Ajanta Pharma Ltd v. Commissioner Of Income-Tax[1], Order Of Thesupreme Court In Kerala Chemicals And Proteins Ltd V

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMASTHURSDAY, THE 15 DAY OF JULY 2021 / 24TH ASHADHA, 1943 ITA NO. 1699 OF 2009 AGAINST THE ORDER IN ITA 36/2008 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.G.T.N.INDUSTRIES LTD., ALUVA BY ADVS.SRI.JOSEPH KODIANTHARASRI.TERRY V.JAMES SR.ADV.JOSEPH MARKOS THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 15.07.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: S.V. Bhatti, J. J U D G M E N T Heard learned Standing Counsel Mr.Jose Joseph and learned Senior Advocate Mr. Joseph Markos for the parties. 2.Commissioner of Income Tax, Cochin/Revenue is theappellant. M/s. G T N Industries Ltd./assessee is therespondent. The appeal is directed against the order of IncomeTax Appellate Tribunal (for short ‘Tribunal'), Cochin Bench inITA No.36/Coch/2008 dated 27.02.2009. The appeal deals withthe issues arising from the tax return filed by the assessee forthe Assessment Year 2003-04. 3.The Assessing Officer through the assessment order in Annexure-A, disallowed the claim of the assessee underSection 80HHC of the Income Tax Act (for short 'the Act'). The I.T.A. No.1699/2009 assessee filed appeal before the Commissioner of Income Tax (Appeals) and the appeal was allowed in part. The Revenue filed appeal before the Tribunal and the Tribunal through order in Annexure-C dismissed the appeal. Hence, the instant Tax Appeal at the instance of the Revenue under Section 260A of the Income Tax Act (for short 'the Act'). The following substantial questions of law are raised by the Revenue: “1. Whether, on the facts and in the circumstances of the case,the Tribunal is right in law - i) in holding that the disallowance was under Sec. 115JBcomputation and it is not under normal computation so as toinvoke section 14A? ii) in rejecting the ground that disallowance under section 14Ais justified in this case; iii) in holding that the disallowance is not justified? 2. Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in interfering with the"another disallowance on account of 80HHC deduction" notedin paragraph 7 of its order based on the decision reported in248 ITR 372 ad is not the interference and the decision relied onwrong and against the decision reported in 295 ITR 228 (SC)? I.T.A. No.1699/2009 3. Whether, on the facts and in the circumstances of the case isnot the computation of book profits under section 115JB towork out the eligible deduction for the purpose of section80HHC benefit against law and the intendment of thelegislature? 4. Whether, on the facts and in the circumstances of the caseand in the light of the decision of the supreme Court in 295 ITR228 and other cases of the Supreme Court, the decision of theKerala High Court is correct and in accordance with law and theTribunal is right in relying on the same? 4.The substantial questions of law raised in the appeal relate to eligibility of profits and deductibility of profits arising under Section 115JB of the Act; whether the assessee is entitledto claim deduction under Section 80HHC. 5. The learned counsel appearing for the parties have invited the attention of this Court to the reported judgments in Ajanta Pharma Ltd. v. Commissioner of Income-Tax[1], order of theSupreme Court in Kerala Chemicals and Proteins Ltd v. I.T.A. No.1699/2009 Commissioner of Income Tax[2] and Commissioner of Income-Tax v.Bhari Information Tech. System (P) Ltd[3] to state that the issue isconcluded by these judgments in favour of assessee Theoperative portion of the judgments is excerpted hereunder: “Ajanta Pharma Ltd 4.The substantial questions of law raised in the appeal relate to eligibility of profits and deductibility of profits arising under Section 115JB of the Act; whether the assessee is entitledto claim deduction under Section 80HHC. 5. The learned counsel appearing for the parties have invited the attention of this Court to the reported judgments in Ajanta Pharma Ltd. v. Commissioner of Income-Tax[1], order of theSupreme Court in Kerala Chemicals and Proteins Ltd v. I.T.A. No.1699/2009 Commissioner of Income Tax[2] and Commissioner of Income-Tax v.Bhari Information Tech. System (P) Ltd[3] to state that the issue isconcluded by these judgments in favour of assessee Theoperative portion of the judgments is excerpted hereunder: “Ajanta Pharma Ltd If the dichotomy between "eligibility of profit and"deductibility" of profit is not kept in mind then section 115JBwill cease to be a self-contained code. In section 115JB, as insection 115JA, it has been clearly stated that the relief will becomputed under section 80HHC(3)/(3A), subject to theconditions under sub-sections (4) and (4A) of that section. Theconditions are only that the relief should be certified by thechartered accountant. Such condition is not a qualifyingcondition but it is a compliance condition. Therefore, onecannot rely upon the last sentence in clause (iv) of Explanationto section 115JB (subject to the conditions specified in sub-sections (4) and (4A) of that section) to obliterate the differencebetween "eligibility" and "deductibility" of profits ascontended on behalf of the Department. 2Civil Appeal No.6901/2012, arising out of SLP(C) No.22881/20113[2012] 340 ITR 593 (SC)3[2012] 340 ITR 593 (SC) For the above reasons, we set aside the impugned judgment ofthe High 11 Court and restore the judgment of the Tribunal.Accordingly, the civil appeal of the assessee is allowed with noorder as to costs.” Civil Appeal No.6901 of 2012 [Arising out of S.L.P. (C) No.22881/2011 “The civil appeal filed by the assessee is allowed in view of thejudgements of this Court in the case of Ajanta Pharma Limitedvs. 327 I.T.R. Commissioner of Income Tax, 305 andCommissioner of reported in [2010] Income Tax vs. BhariInformation Tech. Sys. P. Ltd., reported in [2012] 340 I.T.R. 593. Bhari Information Tech.Sys.P.Ltd. “In the present case, we are concerned with section 80HHEwhich is referred to in the Explanation to section 115JA, clause(ix). In our view, the judgment of the Special Bench of theTribunal in Syncome Formulations¹ squarely applies to thepresent case. Following the view taken by the Special Bench inSyncome Formulations, the Tribunal in the present case cameto the conclusion that deduction claimed by the assessee undersection 80HHE has to be worked out on the basis of adjustedbook profit under section 115JA and not on the basis of theprofits computed under regular provisions of law applicable to I.T.A. No.1699/2009 computation of profits and gains of business. The judgment ofthe Tribunal has been upheld by the High Court.” 5.1Substantial questions having regard to the principleslaid down by the Supreme Court in the reported and unreportedjudgments referred to above, is covered in favour of theassessee and against the Revenue. The questions framed in the appeal, since are held againstthe Revenue and in favour of assessee the appeal standsdismissed accordingly. Sd/-S.V.BHATTIJUDGE Sd/- BECHU KURIAN THOMASJUDGE PETITIONER ANNEXURE ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 1699/2009 TRUE COPY OF THE ASSESSMENT ORDER DATED 15.03.2006 FOR THE ASSESSMENT YEAR 2003-04. TRUE COPY OF THE ORDER DATED 18.10.2007 OF THE COMMISSIONER OF INCOME TAX (APPEALS) TRUE COPY OF THE ORDER DATED 27.2.2009 OF THE INCOME TAX APPELLATE TRIBUAL, COCHIN BENCH IN ITA NO.36/COCH/2008