IN THE HIGH COURT OF JUDICATURE AT MADRAS Date:- 01.02.2011 Coram The Honourable Mr. Justice F.M. IBRAHIM KALIFULLA and The Honourable Mr. Justice N. KIRUBAKARAN Tax Case (Appeal) No.1415 of 2010 The Commissioner of Income Tax-II Madurai. ... Appellant / Appellant ..vs.. M/s. Sri Vishnu Shankar Mills Ltd., P.B.No.109, PAC Ramasamy Raja Salai Rajapalayam-626 108. PAN-AACCSO536Q ...Respondent / Respondent Tax Case Appeal filed under section 260 A of the IT Act 1961 against the order of the Income Tax Appellate Tribunal "A" Bench, Chennai dated 11.6.2010 passed in I.T.A. No. 364/Mds/2010 for the assessment year 2000-01 against the order of the Commissioner of Income Tax (Appeals) II, Madurai dated 15.12.2009 and made in ITA.No.260/07-08. against the order of the Asst Commissioner of Income Tax Circle I, Virudhunagar dated 26.12.2007 in PAN/GIR.No.AACC36536Q/S-134/AC/VNR. For Petitioner : Mr. J.Naresh Kumar ------------ JUDGMENT (Judgement of the Court was delivered by F.M. IBRAHIM KALIFULLA, J.) The revenue has come forward with this appeal and seeks to raise the following question of law as substantial question of law: "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that, disallowance deduction under Section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted books profits under Section 115JA of the Income Tax Act, 1961 is valid?" https://hcservices.ecourts.gov.in/hcservices/ 2. This very question came to be considered by this Court in the decision reported in 302 ITR 22 (CIT v. RAJANIKANT SCHNELDER AND ASSOCIATES P. LTD.) and after detailed analysis, has held as under in paragraph 5. "The Assessing Officer is not entitled to touch the profit and loss account prepared by the assessee as per the provisions contained in the Companies Act, while arriving at the book profit under Section 115J and the book profit so arrived at should be the basis for taxation and therefore the computation under Section 80HHC should be limited to the case of profits of eligible category only. The Tribunal has also come to the conclusion that in view of the non obstante clause available in Section 115JA it was clear that the provisions is a self-contained one and no other provision would have effect on it and thereby it was to be implemented as contained in the said provision. The Tribunal has also further given a reason to the effect that section 80HHC is clear about this aspect that profit only is to be taken into account but not income and sub-section(3) of Section 115JA itself took care of the provisions relating to the adjustment of loss or depreciation and carry forward of the income. The finding arrived at by the Tribunal is correct and followed the decision of the Supreme Court. We are of the view that the conclusion arrived at by the Tribunal cannot be complained of." 3. It was fairly pointed out by the learned Standing Counsel that against the decision of this Court referred to above, the Bombay High Court took a contrary view in the decision reported in 318 ITR 252 (BOM.) (CIT v. AJANTA PHARMA LTD.), which came to be again distinguished by this Court in the decision reported in 321 ITR 448 (CIT v. AMBIKA COTTON MILLS LTD). Subsequently, it is stated that the decision reported in 318 ITR 252 (CIT v. AJANTA PHARMA LTD.), of the Bombay High Court came to be set aside by the Honourable Supreme Court in the decision reported in 327 ITR 305 (AJANTA PHARMA LTD., v. CIT). 4. Before the Honourable Supreme Court, the question of law framed for consideration was as under:- "Whether for determining the "book profits" in terms of Section 115JB, the net profits as shown in the profit and loss account have to be reduced by the amount of profits eligible for https://hcservices.ecourts.gov.in/hcservices/ deduction under Section 80HHC or by the amount of deduction under Section 80HHC?" The Supreme Court ultimately answered the question in paragraph 10, which reads as under:- "One of the contentions raised on behalf of the Department was that if clause (iv) of the Explanation to section 115JB is read in entirety including the last line thereof (which reads "subject to the conditions specified in that section"), it becomes clear that the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, is subject to the conditions specified in that section. According to the Department, the assessee herein is trying to read the various provisions of Section 80HHC in isolation whereas as per clause (iv) of the Explanation to section 115JB, it is clear that the book profit shall be reduced by the amount of profits eligible for deduction under section 80HHC as 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 and subject to the conditions specified in that section, thereby meaning that the deduction allowable would be only to the extent of deduction computed in accordance with the provisions of section 80HHC. Thus, according to the Department, both "eligibility" as well as "deductibility" of the profit have got to be considered together for working out the deduction as mentioned in clause (iv) of the Explanation to section 115JB. We find no merit in this argument. If the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then section 115JB will cease to be a self-contained code. In Section 115JB, as in Section 115JA, it has been clearly stated that the relief will be computed under Section 80HHC(3)/(3A), subject to the conditions under sub-sections (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in clause (iv) of Explanation to section 115JB (subject to the conditions https://hcservices.ecourts.gov.in/hcservices/ specified in sub-sections (4) and (4A) of that section) to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department." 5. Inasmuch as the question of law raised in this appeal, is thus, covered by the decision of this Court in the decision reported in 302 ITR 22 (CIT v. RAJANIKANT SCHNELDER AND ASSOCIATES P. LTD.) as well as that of the Supreme Court reported in 327 ITR 305 (AJANTA PHARMA LTD., v. CIT), there is no scope to entertain this appeal. Accordingly, the appeal fails and the same is dismissed. Tr/ Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar To 1.The Assistant Registrar, Income Tax Appellate Tribunal, "A" Bench, III Floor, Rajaji Bhavan, Besant Nagar, Chennai. 2.The Commissioner of Income Tax (Appeals)-II Madurai. 3.The Assistant Commissioner of Income Tax Circle - I, Virudhunagar. + 1 cc to Mr. J. Naresh Kumar, Advocate SR No.7481 GV(CO) SR/22.2.2011 Tax Case (Appeal) No.1415 of 2010 https://hcservices.ecourts.gov.in/hcservices/