No. 762, dt. 18th Feb., 1998. In this circular, it is, inter alia, mentioned that since MAT is applicable only where total income computed is less than 30 per cent of book profits, so long as enterprises earning income from export profits do not have their components of export income higher than 70 per cent of book profits, provision of s. 115JA will not be attracted. In other words, MAT will apply only to such cases where export profits forming part of book profits of assessee exceeded 70 per cent of total profits. learned counsel had also relied on Circular No. 763, dt. 18th Feb., 1998. In this circular, it is, inter alia, mentioned that MAT on companies was introduced w.e.f. 1st April, 1997. For this purpose, 30 per cent of book profits was deemed to be income of assessee. Act exempts export profits that are eligible for deduction under s. 80HHC or under s. 80HHE from purview of MAT. It may be pointed out here that cl. (viii) of Explanation was inserted w.e.f. 1st April, 1998. Therefore, these circulars deal with position of law before insertion of aforesaid clause. first circular does not really throw any light on mode and manner of deduction under cl. (viii). It only says that MAT will apply only to such cases where export profits forming part of book profits exceeds 70 per cent of total profits. counsel s case seems to be that circular speaks in terms of "export profits forming part of book profits" and therefore, deduction under aforesaid clause should be based upon book profits. Circular No. 763 merely states that Act exempts export profits that are eligible for deduction under s. 80HHC from purview of MAT. It does not prescribe method of computation of deduction under cl. (viii). It also does not speak of export profits as per books. Therefore, we are of view that both these circulars do not prima facie advance case of assessee. learned counsel also relied on Circular No. 559, dt. 4th May, 1990, which deals with exclusion of exports profits from purview of s. 115J. In this circular, it is inter alia, pointed out that provisions of s. 115J took away 100 per cent exemption which was to be allowed in respect of export profits earned by exporters and thus, watered down encouragement which was to be provided to such foreign exchange earning activities. Since intention was that 100 per cent of such profits should be exempt, it was decided that profits, which are exempt under s. 80HHC should be excluded from purview of s. 115J. It may be pointed out that cl. (iii) was inserted under Explanation to s. 115J by Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1st April, 1989. This clause reads that "the amounts as arrived at after increasing net profits by amounts referred to cls. (a) to (f) and reducing net profit by amounts referred to in cls. (i) and (ii) attributable to business, profits of which are eligible for deduction under s. 80HHC or 80HHD; so, however, that such amounts are computed in manner specified in sub-s. (3) or sub-s. (3A) of s. 80HHC or sub-s. (3) of s. 80HHD, as case may be". This clause very clearly stated that exports profits will have to be deducted from book profits and amount to be deducted shall be computed in manner specified in s. 80HHC. language of this clause was very clear to effect that deduction shall be based upon book profit and mode and method of computation of income shall be in accordance with sub-s. (3) etc. of s. 80HHC. aforesaid clause and Board s circular will become applicable to case of assessee only if language of cl. (ii) in s. 115J is in pari materia with language of cl. (viii) in s. 115JA. language of cl. (viii) has already been reproduced in para 4.1 and it will be seen that languages of two clauses are not in pari materia. words used in s. 115JA are that amount of profits eligible for deduction under s. 80HHC, computed under sub-s. (3) etc. of that section. It does not use language specifically to effect that deduction is to be computed in manner specified in sub-s. (3) of s. 80HHC. Therefore, it does transpire that languages of two provisions are not in pari materia. learned counsel of assessee also relied on decision of Hyderabad Bench B in case of Starchik Specialities Ltd. (supra). In para 8 of this order, it is mentioned that provision contained in cl. (iii) of Explanation to s. 115J was considered by Hon ble Kerala High Court in case of CIT vs. G.T.N. Textiles Ltd. (2000) 164 CTR (Ker) 185. It was pointed out that what has to be reduced from book profits is amount of profit eligible under s. 80HHC, and that deduction has to be computed under sub-s. (3) or sub-s. (3A) of that section. slight differences in expression like words "in manner" used in cl. (iii) and absence thereof in cl. (viii) of s. 115JA does not make any material difference. In case decided by Hon ble Kerala High Court, assessee was engaged in manufacture of goods, most of which were exported out of India. Because of substantial amount of depreciation and investment allowance, assessee did not have taxable income and, therefore, AO made assessment under s. 115J. assessee claimed deduction of export profit in computation of book profits as provided in cl. (iii) of s. 115J on basis of book profits. Hon ble Court pointed out that Tribunal was correct in holding that book profits are to be taken into consideration for purpose of this deduction. Hon ble Tribunal relied on this decision to hold that computation on same basis has to be made under s. 115JA also. It was further pointed out by Hon ble Tribunal that both these sections levy MAT on zero tax companies. Taxes levied on basis of book profits are subject to certain adjustments. These provisions come into operation when computation of income under normal provision is less than 30 per cent of book profits. This requires (i) determination of income under normal provisions, and (ii) determination of book profits subject to some adjustments. These two sums are comparable to find out what will be basis of levy of tax. However, provisions of s. 80A(2) and s. 80B(5) are applicable to first procedure only. They do not come into operation for computation of book profits under s. 115JA. We find that Hon ble Tribunal has held provisions of cl. (iii) of s. 115J and cl. (viii) of s. 115JA are in pari materia on grounds, inter alia, that second procedure stands independent of other provisions of Act. We have already pointed out that there is some distinction in these two provisions. learned Departmental Representative relied on decision of Hon ble Kerala High Court in case of CIT vs. Fertilizers & Chemicals Travancore Ltd. (supra). main question before Hon ble High Court was whether on facts and in circumstances of case, Tribunal was right in holding that with reference to book profit as shown in P&L a/c of company, additions made by AO by way of disallowance of provision for foreseeable loss on contract, provision for bad and doubtful debts and provision for obsolescence, are not in accordance with provisions of s. 115J. It will be seen from question that it is not of any relevance to controversy at hand. However, Hon ble Court stated that "As stated earlier, amounts are added as per provisions of Act mentioned s. 115J of Act. Sec. 115J(1), Expln. (a), mentions only amount of income-tax paid or payable that does not include interest. According to us, provisions in Act have to be strictly construed. Insofar as interest on income-tax is not mentioned in section, according to us, this cannot be added under s. 115J of Act." learned Departmental Representative placed emphasis on observations of Hon ble High Court to effect that provisions of Act to be very strictly construed. This case was decided under s. 115J and provisions of this section are akin to provisions of s. 115JA. Therefore, it does appear that this observation will apply with equal force while interpreting provisions of s. 115JA. In other words, provisions of s. 115JA including provisions of cl. (viii) will have to be construed strictly. Having considered all aforesaid arguments, we are of view that Hon ble Hyderabad B Bench placed somewhat liberal interpretations on aforesaid cl. (viii) of section. Nonetheless, Hon ble Members clearly held that deduction under cl. (viii) has to be computed with respect to book profit. In spite of difference in language of s. 115J and s. 115JA in matter pointed out earlier by us, we are of view that judicial propriety demands that we follow decision in case of Starchik Specialities Ltd. (supra). In view thereof, it is held that deduction under s. 115JA, cl. (viii) of Explanation, is to be computed on basis of book profits. result of aforesaid discussion is that ground No. 1 of appeal is dismissed as not pressed, and ground No. 2 of appeal is allowed. Therefore, appeal Nos. 1268 to 1270/Pune/2004 are partly allowed. ITA No. 1273/Pune/2004, Asst. yr. 2001-02 This appeal arises out order of CIT-III, Pune, passed on 2nd June, 2004, dismissing appeal of assessee, filed against order of Dy. CIT, Circle-I, Solapur, under s. 154 of IT Act on 19th March, 2004. only ground of appeal taken up is that learned CIT(A) erred in upholding order of AO passed under s. 154 of Act rejecting assessee s contention that for purpose of calculating interest under ss. 234B and 234C, tax credit allowed under s. 115JAA of Act has to be set off and reduced from amount of assessed tax in context of Expln. 1 to sub-s. (1) of s. 234B of Act. issue has been discussed by learned CIT(A) in para 2.3 of impugned order. He considered provisions of ss. 115JA, 115JAA, 234B, 234C, 208 and 209 of IT Act. It was pointed out that MAT paid under s. 115JA cannot be considered on par with tax deduction at source, tax collection t source or advance tax. Therefore, credit cannot be deducted from tax payable to arrive at assessed tax, which has been defined in Expln. 1 of s. 234B. In view thereof, contention of appellant to reduce interest under ss. 234B and 234C was rejected. Before us, learned counsel relied on decision of Chennai Tribunal, "C" Bench, in case of Chemplast Sanmar Ltd. vs. Dy. CIT (2004) 83 TTJ (Chennai) 427. In this case, it was, inter alia, held that when assessee is taxed under s. 115JA, then difference between tax on book profits and tax under normal computation is treated as MAT credit and retained by Department. tax credit is to be carried forward and in year when assessee is taxable under normal computation of income-tax, carried forward tax credit is set off against difference between tax payable under normal computation and tax payable on book profits. If tax liability increases or decreases on account of appeal etc., amount of credit set off is also accordingly altered. However, amount of unutilised credit is not to be repaid. No interest is payable by Department till date of adjustment. In view of this, it was held in that case that credit retained by Department for purpose of subsequent set off was in nature of advance tax payment. learned counsel of assessee also relied on decision of Tribunal, Cochin Bench, in case of Synthetic Industrial Chemicals Ltd. vs. Dy. CIT (2004) 85 TTJ (Coch) 162: (2004) 90 ITD 851 (Coch). Hon ble Tribunal pointed out that simple reading of provisions of law makes it clear that assessee has to first work out its advance tax liability on estimate basis and thereafter reduce tax deducted or collected at source and make arrangements for paying balance amount in specified instalments. It can also be seen that benefit of MAT is available to assessee for purpose of carry forward and set off in subsequent years. liability to pay advance tax is linked with liability for payment of assessed tax. It is only when payment of advance tax is lesser than specified limit, question of non-payment of advance tax and question of deferment of advance tax arise. Therefore, it was held that MAT credit carried forward available to assessee goes to reduce assessed tax and thereby as consequence, also reduces liability towards payment of advance tax. It was also pointed that even though MAT credit is not specifically mentioned in Explanation to s. 234B, credit has to be considered while quantifying amount of advance tax payable by assessee during previous year. As against aforesaid argument of learned counsel of assessee, learned Departmental Representative pointed out that instant appeal is not against regular assessment order, but against order under s. 154 of IT Act. intent and purpose of his argument was that under such order, only patent and apparent mistake of fact or law can be rectified and mistake on which there could be two conceivable opinions cannot be rectified. We have considered facts of case and rival submissions. We have also considered decision of Hon ble Tribunal in case of Chemplast and Synthetic Industrial Chemicals (supra). On combined reading of various sections, namely, ss. 115JA, 115JAA, 208, 209, 234B and 234C, Hon ble Tribunal came to conclusion that MAT credit is akin to advance tax because it goes to reduce liability of assessee of year and, accordingly, it reduces liability of assessee by equivalent amount from payment of advance tax. It has been mentioned by Tribunal that MAT credit is not mentioned specifically in Expln. 1 to s. 234B. Therefore, it can be said that issue whether MAT credit is advance tax paid or not is debatable issue and any independent conclusion can be arrived at only after detailed arguments on harmonious construction of aforesaid sections. Even after that, it cannot be said that MAT credit is tax deducted at source, tax collected at source or advance tax paid. Therefore, we are of opinion that question of law on this issue requires considerable debate. If issue requires debate and discussion, it cannot become subject-matter of rectification under s. 154 because under this section only patent and obvious mistake of law can be rectified. In view of this discussion, we are of considered view that learned CIT(A) was right in dismissing appeals of assessee on issue of computation of interest under ss. 234B and 234C. result of this discussion is that appeal of assessee is dismissed. *** SMRUTHI ORGANICS LTD. v. DEPUTY COMMISSIONER OF INCOME TAX