The Commissioner Of Income Tax-Iimadurai v. M/S. Srivishnu Shankar Mills Ltd.,P.b

IN THE HIGH COURT OF JUDICATURE AT MADRAS Coram The Honourable Mr. Justice F.M. IBRAHIM KALIFULLAandThe Honourable Mr. Justice N. KIRUBAKARAN Tax Case (Appeal) No.1415 of 2010 The Commissioner of Income Tax-IIMadurai.... Appellant / Appellant ..vs.. M/s. SriVishnu Shankar Mills Ltd.,P.B.No.109, PAC Ramasamy Raja SalaiRajapalayam-626 108.PAN-AACCSO536Q...Respondent / Respondent Tax Case Appeal filed under section 260 A of the IT Act 1961against 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 theassessment year 2000-01 against the order of the Commissioner ofIncome Tax (Appeals) II, Madurai dated 15.12.2009 and made inITA.No.260/07-08. against the order of the Asst Commissioner ofIncome Tax Circle I, Virudhunagar dated 26.12.2007 inPAN/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 toraise the following question of law as substantial question of law:"Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in law in holding that, disallowancededuction under Section 80HHC in a case of MATassessment is to be worked out on the basis ofthe adjusted books profits under Section 115JA ofthe Income Tax Act, 1961 is valid?" 2. This very question came to be considered by this Court inthe decision reported in 302 ITR 22 (CIT v. RAJANIKANT SCHNELDERAND ASSOCIATES P. LTD.) and after detailed analysis, has held asunder in paragraph 5. "The Assessing Officer is not entitled totouch the profit and loss account prepared bythe assessee as per the provisions containedin the Companies Act, while arriving at thebook profit under Section 115J and the bookprofit so arrived at should be the basis fortaxation and therefore the computation underSection 80HHC should be limited to the case ofprofits of eligible category only. TheTribunal has also come to the conclusion thatin view of the non obstante clause availablein Section 115JA it was clear that theprovisions is a self-contained one and noother provision would have effect on it andthereby it was to be implemented as containedin the said provision. The Tribunal has alsofurther given a reason to the effect thatsection 80HHC is clear about this aspect thatprofit only is to be taken into account butnot income and sub-section(3) of Section 115JAitself took care of the provisions relating tothe adjustment of loss or depreciation andcarry forward of the income. The findingarrived at by the Tribunal is correct andfollowed the decision of the Supreme Court.We are of the view that the conclusion arrivedat by the Tribunal cannot be complained of." 3. It was fairly pointed out by the learned Standing Counselthat against the decision of this Court referred to above, theBombay High Court took a contrary view in the decision reported in318 ITR 252 (BOM.) (CIT v. AJANTA PHARMA LTD.), which came to beagain distinguished by this Court in the decision reported in 321ITR 448 (CIT v. AMBIKA COTTON MILLS LTD). Subsequently, it isstated that the decision reported in 318 ITR 252 (CIT v. AJANTAPHARMA LTD.), of the Bombay High Court came to be set aside by theHonourable Supreme Court in the decision reported in 327 ITR 305(AJANTA PHARMA LTD., v. CIT). 4. Before the Honourable Supreme Court, the question of lawframed for consideration was as under:-"Whether for determining the "book profits"in terms of Section 115JB, the net profits asshown in the profit and loss account have to bereduced by the amount of profits eligible for https://hcservices.ecourts.gov.in/hcservices/ deduction under Section 80HHC or by the amount ofdeduction under Section 80HHC?" The Supreme Court ultimately answered the question in paragraph 10,which reads as under:- 4. Before the Honourable Supreme Court, the question of lawframed for consideration was as under:-"Whether for determining the "book profits"in terms of Section 115JB, the net profits asshown in the profit and loss account have to bereduced by the amount of profits eligible for https://hcservices.ecourts.gov.in/hcservices/ deduction under Section 80HHC or by the amount ofdeduction under Section 80HHC?" The Supreme Court ultimately answered the question in paragraph 10,which reads as under:- "One of the contentions raised on behalf ofthe Department was that if clause (iv) of theExplanation to section 115JB is read in entiretyincluding the last line thereof (which reads"subject to the conditions specified in thatsection"), it becomes clear that the amount ofprofits eligible for deduction under section80HHC, 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 theconditions specified in that section. Accordingto the Department, the assessee herein is tryingto read the various provisions of Section 80HHCin isolation whereas as per clause (iv) of theExplanation to section 115JB, it is clear thatthe book profit shall be reduced by the amountof profits eligible for deduction under section80HHC 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 andsubject to the conditions specified in thatsection, thereby meaning that the deductionallowable would be only to the extent ofdeduction computed in accordance with theprovisions of section 80HHC. Thus, according tothe Department, both "eligibility" as well as"deductibility" of the profit have got to beconsidered together for working out thededuction as mentioned in clause (iv) of theExplanation to section 115JB. We find no meritin this argument. If the dichotomy between"eligibility" of profit and "deductibility" ofprofit is not kept in mind then section 115JBwill cease to be a self-contained code. InSection 115JB, as in Section 115JA, it has beenclearly stated that the relief will be computedunder Section 80HHC(3)/(3A), subject to theconditions under sub-sections (4) and (4A) ofthat section. The conditions are only that therelief should be certified by the charteredaccountant. Such condition is not a qualifyingcondition but it is a compliance condition.Therefore, one cannot rely upon the lastsentence in clause (iv) of Explanation tosection 115JB (subject to the conditions specified in sub-sections (4) and (4A) of thatsection) to obliterate the difference between"eligibility" and "deductibility" of profits ascontended on behalf of the Department." 5. Inasmuch as the question of law raised in this appeal, isthus, covered by the decision of this Court in the decisionreported in 302 ITR 22 (CIT v. RAJANIKANT SCHNELDER AND ASSOCIATESP. LTD.) as well as that of the Supreme Court reported in 327 ITR305 (AJANTA PHARMA LTD., v. CIT), there is no scope to entertainthis appeal. Accordingly, the appeal fails and the same isdismissed. Tr/ Sd/-Asst. Registrar //True Copy// Sub Asst. RegistrarTo1.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