BROOK CROMPTON GREAVES LTD. v. INCOME TAX OFFICER
[Citation -2006-LL-0310-10]

Citation 2006-LL-0310-10
Appellant Name BROOK CROMPTON GREAVES LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 10/03/2006
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags profits and gains of business or profession • cumulative unabsorbed depreciation • income from house property • computing total income • computation of income • minimum alternate tax • power of enhancement • quantum of deduction • adjusted book profit • brought forward loss • denial of exemption • computing deduction • gross total income • export activities • separate business • avoidance of tax • positive income • positive profit • export business • total turnover • payment of tax • actual export • deemed income • export profit • net loss
Bot Summary: The computation of the tax under MAT in view of s. 115JB r/w s. 80HHC is made as under: Book profit before tax as per books Rs. 3,28,11,709 Less: Least of unabsorbed depreciation and unabsorbed business losses Rs. 1,71,28,751 Deduction under s. 80HHC Rs. 1,06,92,643 Rs. 2,78,21,394 Adjusted book profit Rs. 49,90,315 Tax on adjusted book profit Rs. 3,74,273 Aggrieved by this order, the assessee filed appeal before the learned CIT(A), Pune. The question before the Tribunal was regarding determination of book profits under s. 115J and the issue was whether the assessee was entitled to deduct from the book profits the amount attributable to exports under s. 80HHC in a circumstance when deduction under s. 80HHC was denied because of provisions of s. 80A. This section was not of any relevance to decide the question at hand. Of the Explanation under s. 115J, in which it was claimed that the deduction had to be computed in the manner provided in s. 80HHC(3) or s. 80HHC(3A). Of the Explanation below s. 80HHC. Therefore, we are clearly of the view that with reference to provisions of s. 80HHC as also because of overriding provisions of s. 80AB, the assessee is not entitled to any deduction under s. 80HHC, especially in view of the expressed decision of Hon ble Supreme Court in the case of IPCA Laboratories. To s. 115JB while computing book profits under s. 115JB of the Act by holding that the appellant was not entitled to deduction under s. 80HHC at all ignoring the finding of the learned AO that the appellant was entitled to deduction under s. 80HHC of Rs. 1,06,92,643 being 80 per cent of such deduction of Rs. 1,33,65,804. Of Explanation under s. 115JB is the same as the deduction admissible under s. 80HHC and what could have been deducted was 80 per cent of the deduction computed under s. 80HHC, which is nil in this case. Provisions of s. 234B and s. 234C are applicable and thus, there was no merit in the case of the assessee that interest under these sections cannot be charged on the liability under s. 115JB. Ground No. 6, being residuary in nature, does not require any decision from us.


K.G. Bansal, A.M.: This appeal of assessee arises out of order of CIT(A)-I, Pune, passed on 30th Dec., 2004. corresponding order of assessment was passed by ITO, Ward-1, Ahmednagar (hereinafter called AO), under provisions of s. 143(3) of IT Act, 1961, on 28th Jan., 2004. assessee has taken up five grounds of appeal. Ground No. 5 is against charging of interest under ss. 234B and 234C in respect of tax payable by assessee under s. 115JB of Act. This ground was withdrawn in course of hearing by learned counsel of assessee. Before dealing with other grounds of appeal, we may record in brief contents of orders of AO and learned CIT(A). assessee had filed its return of income on 25th Oct., 2001, declaring total income of Rs. 2,07,675. AO computed income of assessee at Rs. 2,07,675. He also computed book profits under s. 115JB of Act at Rs. 23,17,154. While doing so, he, inter alia, reduced from book profits amount of Rs. 1,06,92,643, representing 80 per cent of profits derived from exports business, as against claim of assessee of Rs. 1,33,65,804. In this connection, AO mentioned in para 9 of his order that for asst. yr. 2001-02, only 80 per cent of export profits was eligible for deduction under s. 80HHC(1) r/w s. 80HHC(1B). For sake of ready reference, para 9 of his order is reproduced below: "9. In view of above, it is clear that assessee s claim of deduction under s. 80HHC in its working given above in para 3 above is excess by 20 per cent and same is not acceptable. assessee is entitled for deduction only to extent of 80 per cent of profit derived from export business. computation of tax under MAT in view of s. 115JB r/w s. 80HHC is made as under: Book profit before tax as per books Rs. 3,28,11,709 Less: Least of unabsorbed depreciation and unabsorbed business losses Rs. 1,71,28,751 Deduction under s. 80HHC Rs. 1,06,92,643 Rs. 2,78,21,394 Adjusted book profit Rs. 49,90,315 Tax on adjusted book profit Rs. 3,74,273" Aggrieved by this order, assessee filed appeal before learned CIT(A), Pune. learned CIT(A) was of view that AO was right in applying provisions of s. 80HHC(1B) while deducting amount of profits eligible for deduction under s. 80HHC under cl. (iv) of Explanation to s. 115JB. He was also of view that deduction under aforesaid clause has to be made in accordance with provisions of s. 80HHC. assessee had unabsorbed depreciation and carried forward business losses whose aggregate was more than gross total income of assessee for relevant previous year. He referred to decision of Hon ble Supreme Court in case of IPCA Laboratories Ltd. vs. Dy. CIT (2004) 187 CTR (SC) 513: (2004) 266 ITR 521 (SC), in which it was, inter alia, held that deduction under s. 80HHC is also controlled by provisions contained in ss. 80A and 80AB. In view thereof, he came to conclusion that assessee was not entitled to any deduction under s. 80HHC in computation of its income under other provisions of Act. For sake of ready reference, para 2.3 of his order, dealing with this issue, is reproduced below: "2.3 I have considered submissions of appellant and facts of case. As far as normal computation of income is concerned, appellant is entitled to allowance under s. 80HHC of IT Act, 1961 only if gross total income of appellant is positive figure. There is no dispute that current year s income would be wiped off by setting off of carry forward business losses/unabsorbed depreciation of earlier years. appellant therefore before claiming allowance under s. 80HHC of IT Act, 1961 in normal computation of income should have first of all given effect to set off of carry forward business losses/unabsorbed depreciation of earlier years and then if there was positive income was entitled to claim deduction under s. 80HHC of IT Act, 1961. appellant has objected to proposed enhancement stating that powers of enhancement are not in substitution of provisions of reassessment and could not be so utilized in manner that such enhancement proceedings result in overriding or bypassing definite provisions of reassessment. This is absurd proposition. powers and functions of CIT(A) are quite wide and have not been restricted to decide appeal only in favour of appellant. If there are mistakes committed by AO, then it is incumbent rather duty assigned to CIT(A) to rectify such mistakes. As per provisions of IT Act, 1961 and judicial pronouncements of Hon ble Supreme Court in case of IPCA Laboratories Ltd. vs. Dy. CIT (2004) 187 CTR (SC) 513: (2004) 266 ITR 521 (SC), deduction allowable under s. 80HHC cannot be granted overriding provisions of ss. 80A and 80AB of IT Act,1961. In case under consideration, gross total income of appellant would be computed after applying all provisions of Act leading upto Chapter VI-A and this includes provisions mentioned in ss. 71 and 72 of IT Act, 1961. May be carry forward losses would not affect determination of quantum of allowance under s. 80HHC of IT Act, 1961, but allowability of deduction under s. 80HHC would only arise if there is positive income after effect to set off of carry forward business losses or unabsorbed depreciation is given to income of particular assessment year. In year under consideration, it is admitted position that profits in this year would be wiped off by setting off of carry forward business losses and hence there would be no question of any allowance of deduction under s. 80HHC of IT Act, 1961. AO by accepting results declared by appellant had in effect allowed deduction under s. 80HHC of IT Act, 1961 which was not permissible and in process AO did not disturb claim of carry forward business losses/unabsorbed depreciation of appellant. Having failed to apply correct provisions of law, it was considered necessary that mistakes committed in assessment order be rectified which would result in enhancement of income and accordingly appellant was given opportunity of stating its objection. Having considered objections and finding no merits therein, I direct AO to withdraw allowance granted under s. 80HHC of IT Act, 1961 in normal computation of income and rework out total income by taking into consideration carry forward business losses/unabsorbed depreciation of earlier years." Coming to computation of payment of tax by certain companies under s . 115JB, he referred to provisions contained in aforesaid cl. (iv) of Explanation under this section. He was of view that deduction under this clause has to be made as per provisions of s. 80HHC. In view thereof, he upheld decision of AO that only 80 per cent of amount of export profits, computed in accordance with s. 80HHC, can be deducted under aforesaid clause from book profits. Since amount deductible under s. 80HHC was nil, he came to conclusion that no deduction was admissible to t h e assessee under aforesaid cl. (iv). Accordingly, he worked out adjusted book profits at Rs. 1,56,82,958. calculation made by him is reproduced below: "Book profits before tax as per books Rs. 3,28,11,709 Less: Least of unabsorbed depreciation and unabsorbed business losses (as per books) Rs. 1,71,28,751 Adjusted book profits Rs. 1,56,82,958 Aggrieved by order of learned CIT(A) regarding enhancement of adjusted book profits and denial of exemption under s. 80HHC under other provisions of Act, assessee filed appeal before Tribunal. Ground Nos. 1 and 2 of appeal are in relation to denial of exemption under s. 80HHC in computing income of assessee. Ground Nos. 3 and 4 are regarding enhancement of adjusted book profits by holding, inter alia, that-(i) only 80 per cent of amount computed in accordance with provisions of s. 80HHC is deductible under aforesaid cl. (iv), and (ii) computation of deduction under cl. (iv) has to be made under s. 80HHC and not with reference to book profits. Before us, learned counsel of assessee pointed out that assessee is primarily engaged in export business and such export constituted about 98.8 per cent of its total turnover. Therefore, assessee was entitled to deduction under s. 80HHC. Such deduction was claimed in computing total income as well as adjusted book profits. However, AO was of view that only 80 per cent of eligible profits were to be allowed while computing adjusted book profits. learned CIT(A) came to conclusion that carried forward losses and unabsorbed depreciation exceeded gross total income of assessee. Therefore, assessee was not entitled to any deduction under s. 80HHC in view of provisions contained in ss. 80A and 80AB. He was also of view that provisions of cl. (iv) permitted deduction of only that amount from book profits as computed under s. 80HHC. Therefore, he came to conclusion that no amount was deductible under aforesaid cl. (iv). He referred to pp. 50 and 51 of paper book filed by assessee, in which deduction under s. 80HHC for this year was computed at Rs. 1,06,92,643, which was duly certified by Sharp Tanan, chartered accountants, on 17th Oct., 2001. It was pointed out by learned counsel that unabsorbed depreciation amounted to about Rs. 7.16 crore, and thus, it was fairly conceded that gross total income of assessee was lesser in amount than aggregate of carried forward losses and unabsorbed depreciation. Coming to legal issues, case of learned counsel was that it was entitled to deduction under cl. (iv) of full amount of admissible deduction under s. 80HHC, as claimed by assessee. In this connection, reliance was placed on decision of Hon ble Kerala High Court in case of CIT vs. GTN Textiles Ltd. (2000) 164 CTR (Ker) 185: (2001) 248 ITR 372 (Ker), case decided under s. 115J of Act. decision of Hon ble Court, material for our discussion, is that Tribunal was correct in interpreting that under s. 115J(1A)(iii) of Act, book profit will be taken into consideration as per books of account and not income calculated under other provisions of Act. In other words, it was to be computed in manner provided in sub-s. (3) of s. 80HHC but with reference to book profits and not income computed under Act. learned counsel also relied on decision of Tribunal, Mumbai "E" Bench, in case of Dy. CIT vs. Govind Rubber (P) Ltd. (2004) 82 TTJ (Mum) 615, case decided under s. 115J. In this order, decision of Hon ble Kerala High Court in aforesaid case of GTN Textiles Ltd. (supra), was referred to and that decision was followed for purpose of computing deduction under s. 115J(1A)(iii). case of IPCA Laboratories Ltd. (supra), decided by Hon ble Supreme Court and Bombay High Court s Synco Industries Ltd. vs. AO & Ors. (2002) 173 CTR (Bom) 1: (2002) 254 ITR 608 (Bom) and IPCA Laboratories Ltd. vs. Dy. CIT (2001) 170 CTR (Bom) 568, were also considered in that decision. In that case, Hon ble Bombay High Court had laid down that disclaiming export benefits in favour of supporting manufacturers can be done only when there is profit. assessee had shown net loss from export of goods. Under these circumstances, Hon ble Court held that net result should be profits for computation of claiming deduction under s. 80HHC. As profit was nil, therefore, there was no question of allowing deduction under s. 80HHC. However, Hon ble Tribunal further mentioned that we are unable to understand how this case is relevant to issue under consideration. question before Tribunal was regarding determination of book profits under s. 115J and issue was whether assessee was entitled to deduct from book profits amount attributable to exports under s. 80HHC in circumstance when deduction under s. 80HHC was denied because of provisions of s. 80A. This section was not of any relevance to decide question at hand. learned counsel also relied on decision of Hon ble Tribunal, Hyderabad "B" Bench, in case of Starchik Specialities Ltd. vs. Dy. CIT (2004) 90 TTJ (Hyd) 546: (2004) 90 ITD 34 (Hyd). burden of this decision is that 90 TTJ (Hyd) 546: (2004) 90 ITD 34 (Hyd). burden of this decision is that provisions of s. 80A(2) are not applicable for working out deduction under s. 80HHC, eligible for reduction to arrive at adjusted book profits under s. 115JA. learned counsel relied on decision of Hon ble Tribunal, Delhi "A" Bench, in case of ITO vs. Selchem Engineers (P) Ltd. (2004) 84 TTJ (Del) 101. question before Hon ble Tribunal was whether in view of amendment in s. 32 by Finance (No. 2) Act, 1996, w.e.f. 1st April, 1997, unabsorbed depreciation of earlier years could be allowed to be set off against income from house property for asst. yr. 1997-98. Hon ble Tribunal took recourse to Budget Speech of Finance Minister while moving Finance Bill and Board Circular No. 762, dt. 18th Feb., 1998 [(1998) 145 CTR (St) 5], intent of which was that amendment will have effect that cumulative unabsorbed depreciation brought forward as on 1st April, 1997 could be set off against income under any other head in asst. yr. 1997-98 and seven subsequent years, while depreciation for asst. yr. 1997-98, remaining unabsorbed, will be governed by amended provisions. learned counsel relied on Circular No. 559, dt. 4th May, 1990 [(1990) 85 CTR (St.) 1], being explanatory notes on provisions of Direct Tax Law (Amendment) Act, 1989. In regard to deduction under s. 80HHC, it was, inter alia, mentioned that under old provisions of s. 115J, it was provided that where total income of assessee in respect of any previous year, computed under this Act, was less than 30 per cent of book profits , total income chargeable for previous year shall be taken to be 30 per cent of such book profits . This provision took away 100 per cent exemption which was to be allowed in respect of export profits. Since intention was that 100 per cent profit should be exempt, it was decided that profits, which were exempt under s. 80HHC, should be excluded from purview of s. 115J. With view to obtain this objective, cl. (iii) was inserted in Explanation so as to exclude from book profits, profits derived from export of goods, which are eligible for deduction under s. 80HHC. learned counsel also relied on Circular No. 680, dt. 21st Feb., 1994 [(1994) 117 CTR (St.) 215], which deals with cl. (iii) of Explanation under s. 115J, in which it was claimed that deduction had to be computed in manner provided in s. 80HHC(3) or s. 80HHC(3A). learned counsel also relied on Circular No. 794, dt. 9th Aug., 2000 [(2000) 162 CTR (St.) 9], being explanatory notes on provisions relating to Direct Tax Acts in Finance Act, 2000. This circular explains provisions of s. 115JA in para 43. In para 43.5, it is, inter alia, mentioned that export profits under s. 80HHC are kept out of purview of this provision as these are being phased out. learned counsel also relied on memorandum explaining provisions in Finance Bill, 2000, in which sunset clause was introduced in provisions of MAT, so that they were not applicable to assessment years after asst. yr. 2000- 01. It was pointed out that company shall be liable to pay Minimum Alternate Tax at lower rate of 7.5 per cent against existing rate of 10.5 per cent of book profits. It was further pointed out that export profits under s. 80HHC, etc. are kept outside purview of this provision during period of phasing out of deduction available under provision. learned counsel also referred to Finance Minister s Speech. In para 169, it was stated that exporters would continue to enjoy exemption from MAT till it is fully phased out. It was also case of learned counsel that if there was any doubt in interpretation of provisions of aforesaid cl. (iv), benefit of doubt should go to assessee. It was sought to be argued that decision of Hon ble Bombay High Court in case of IPCA Laboratories (supra) was considered by Hon ble Tribunal, wherein it was pointed out that provisions of s. 80A are applicable only when there is no loss from export activities. If that is not case, then, deduction under s. 80HHC has to be computed on basis that export activities constitute separate business and only such losses, etc. can be considered as are attributable to export business. It was also argued that s. 115JB is complete code unto itself and it also contains provisions which are in nature of charging provisions. Therefore, these provisions are to be strictly construed. It was also argued that learned CIT(A) did not have any power to enhance income and for this purpose he relied on decision of Hon ble Supreme Court in case of CIT vs. Manmohan Das (1966) 59 ITR 699 (SC). We find that decision is to effect that when loss in any year is carried forward to following year and is to be set off against profits and gains of subsequent year under s. 24(2) of 1922 Act, it is ITO who deals with assessment of subsequent year who has to decide matter. decision recorded by ITO who computed loss in previous year that loss cannot be set off against income of subsequent year, is not binding on assessee. As against aforesaid, learned Departmental Representative pointed out that issues of allowance of deduction under s. 80HHC as well as deduction under aforesaid cl. (iv) were before AO. Therefore, learned CIT(A) could examine both these issues. If upon examination, learned CIT(A) came to conclusion that deduction under one or both sections was excessive, he could withdraw same in full or in part and thereby enhance income. It was further pointed out that provisions of ss. 115J and 115JA, on one hand, and s. 115JB, on other hand, insofar as we are concerned, are materially different. Therefore, decisions of Tribunal or Courts given under s. 115J and s. 115JA will not be applicable to provisions contained in s. 115JB. In this connection, he referred to decision of Hon ble Supreme Court in case of CIT vs. Vadilal Lallubhai and CIT vs. Sakarlal Balabhai (1972) CTR (SC) 321: (1972) 86 ITR 2 (SC). Hon ble Court pointed out that in order to find out legislative intent, we have to find out what was mischief that legislature wanted to remedy. Act was extensively amended in year 1939. Sec. 44F was not there in draft Bill. That section was recommended by select committee consisting of very eminent lawyers. It will not be inappropriate to find out reasons which persuaded select committee to recommend inclusion of s. 44F if section is considered as ambiguous. In this connection, Hon ble Court referred to decision in case of CIT vs. Sodra Devi (1957) 32 ITR 615 (SC). It was further pointed out that ss. 44E and 44F were designed to prevent avoidance of tax by "bond washing transactions". Sec. 45 was more or less reproduction of s. 33 of English Finance Act, 1927. intent of s. 44F can also be found from marginal note which reads "avoidance of tax by sale-cum-dividend". Based upon this decision, case of learned Departmental Representative was that intent of legislature has to be found out by comparative reading of cl. (iv) of s. 115JB and cl. (iii) of s. 115J. learned Departmental Representative also referred to decision of Hon ble Supreme Court in case of IPCA Laboratories vs. Dy. CIT (supra). There were two limbs of judgment. first limb dealt with deduction under s. There were two limbs of judgment. first limb dealt with deduction under s. 80HHC and Hon ble Court pointed out that in arriving at profits earned from exports of manufactured goods and trading goods, profit and loss in both trades will have to be taken into consideration. If after such inter se set off, there is positive profit, only then assessee is entitled to deduction under s. 80HHC(1). If there is loss, assessee would not be entitled to any deduction. second limb deals with provisions of s. 80AB, on one hand, and s. 80HHC, on other. Hon ble Court held that provisions of s. 80AB have overriding effect over all other sections in Chapter VI-A. Sec. 80HHC nowhere provides that its provision shall prevail over provisions of s. 80AB or over any other provision of Act. Therefore, case of learned Departmental Representative was that learned CIT(A) has correctly interpreted provisions contained in Expln. (iv) to s. 115JB as also provisions contained in s. 80HHC. We have considered facts of case and rival submissions. Insofar as controversy regarding s. 115JB is concerned, it is substantive in nature for this year inasmuch as interpretation placed by AO and learned CIT(A) on cl. (iv) of Explanation enhances tax liability of assessee. Therefore, we proceed to deal with this controversy in first place. Broadly speaking, s. 115JB provides for ascertainment of adjusted book profits. exercise starts from ascertainment of profits from P&L a/c prepared in accordance with provisions of Parts II and III of Sch. VI to Companies Act, 1956. There is no dispute about profit in this case. Thereafter, adjusted book profits are to be found by increasing net profits by items mentioned in cls. (a) to (f) of Explanation. sum so arrived at has to be reduced by items mentioned in cls. (i) to (vii) of Explanation to s. 115JB. Clause (iv) of this section reads as under: (iv) amount of profits eligible for deduction under s. 80HHC, computed under cl. (a) or cl. (b) or cl. (c) of sub-s. (3) or sub-s. (3A), as case may be, of that section, and subject to conditions specified in that section; At this juncture, it may also be appropriate to reproduce provisions of cl. (iii) of Explanation to s. 115J, frequently referred to by learned counsel of assessee. provision reads as under: (iii) amounts as arrived at after increasing net profit by amounts referred to in cls. (a) to (f) and reducing net profit by amounts referred to in cls. (i) and (ii) attributable to business, profits from which are eligible for deduction under s. 80HHC or s. 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; Clause (iii) of s. 115J states that profits which are eligible for deduction under s. 80HHC shall be reduced from net profit so, however, that such amount is computed in manner specified in sub-s. (3) or sub-s. (3A) of s. 80HHC. This clause does not state that deduction will be equivalent to deduction computed in sub-s. (3) or sub-s. (3A) of s. 80HHC, but that it shall be computed in manner provided in those sections. This peculiar language led to interpretation that this clause provides ratio of book profit to be same as mentioned in sub-s. (3) or sub-s. (3A), but profits of business contemplated in s. 80HHC shall be replaced by book profits while computing deduction under this clause. On other hand, cl. (iv) of s. 115JB is quite different when it states that amount to be deducted under this clause shall be amount of profits eligible for deduction under s. 80HHC and computed under cl. (a) or cl. (b) or cl. (c) of sub-s. (3) or sub-s. (3A) of that section and subject to conditions specified in that section. language of this clause is quite different from language of cl. (iii) of s. 115J. clause is also clear in its content in two respects, namely, that (i) only such amounts as are deductible under s. 80HHC shall be reduced, and (ii) conditions specified in that section shall be applicable. Coming to provisions of sub-s. (1) and sub-s. (1B) of s. 80HHC, it is clear that only 80 per cent of normal deduction under s. 80HHC is admissible for asst. yr. 2001-02. As only that amount which is eligible for deduction under s. 80HHC is to be reduced under aforesaid cl. (iv), thus, it is quite clear that as per statutory language, only 80 per cent of amount mentioned in sub-s. (1) can be deducted for this year. Therefore, we are of view that action of AO in restricting deduction to 80 per cent of amount deductible under s. 80HHC(1) was right on basis of clear language of statute. second issue in this case is whether learned CIT(A) could enhance book profits as well as total income of assessee. We find that matters regarding computation of book profits and computation of total income were before AO and relevant documents, etc. were also there before AO. Sec. 251(1)(a), dealing with powers of CIT(A), provides that in disposing of appeal, he may confirm, reduce, enhance or annul assessment. Thus, power of enhancement has been vested in CIT(A) in disposal of appeal. learned counsel did not refer to any decision or authority or any special circumstance in his case which mitigated against power of learned CIT(A) to enhance assessment. Accordingly, we are of view that learned CIT(A) could have enhanced assessment. In regard to enhancement of book profits, case of learned counsel was that since it was engaged mainly in export business, whole of export profits should have been deducted under cl. (iv). As against that, case o f learned Departmental Representative was that assessee was exporting goods as well as trading in Indian market. Therefore, deduction under aforesaid cl. (iv) had to be made of same amount which was deductible under s. 80HHC, and all provisions of that section will apply with full force. learned counsel had relied on decision of Hon ble Kerala High Court reported at (2000) 164 CTR (Ker) 185: (2001) 248 ITR 372 (Ker) (supra). judgment in that case was given in context of provisions of s. 115J. W e have seen that language of that section and s. 115JB are materially different. Therefore, ratio of that and other cases decided by Tribunal under s. 115J or s. 115JA will not be applicable while interpreting cl. (iv) of Explanation to s. 115JB. learned counsel also referred to various circulars of Board to canvass its case that export profits are outside purview of MAT. In first place, these circulars were issued in context of ss. 115J or 115JA. That point apart, circulars never stated that export profits shall be excluded from book profits without having regard to various provisions of s. 80HHC. Circular No. 559 clearly mentions that cl. (iii) has been inserted in Explanation to provide that for purpose of computation of "book profits", net profit shall be reduced by amount of net profits derived from export business, which are be reduced by amount of net profits derived from export business, which are eligible for deduction under s. 80HHC. It appears that learned counsel wants us to ignore words "which are eligible for deduction under s. 80HHC" in circular. Circular No. 680 is also worded in same manner. Circular No. 794 also states that export profits under s. 80HHC are kept out of purview of provisions. Therefore, what is kept out of purview is not export profits per se but export profits computed under s. 80HHC. We may also refer to Budget Speech of Finance Minister, which primarily deals with issue of phasing out deduction under s. 80HHC. It is also mentioned that exporters would continue to enjoy exemption from MAT. This sentence has to be seen in context of provisions of s. 115JB and not in isolation as words are not words of statute. If we take this factor into account, it is no doubt true that 100 per cent exporters would be outside purview of MAT, but in case of mixed sales, that is, where sales are by way of exports as well as inland sales, persons cannot be said to be exporters only and, therefore, question of applicability of provisions of s. 80HHC(3) will come into operation by dint of language of cl. (iv). It is also accepted proposition that aid in construction of statutes is required only when language of statute is unclear or ambiguous. When language is clear, there is no reason to invoke any aid for reason that no such aid is required for arriving at true meaning of statute. We are of view that provisions of cl. (iv) are quite clear and can be distinguished from provisions of cl. (iii) of Explanation to ss. 115J or 115JA. instant clause clearly provides that what is to be reduced is amount of profits eligible for deduction under s. 80HHC, computed under sub-s. (3) or sub-s. (3A), as case may be, and subject to conditions specified in that sub-sections. As pointed out earlier, it is clear that preconditions for grant of deduction as well as mode and method of computing deduction under cl. (iv) are same as mentioned in s. 80HHC. Therefore, question to be seen now is whether learned CIT(A) was right in computing deduction under s. 80HHC at nil. learned CIT(A) mentioned that as per decision of Hon ble Supreme Court in case of IPCA Laboratories (supra), s. 80AB has been given overriding effect over all other sections in Chapter VI-A. Sec. 80HHC does not anywhere provides that provisions of this section are to prevail over s. 80AB. As gross total income of assessee is nil, no deduction under s. 80AB can be allowed. As against aforesaid, case of learned counsel was that s. 80AB speaks about inclusion of certain incomes in gross total income. gross total income of assessee included income eligible for deduction under s. 80HHC. Therefore, his case was that assessee was eligible for deduction under s. 80HHC. His alternative argument was that only so much of unabsorbed depreciation and brought forward losses can be set off for purpose of computing gross total income as are attributable to export activities. Therefore, it was contended that assessee was entitled to deduction under s. 80HHC on first premise or, in alternative, on second premise. We have considered facts of case and submissions made before us. assessee has been exporting goods and also selling goods in inland market. Therefore, provisions of sub-s. (3) are applicable to facts of case. In cl. (ba) of Explanation below s. 80HHC, profits of business have been defined to mean profits of business as computed under head Profits and gains of business or profession as reduced by certain amounts. Therefore, in case of assessee, profits of business will have to be calculated under ss. 28 to 44DA. Sec. 32 is part and parcel of Chapter IV-D regarding profits and gains of business or profession . Sec. 32 provides that unabsorbed depreciation brought forward from earlier years will be taken to be depreciation of current year. Therefore, unabsorbed depreciation and current depreciation will have to be deducted in computing profits and gains of business. In other words, such deductions will have to be made for computing profits of business also. We have already seen if only that is done, income of assessee under Chapter IV-D becomes nil. In this context, we may also examine provisions of s. 80AB, which read as under: "Where any deduction is required to be made or allowed under any section included in this chapter under heading C. Deductions in respect of certain incomes in respect of any income of nature specified in that section which is included in gross total income of assessee, then, notwithstanding anything contained in that section, for purpose of computing deduction under that section, amount of income of that nature as computed in accordance with provisions of this Act (before making any deduction under accordance with provisions of this Act (before making any deduction under this chapter) shall alone be deemed to be amount of income of that nature which is derived or received by assessee and which is included in his gross total income." Assuming that arguments of assessee to effect that we have to find out income of specie referred to in s. 80HHC, which has been included in gross total income, one thing is clear that gross total income is nil. In nullset, we cannot see anything which could be said to be income of particular nature. To put it figuratively, empty box cannot be said to be containing anything. Therefore, in instant case, it cannot be said that any income from exports of goods or merchandize is included in nil gross total income of assessee. argument of assessee that only that portion of unabsorbed depreciation or brought forward loss can be set off while computing gross total income for purpose of finding out export income included therein seems to be based upon premise that s. 80HHC enjoins upon authorities to make two sets of calculations, one regarding export income and other regarding inland income from year to year. Such premise is not validated by provisions of s. 80HHC, particularly when we see definitions of total turnover and profits of business as furnished in cls. (ba) and (baa) of Explanation below s. 80HHC. Therefore, we are clearly of view that with reference to provisions of s. 80HHC as also because of overriding provisions of s. 80AB, assessee is not entitled to any deduction under s. 80HHC, especially in view of expressed decision of Hon ble Supreme Court in case of IPCA Laboratories (supra). For this very reason, we uphold decision of learned CIT(A) that unabsorbed depreciation and brought forward losses, to extent absorbed in profits of this year to arrive at gross total income, cannot be carried forward. In light of aforesaid discussion, various grounds of appeal are decided as under: (1) Ground No. 1 reads as under: (a) learned CIT(A) erred in law and on facts in initiating enhancement proceedings in case of appellant and further erred in (i) recomputing total income (ii) denying deduction under s. 80HHC altogether and (iii) enhancing book profit of appellant assessed under s. 143(3). (b) Your appellant submits that: (i) enhancement proceedings were not possible in respect of computation of total income for year under consideration inasmuch as that t h e computation of total income or deduction under s. 80HHC were not subject-matter of appeal. (ii) learned AO had computed total income of assessee under normal provisions of Act correctly after application of mind and prevalent law and judicial pronouncements. (iii) appellant before CIT(A) was for computation of book profit only and not for computation of deduction under s. 80HHC nor for total income. (c) Your appellant prays that order passed by initiating enhancement proceedings be quashed. This ground is dismissed and we may only add at this juncture that powers of learned CIT(A) are co-terminus with powers of AO and, therefore, on facts and in circumstances of case, he was competent to examine all matters which AO could have examined. (2) Ground No. 2 reads as under: (a) learned CIT(A) erred in law and in facts in denying deduction under s. 80HHC of Act by reducing export profit for year by amount of brought forward unabsorbed depreciation/unabsorbed losses and holding that appellant did not have any export profit thereafter. (b) Your appellant submits that deduction under s. 80HHC is to be computed in respect of export profits of current year without reducing same by unabsorbed depreciation/unabsorbed losses. (c) Your appellant prays that deduction under s. 80HHC be allowed in full at Rs. 1,06,92,643 as claimed by appellant in computing total income under regular provisions of IT Act. This ground is dismissed in view of discussion in body of this order. (3) Ground No. 3 reads as under: (a) learned CIT(A) further erred in law and on facts in not allowing deduction of Rs. 1,33,65,804 on account of profits eligible for deduction under s. 80HHC as per Expln. (iv) to s. 115JB while computing book profits under s. 115JB of Act by holding that appellant was not entitled to deduction under s. 80HHC at all ignoring finding of learned AO that appellant was entitled to deduction under s. 80HHC of Rs. 1,06,92,643 being 80 per cent of such deduction of Rs. 1,33,65,804. (b) Your appellant submits that: (i) Book profit is to be computed strictly in accordance with provisions of s. 115JB. (ii) Under Expln. (iv) to s. 115JB, export profits eligible for deduction under s. 80HHC of Act are to be excluded in computation of book profit. (iii) appellant had profits of Rs. 1,33,65,804 eligible for deduction under s. 80HHC of Act and same was to be excluded under said Explanation while computing book profits. (c) Your appellant prays that amount of Rs. 1,33,65,804 representing profits eligible for deduction under s. 80HHC be allowed and deduction under Expln. (iv) to s. 115JB. Alternatively, without prejudice to claim for relief, deduction under s. 80HHC be computed on basis of net profit as per books of account and not as per income determined under head "Profits and gains of business" which net profit cannot be reduced by unabsorbed depreciation under IT Act. This ground is also dismissed. We may add at this juncture that provisions of cl. (iv) of Explanation to s. 115JB are quite distinct from provisions of cl. (iii) of s. 115J. Under new provisions, amount deductible under cl. (iv) is same as amount deductible under s. 80HHC. (4) Ground No. 4 reads as under: (a) learned CIT(A) erred in law and on facts in not dealing with appeal against action of learned AO in increasing book profit as computed by appellant by amount of Rs. 26,73,161 by holding that deduction adjustment permissible under cl. (iv) of Explanation to s. 115JB of export profit from book profit was to be allowed at Rs. 1,06,92,643 instead of Rs. 1,33,65,804 as claimed by your appellant. (b) Your appellant submits that: (i) eligible export profits for purposes of deduction permissible under s. 115JB r/w cl. (iv) of Explanation to said section is actual export profit and not deduction eligible under s. 80HHC. (ii) quantum of deduction by virtue of s. 80HHC(1B) is 80 per cent of t h e export profit for asst. yr. 2001-02. This has effect of reducing quantum of deduction under s. 80HHC but not export profits eligible for deduction under s. 115JB. (c) Your appellant prays that deduction/adjustment of Rs. 1,33,65,804 o n account of export profit as claimed by your appellant as per cl. (iv) of Explanation to s. 115JB. This ground is also dismissed. It may be added at this juncture that deduction under cl. (iv) of Explanation under s. 115JB is same as deduction admissible under s. 80HHC and, therefore, what could have been deducted was 80 per cent of deduction computed under s. 80HHC, which is nil in this case. (5) Ground No. 5 reads as under: (a) learned CIT(A) erred in law and on facts in confirming act of learned AO in levying interest under ss. 234B, 234C and 234D on payment of income-tax in pursuance of provisions of s. 115JB on book profit and further erred in levying interest without giving any opportunity of hearing and without passing speaking order. (b) Your appellant submits that interest under ss. 234B and 234C cannot b e levied on taxes payable on deemed income under s. 115JB. Your appellant further submits that Karnataka High Court in case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316: (2000) 243 ITR 519 (Kar) had held that no interest under said sections could be levied where tax was payable on book profit and in any case it had paid taxes as per provisions of IT Act. (c) Your appellant prays that said interest be deleted. This ground is dismissed as withdrawn. It may be added at this juncture that provisions of s. 115JB provide that all other provisions of this Act apply save as otherwise provided in this section. Therefore, provisions of s. 234B and s. 234C are applicable and thus, there was no merit in case of assessee that interest under these sections cannot be charged on liability under s. 115JB. (6) Ground No. 6, being residuary in nature, does not require any decision from us. In result, appeal of assessee is dismissed. *** BROOK CROMPTON GREAVES LTD. v. INCOME TAX OFFICER
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