This appeal by assessee is preferred against order of CIT(A) on various grounds which are as under: "Confirming determination of income of Rs. 4,38,762 being 30 per cent of book profit of Rs. 14,62,541 under s. 115JA learned CIT(A) erred in confirming income under s. 115JA of Rs. 4,38,762 being 30 per cent of book profit of Rs. 14,62,541 and thereby tax liability is worked out to Rs. 2,13,875. learned CIT(A) has accepted fact that appellant company is in business of manufacturing of pharmaceutical products and has set-up industrial unit in Backward Industrial Zone at Ponda, Goa and commenced production on 17th March, 1998 and that undertaking is eligible for deduction under s. 80-IA. learned CIT(A) failed to appreciate fact that: (i) As per provisions of s. 115JA appellants book profit is worked out at nil; (ii) For determining book profit as per s. 115JA(2) AO has to reduce profit of industrial undertaking to whom provisions of s. 80-IA are applicable. learned CIT(A) erred in drawing conclusion that for purposes of s. 115JA deduction eligible from book profits is deduction eligible under s. 80-IA and not profits as per books of account of eligible unit under s. 80-IA. learned CIT(A) ought not to have confirmed determination of tax liability of Rs. 2,13,875 on Rs. 4,38,762 being 30 per cent of book profit of Rs. 14,62,541. confirmation of determination of income under s. 115JA of Rs. 4,38,762 requires to be deleted. appellant craves leave to add, amend, alter or modify ground or grounds of appeal." Though assessee has raised various grounds of appeal, but, all grounds relate to issue, i.e., what would be amount to be reduced from net profit as shown in P&L a/c for relevant, previous year prepared in accordance with provisions of parts II and III of Sch. VI of Companies Act as per cl. v of Explanation below s. 115JA(2) of Act in order to compute book profit for purpose of s. 115JA of IT Act. facts borne out from record are that AO did not allow any amount of deduction of s. 80-IA for computing book profit for purpose of s . 115JA on ground that admissible deduction under s. 80-IA was nil. assessee preferred appeal before CIT(A) and placed reliance upon judgment of Kerala High Court in case of CIT vs. G.T.N. Textiles Ltd. (2000) 164 CTR (Ker) 185: (2001) 248 ITR 372 (Ker) and also order of Tribunal in case of Royal Cushion Vinyl Products Ltd. vs. Dy. CIT (1993) 47 ITD 111 (Bom), but CIT(A) was not convinced with arguments of assessee and has observed that both these judgments were rendered with respect to provision of s. 115J of Act vis-a-vis provision of s. 80HHC of Act and he accordingly confirmed disallowance. Now assessee has preferred appeal before Tribunal and placed heavy reliance upon order of Special Bench of Tribunal in case of Dy. CIT vs. Syncome Formulations (I) Ltd. in (ITA No. 2711/Mum/2003) in which it has been held that deduction under s. 80HHC in MAT scheme is from taxable income which is otherwise, adjusted book profit. deduction under s. 80HHC in case of MAT is to be computed on basis of adjusted book profit and not on basis of profit computed under regular provision of law applicable to computation of profits and gains of business or profession. learned Departmental Representative on other hand has invited our attention that order of Special Bench was rendered on s. 115JA with reference to s. 80HHC and no discussion was made with regard to cl. v of Explanation below s. 115JA(2) which deals with profits derived by industrial undertaking, eligible for deduction under s. 80-IA of Act. As such, order of Tribunal in case of Syncome Formulations (I) Ltd. (supra) cannot be applied to present controversy. She, however, supported order of lower authorities. We have carefully examined orders of lower authorities and Order of Special Bench in case of Syncome Formulations (I) Ltd. (supra). controversy raised before us is, with regard to computation of book profit under s. 115JA in order to decide what would be total income of assessee under MAT scheme. book profit is defined in Explanation and according to it, it means net profit as shown in P&L a/c for relevant previous year prepared in accordance with provisions of part II and part II of Sch. VI of Companies Act, 1956, as increased by amount described in cls. (a) to (f) if any amount referred therein is debited to P&L a/c and as reduced by amount computed in cls. (i) to (ix). According to cl. (v) aforesaid net profit is to be reduced, by amount of profit derived by industrial undertaking "located in industrial backward State or District as referred to in sub-cl. (b) or sub-cl. (c) of cl. (iv) of sub-s. (2) of s. 80-IA for assessment years, such industrial undertaking is eligible to claim of deduction of 100 per cent of profits and gains under sub-s. (4) of s. 80-IA. amount which is required to be reduced from aforesaid net profit in order to compute book profit for purpose of s. 115J, is only amounts of profit derived by industrial undertaking, eligible for deduction under s. 80-IA of Act. It is no where mentioned under this clause that profits derived by industrial undertaking must be profit eligible for deduction under s. 80-IA of IT Act. While allowing deduction under s. 80-IA of Act, one has to examine gross total income of industrial undertaking and eligible deduction shall not exceed gross total income of assessee. But, for purpose of s. 115JA, amount which is required to be reduced from net profit, is profits derived from industrial undertaking, eligible for deduction under s. 80- IA. necessary condition, which is required to be seen is only whether industrial undertaking is eligible for deduction under s. 80-IA. In order to determine profits derived from industrial undertaking, one has to examine definition of word derived in light of various judicial pronouncements in cases of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439: (1999) 237 ITR 579 (SC), Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99: (2003) 262 ITR 278 (SC) and other Judgments on this subject. We have also examined contention of assessee that adjusted book profit should be profit derived from industrial undertaking and is eligible for deduction under s. 80- IA, but, we are not inclined to accept this argument of assessee, inasmuch as for computing book profit, one has to take different aspect under consideration. In fact, word "adjusted book profit" has not been defined either under s. 115JA or anywhere in Act. This word is first time used by Special Bench of Tribunal in case of Syncome Formulation (I) Ltd. (supra). Under s. 115JA computation of book profit starts from net profit shown in P&L a/c and this net profit may be profits of business of industrial undertaking, but, it cannot be called to be profits derived by industrial undertaking, as it includes profits on receipts from different activities/business of industrial undertaking, which may not be called to be profits derived by industrial undertaking in light of judgment of apex Court in cases of Sterling Foods (supra), Pandian Chemicals (supra). Order of Tribunal in case of Syncome Formulations (I) Ltd. (supra) has been rendered on point of computation of book profit under s. 115JA vis-a-vis amounts of profits eligible for deduction under s. 80HHC as per cl. VIII of Expln. below s. 115JA of Act. As per cl. (VIII) of Explanation, net profit is to be reduced from amounts of profit eligible for deduction under s. 80HHC computed under cl. (a), (b) or (c) of sub-s. (3) or sub-s. (3A) or as case may be of that section and subject to conditions specified in sub- s. (4) and (4A) of that section. In that case, amount which is required be reduced from net profit, is amount of profit eligible for deduction under s. 80HHC and not profit derived from export unit like case in cl. (V) in which amounts required to be reduced, is profits derived by industrial undertaking. It has been repeatedly held that s. 80HHC is complete code and for computing deduction under s. 80HHC, different formula is laid down. To start with computation under s. 80HHC, one has to find out, what would be profits of business. profits of business was defined in Expln. (baa) of Explanation below sub-s. (IV-3) of s. 80HHC of Act. profits of business means profits of business as computed under head "Profits and gains of business or profession" as reduced by amount specified in cls. 1 and 2. moot question arose in case of Syncome Formulations (I) Ltd. (supra) that what would be profits of business; to start with it for computation of deduction under s. 80HHC. Whether it would be profits of business computed under head Profits and gains of business or profession as per provisions of Act or it would be adjusted book profit worked out as per s. 115JA. Having deliberated on this issue, Special Bench of Tribunal in case of Syncome Formulations (I) Ltd. (supra) has categorically held that deduction under s. 80HHC in MAT Scheme is from taxable income which is otherwise adjusted book profit. Tribunal further held that this in turn, means that s. 80HHC should be computed on adjusted book profit. relevant observation of Tribunal in this regard is extracted hereunder for sake of reference: "The deduction under s. 80HHC in MAT scheme is from taxable income, which is otherwise adjusted book profit. If no deduction is available to assessee, gross total income itself is taxable income of assessee. MAT scheme does not provide for deductions. Therefore, interpretation is that adjusted book profit of company itself is gross total income of that assessee company. deduction under s. 80HHC is in that way given out of gross total income in case falling under MAT. This in turn means that s. 80HHC should be computed on adjusted book profit. Secs. 115J, 115JA and 115JB came into operation, as regular profits has been substituted by book profit. Once substitution is over, there is no way to go back to normal computation process of statutory profit, which has already been overwhelmed by ss. 115J, 115JA and 115JB. This reconciles alleged incompatibility pointed out by Revenue that deduction available to assessee under Chapter VI-A is subject to s. 80AB. Therefore, we find that deduction under s. 80HHC in case of MAT assessment is to be worked out on basis of adjusted book profit and not on basis of profit computed under regular provisions of law applicable to computation of profits and gains of business or profession." But, in case of computation of book profit vis-a-vis profits derived But, in case of computation of book profit vis-a-vis profits derived by industrial undertaking, eligible for deduction under s. 80-IA, eligible profit for deduction under s. 80-IA, is not required to be computed as per cl. (v) of Explanation. net profit is required to be reduced by amount of profits derived by industrial undertaking which is eligible for deduction under s. 80-IA of IT Act. It is not necessary whether profits derived by industrial undertaking, is eligible for deduction in terms of other conditions of s. 80-IA. In order to understand real meaning of language used in cl. (v), we extract same as under: (v) amount of profits derived by industrial undertaking located in industrially backward State or district as referred to in sub-cl. (b) or sub-cl. (c) of cl. (iv) of sub-s. (2) of s. 80-IA, for assessment years such industrial undertaking is eligible to claim deduction of hundred per cent of profits and gains under sub-s. (5) of s. 80-IA. language used in sub-clause is quite unambiguous and clear to explain that it means amount required to be reduced is profit derived from industrial undertaking which is eligible for deduction under s. 80-IA and not profit eligible for deduction. In light of these facts we are of view that ratio laid down in case of Syncome Formulations (I) Ltd. (supra) cannot be applied in present case. Having examined order of lower authorities we find that none of authorities has examined issue in proper perspective. They have examined whether industrial undertaking is independently eligible for deduction under s. 80-IA or not? Whereas, this factor was not required to be examined at all. lower authorities have disallowed claim of assessee having realized that under s. 80-IA, assessee is not eligible for deduction of Act. Since issue was not properly examined and profits derived from industrial undertaking, is not computed for its reduction from net profit as shown in P&L a/c prepared under sub-s. (2) of s. 115JA, book profit under s. 115JA, cannot be properly computed. We, therefore, of view that matter should go back to file of AO for calculation of amounts of profit derived by industrial undertaking in light of judgment of apex Court in cases of Pandian Chemicals (supra) and Sterling Foods (supra) and thereafter to compute book profit for purpose of s. 115JA of Act. Accordingly, order of CIT(A) is set-aside and matter is restored to file of AO for re-computation of book profit and total income of assessee in terms indicated above. In result, appeal of assessee is allowed for statistical purposes. *** ENCUBE ETHICALS (P) LTD. v. INCOME TAX OFFICER