The Commissioner Of Income-Tax-I v. M/S. C.p.s.textiles P. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.02.2011 CORAM: THE HONOURABLE MR. JUSTICE F.M. IBRAHIM KALIFULLAandTHE HONOURABLE MR.JUSTICE N.KIRUBAKARAN Tax Case (Appeal) Nos.1442 and 1443 of 2010 The Commissioner of Income-tax-I.. Appellant inTiruchirapalli. all the appeals.vs. M/s. C.P.S.Textiles P. Ltd.No.143, Salai Road Lakshmi Complex, Thillainagar.. Respondent inTiruchirapalli – 620 018. all the appeals. Tax Case Appeals filed under Section 260A of the Income Tax Act,1961, against the common order of the Income Tax Appellate Tribunal,Madras 'A' Bench, Chennai dated 18.06.2010 passed in I.T.A.Nos.404 &405/Mds/2010 for the assessment years 2003-2004 and 2000-2001(ITA.No.41/08-09 and 167/07-08, respectively dated 07.01.2010 on thefile of the Commissioner of Income-Tax (Appeals) Tiruchirappalliagainst PAN AAACC 262 OD dated 10.04.2008 and PAN/GIR.No.AAACC262 ODdated 13.12.2007 respectively on the file of the AssistantCommissioner of Income-Tax, Company Circle - II, Tiruchirappalli. For Appellant : Mr.K.SubramaniamSenior Standing Counsel for Income-tax Common Judgment (Judgment of the Court was delivered by F.M.IBRAHIM KALIFULLA,J.) The Revenue has come forward with these appeals and seeks toraise the following question of law as substantial question of law:"Whether on the facts and in the circumstances ofthe case, the Income-tax Appellate Tribunal was rightin holding that in the computation of book profitsu/s.115JA / 115JB, the deduction u/s.80HHC had to beallowed on the basis of book profits and not byapplying the normal provisions of the Act, forcomputation of the deduction?" https://hcservices.ecourts.gov.in/hcservices/ 2. It was fairly brought to our notice that this very questioncame up for consideration before the Hon'ble Supreme Court in thedecision reported in (2010) 327 ITR 305 (Ajanta Pharma Limited vs.Commissioner of Income-tax). The Hon'ble Supreme Court posed thequestion, namely, "whether for determining the "book profits" interms of Section 115JB, the net profits as shown in the P&L accounthave to be reduced by the amount of profits eligible for deductionunder Section 80HHC or by the amount of deduction under Section80HHC?" 3. While examining the said question, the Hon'ble Supreme Courthas observed as under in paragraph 9: "..... Thus, Section 80HHC(IB) deals not with"eligibility", but with the "extent of deduction". Asstated earlier, Section 115JB is a self-contained code.It taxes deemed income. It begins with a non obstanteclause. Section 115JB refers to computation of "bookprofits" which have to be computed by making upward anddownward adjustments. In the downward adjustment, videcl.(iv) it seeks to exclude "eligible" profits derivedfrom exports. On the other hand, under Section 80HHC(IB) it is the extent of deduction which matters. Theword "thereof" in each of the items under Section 80HHC (IB) is important. ......" 4. Then, again in paragraph 10, the Hon'ble Supreme Courtconcluded as under: 3. While examining the said question, the Hon'ble Supreme Courthas observed as under in paragraph 9: "..... Thus, Section 80HHC(IB) deals not with"eligibility", but with the "extent of deduction". Asstated earlier, Section 115JB is a self-contained code.It taxes deemed income. It begins with a non obstanteclause. Section 115JB refers to computation of "bookprofits" which have to be computed by making upward anddownward adjustments. In the downward adjustment, videcl.(iv) it seeks to exclude "eligible" profits derivedfrom exports. On the other hand, under Section 80HHC(IB) it is the extent of deduction which matters. Theword "thereof" in each of the items under Section 80HHC (IB) is important. ......" 4. Then, again in paragraph 10, the Hon'ble Supreme Courtconcluded as under: ".... Thus, according to the Department, both"eligibility" as well as "deductibility" of the profithave got to be considered together for working of thededuction as mentioned in cl.(iv) of Explanation toSection 115JB. We find no merit in this argument. Ifthe dichotomy between "eligibility" of profit and"deductibility" of profit is not kept in mind thenSection 115JB will cease to be a self-contained code.In Section 115JB as in Section 115JA, it has beenclearly stated that the relief will be computed underSection 80HHC(3)/(3A), subject to the conditions undersub-cls. (4) and (4A) of that section. The conditionsare only that the relief should be certified by thechartered accountant. Such condition is not aqualifying condition, but it is a compliance condition.Therefore, one cannot rely upon the last sentence incl. (iv) of Explanation to Section 115JB [subject tothe conditions specified in sub-cls, (4) and (4A) ofthat section] to obliterate the difference between"eligibility" and "deductibility" of profits ascontended on behalf of the Department." 5. Having regard to the above dictum of Hon'ble Supreme Courtand as the question raised is covered by the above referred todecision, these appeals fail and the same are dismissed. No costs.Consequently, M.P.No.1 of 2010 is also dismissed. /true copy/ ATR Sub Asst.Registrar To 1. The Assistant Registrar, Income Tax Appellate Tribunal Madras 'A' Bench, Rajaji Bhavan, 5th Floor, Besant Nagar, Chennai - 90. 2. The Commissioner of Income-Tax (Appeals) No.44, Williams Road, Cantonment Tiruchirapalli-620001. 3. The Commissioner of Income-Tax I, Tiruchirappali. 4. The Assistant Commissioner of Income-tax Company Circle-II, Tiruchirapalli. 1 cc To Mr.K.Subramanian, Sr.Standing Counsel for Income-Tax, SR.9504. JRG(CO)RVL 23.02.2011