ACIT, Bangalore V. Steer Engineering Pvt. Ltd., Bangalore

ITA 1177/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80749 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 12-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: PADAM CHAND KHINCHACA
• Keywords: Deemed to accrue or arise in india
• Section: 80HHC; 115JB

Judgement Text

ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BBENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1177/BANG/2012 (ASSESSMENT YEAR: 2004-05) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 12(3) 14/3, 4 TH FLOOR, RASTROTHANA BHAVAN, OPP: RBI, NRUPATHUNGA ROAD, BANGALORE 560001 VS. STEER ENGINEERING PVT LTD 290, 4 MAIN, 4 TH PHASE, PEENYA INDUSTRIAL AREA, BANGALORE 560058 PAN: AABCS 8840 E (APPELLANT) (RESPONDENT) C.O.NO.46/BANG/2013 (ARISING OUT OF ITA NO.1177/BANG/2012) (ASSESSMENT YEAR: 2004-05) STEER ENGINEERING PVT LTD 290, 4 MAIN, 4 TH PHASE, PEENYA INDUSTRIAL AREA, BANGALORE 560058 PAN: AABCS 8840 VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 12(3) 14/3, 4 TH FLOOR, RASTROTHANA BHAVAN, OPP: RBI, NRUPATHUNGA ROAD, BANGALORE 560001 (APPELLANT) (RESPONDENT) DEPARTMENT BY: DR. P.K. SRIHARI, (DR) ASSESSEE BY: SHRI PADAM CHAND KHINCHA,CA DATE OF HEARING: 11/11/2014 DATE OF PRONOUNCEMENT: 14/11/2014 O R D E R PER RAJPAL YADAV, J.M. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED CIT (A) DATED 11.6.2013 PASSED FOR ASSESSME NT YEAR 2004-05. ON RECEIPT OF NOTICE IN THE REVENUES APPE AL, THE ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 2 OF 10 ASSESSEE HAS FILED CROSS OBJECTION BEARING C.O NO.4 6/BANG/ 2013. 2. IN THE ORIGINAL GROUNDS OF APPEAL, THE REVENUE R AISED FOUR GROUNDS. IT HAS FILED AN APPLICATION FOR PERMISSION TO RAISE ADDITIONAL GROUNDS OF APPEAL. HOWEVER, ITS GRIEVANC E REVOLVES AROUND TWO ISSUES NAMELY; (A) LEARNED CIT (A) HAS E RRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE 90% OF T HE NET JOB WORK CHARGES FROM PROFITS OF THE BUSINESS WHILE COMPUTIN G DEDUCTION ADMISSIBLE U/S 80HHC AND (B) LEARNED CIT (A) ERRED IN ALLOWING THE PROVISION FOR WARRANTY AS A DEDUCTION. 3. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN T HREE GROUNDS OF APPEAL ALONGWITH SUB GROUNDS. ITS FIRST GROUND IS COMMON WITH THE FIRST FOLD OF GRIEVANCE OF THE REVE NUE. IN OTHER WORDS, ACCORDING TO THE ASSESSEE THE JOB WORK CHARG ES RECEIVED BY IT OUGHT TO BE INCLUDED IN THE PROFITS OF THE BU SIENSS WHILE COMPUTNIG THE DEDUCTION, WHEREAS THE REVENUE IS OF THE OPINION THAT THESE CHARGES SHOULD BE EXCLUDED. THE LEARNED CIT (A) HAS ERRED IN EXCLUDING 90% OF THE NET CHARGES. 4. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31.10.2014 DECLARING AN INCOME OF RS.1,49,26,960/-. THE ASSESSEE IS ENTITLED FOR DEDU CTION U/S 80HHC. THERE IS NO DISPUTE WITH REGARD TO THIS CLAI M. IT HAS CLAIMED DEDUCTION AT RS.58,92,626/-. THE ASSESSEE C OMPUTED THE BUSINESS PROFIT FOR THE DEDUCTION AT RS.2,62,65 ,982/- WITHOUT EXCLUDING 90% OF THE LABOUR CHARGES RECEIVED. THE A SSESSING ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 3 OF 10 OFFICER HAS EXCLUDED 90% OF THE LABOUR CHARGES. THE DISPUTE BEFORE US IS WHETHER 90% OF THE NET LABOUR CHARGES ARE TO BE EXCLUDED OR GROSS LABOUR CHARGES. IT IS PERTINENT T O MENTION HERE THAT EXPLANATION (BAA) HAS BEEN APPENDED WITH SECTI ON 80HHC W.E.F. 1.4.1992. ACCORDING TO THIS EXPLANATION, WHI LE COMPUTING THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF SECT ION 80HHC, THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTERESTS , RENT CHARGES OR ANY OTHER RECEIPTS OF SIMILAR NATURE WILL NOT BE INCLUDED. AS SOME EXPENDITURE MIGHT BE INCURRED IN EARNING THESE INCOMES, WHICH IS IN THE GENERALITY OF THE CASES IS PART OF THE COMMON EXPENSES, ADHOC 10% HAS BEEN ALLOCATED TOWARDS THE EXPENDITURE. THE ADHOC 10% DEDUCTION GIVEN INDIRECT LY BY SAYING THAT ONLY 90% OF THE RECEIPTS WILL BE EXCLUDED FROM THE PROFITS OF THE BUSINESS AS COMPUTED, INSTEAD OF THE ENTIRE REC EIPTS WHICH HAS BEEN GIVEN FOR COMMON EXPENSES ACCORDING TO THE CIRCULAR NO.621 ISSUED BY THE BOARD. NOW DISPUTE AROSE WHETH ER THIS 90% SHOULD BE OF THE GROSS RECEIPTS OR OF THE NET R ECEIPTS. ASSESSING OFFICER WANTS TO EXCLUDE THE GROSS RECEI PTS, WHEREAS THE CIT (A) AFTER PUTTING RELIANCE UPON THE JUDGMEN T OF THE HON'BLE SUPREME COURT HELD THAT NET OF LABOUR CHARG ES BE REDUCED BY 90%. IT WAS BROUGHT TO OUR N OTICE THAT THIS ISSUE HAS COME UP BEFORE THE TRIBUNAL IN THE ASSESSEES OWN C ASE AND TRAVELLED UPTO THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT HAS UPHELD THE EXCLUSION OF 90% OF THE NET LABOUR C HARGES FROM THE PROFIT OF THE BUSINESS. THE ORDER OF THE HON'BL E HIGH COURT IN ITA NO.21 OF 2008 IN THE ASSESSEES OWN CASE READ A S UNDER: JUDGMENT IN ITA NO.52/09 AND IN ITA NO.903/07 HAS HELD THAT U/S 80HHC 90% OF THE LABOUR CHARGES HAVE TO BE DEDUCTED AND THE SAID DEDUCTIONS SHOULD BE ON THE ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 4 OF 10 NET AND NOT THE GROSS. THE QUESTIONS INVOLVED IN TH IS APPEAL IS ALSO THE SAME. IN THAT VIEW, IN VIEW OF T HE DECISION REFERRED TO ABOVE, THIS APPEAL IS DISPOSED OF. THE ASSESSEE IS ENTITLED TO DEDUCTION OF 90% TOWARD S THE LABOUR CHARGES ON THE NET INCOME AND NOT ON THE GROSS INCOME. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'B LE HIGH COURT IN THE ASSESSEES OWN CASE, WE DO NOT FIND AN Y ERROR IN THE ORDER OF THE CIT (A) ON THIS ISSUE. ACCORDINGLY THE GROUNDS OF APPEAL RAISED BY THE REVENUE, AS WELL AS GROUND NO. 1.1 AND 1.2 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION ARE R EJECTED. 6. THE NEXT ISSUE IN THE REVENUES APPEAL HAS BEEN PLEADED BY WAY OF ADDITIONAL GROUND OF APPEAL. THE ASSESSEE HA D MADE A PROVISION FOR WARRANTY TO THE EXTENT OF RS.16,09,45 3/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUN D THAT IT IS A CONTINGENT LIABILITY. THE CIT (A) HAS ALLOWED THE C LAIM OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE HON'BLE S UPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA P. LTD. V. CIT REPORTED IN 314 ITR 62 (SC). THE LEARNED DR WHILE IMPUGNING THE ORDER OF THE CIT (A) CONTENDED THAT AS PER THE DECISION THE PROVISION WAS TO BE MADE BY KEEPING IN VIEW THE SENSIBLE ANALYSIS OF HISTORICAL TRENDS INDICATING THE DEFECTS IN THE PRODUCT MANUFA CTURED BY THE ASSESSEE. HE POINTED OUT THAT THERE IS NO HISTORY I N THIS CASE AND THERE IS NO SCIENTIFIC STUDY, WHICH ENABLE THE ASSE SSEE TO MAKE A PROVISION AT 20% OF THE SALES. ACCORDING TO HIM THI S DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE. ON THE OTHER HAND TH E LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD A NOTE IN DICATING THE CIRCUMSTANCES ENABLING THE ASSESSEE TO MAKE THE PRO VISION. HE POINTED OUT THAT THIS IS FIRST YEAR WHEN THE ASSESS EE HAS STARTED ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 5 OF 10 MANUFACTURING OF EXTRUDER. THE ASSESSEE WAS EARLIER MANUFACTURING EXTRUDER PARTS. THIS YEAR IT HAD MANU FACTURED EXTRUDER AND IN FINANCIAL YEAR 2003-04 IT HAS SOLD ONE EXTRUDER. THERE WAS A FAILURE IN THE GEARBOX AND COST COMES U P TO RS.12.00 LAKHS OUT OF THE SALE VALUE OF RS.56.00 LAKHS. SIMI LARLY IN NEXT ASSESSMENT YEAR, THE ASSESSEE HAD SOLD SIX EXTRUDER S. CONSIDERING ALL THESE ASPECTS IT HAD STARTED THE PR OVISION AT 20% IN THE INITIAL YEAR, BUT ULTIMATELY REDUCED IT TO 3 % OF THE SALES. THUS THE PROVISION WAS MADE KEEPING IN VIEW THE PAS T EXPERIENCE ON THE PARTS AND OTHER CIRCUMSTANCES OF THE BUSINES S. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE LEAR NED FIRST APPELLATE AUTHORITY HAS APPRECIATED THE JUDGMENT OF THE HON'BLE SUPREME COURT IN RIGHT PERSPECTIVE. ACCORDING TO TH E CIT (A) THE JUDGMENT OF THE HON'BLE SUPREME COURT HAS HELD THAT PROVISIONING TO BE AN ADMISSIBLE EXPENSES, SINCE A SENSIBLE ANALYSIS OF HIRSOTICAL TRENDS ENABLES A ROBUST AND RELIABLE ESTIMATION OF A PRESENT OBLIGATION WHICH ARISES OUT OF AN OBLIGATING EVENT. IF SUCH A PROVISION IS BASED ON T HE PAST EXPERIENCE, CONTAINING DEMONSTRABLE DATA OF THE EXP ENSES INCURRED BY THE ASSESSEE FOR PROVIDING WARRANTY, TH EN IT WOULD BE AN ASCERTAINED LIABILITY. THE LEARNED COUNSEL FOR T HE ASSESSEE HAS PLACED ON RECORD THE DETAILS IN TABULAR FORM INDICT ING THAT PROVISION MADE DURING THIS YEAR IS TO BE EXHAUSTED IN THE IMMEDIATELY SUBSEQUENT YEAR DURING WARRANTY PERIOD, OTHERWISE IT WOULD BE WRITTEN BACK. CONSIDERING THESE DETAILS , WE ARE OF THE VIEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY ALLOWED ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 6 OF 10 THE CLAIM OF THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THE ADDITIONAL GROUND OF APPEAL, IT IS REJECTED. 8. IN THE CROSS OBJECTION, THE NEXT GRIEVANCE OF TH E ASSESSEE IS THAT WHILE COMPUTING THE BOOK PROFIT U/S 115JB, THE DEDUCTION COMPUTED U/S 80HHC IS TO BE ALLOWED AS A DEDUCTION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F AJANTA PHARMA LTD VS. CIT REPORTED IN 327 ITR 305. BEFORE ADVERTING TO THE BRIEF FACTS OF THE PRESENT CASE, IT IS PERTINEN T TO TAKE NOTE OF THE FINDING RECORDED BY THE HON'BLE SUPREME COURT I N THE CASE OF AJANTA PHARMA LTD (SUPRA) EXPLAINING THE POSITION O F LAW: 9. ON THE OTHER HAND, SECTION 80HHC(1) INTER ALIA STATES THAT WHERE AN ASSESSEE, WHO IS THE INDIAN RESIDENT, IS ENGAGED IN THE BUSINESS OF EXPORTS OUT OF INDIA OF ANY GOODS EARNS CONVERTIBLE FOREIGN EXCHANGE THEN IN COMPUTING THE TOTAL INCOME, A DEDUCTION OF THE PROFITS DERIVED FROM SUCH EXPORTS WOULD BE ADMISSIBLE. THUS, SECTION 80HHC PROVIDES FOR TAX INCENTIVES. SECTION 80HHC(1) AT ON E POINT OF TIME LAID DOWN THAT AN AMOUNT EQUAL TO THE AMOUNT OF DEDUCTION CLAIMED SHOULD BE DEBITED TO THE P&L ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH DEDUCTION IS TO BE ALLOWED AND CREDITED TO THE RESERVE ACCOUNT TO BE UTILIZED FOR THE BUSINESS PURPOSE. SECTION 80HHC(1) CONCERNS ELIGIBILITY WHEREAS SECTION 80HHC(3) CONCERNS COMPUTATION OF THE QUANTUM OF DEDUCTION/TAX RELIEF. AT ONE POINT O F TIME PRIOR TO THE FINANCE ACT, 2000, EXPORTERS WERE ALLOWED 100% DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORT OF GOODS. HOWEVER, THAT HAS NOW BEEN REDUCED IN A PHASE-WISE MANNER UNDER SECTION 80HHC(1B). IT MAY BE NOTED THAT ALL ASSESSABLE ENTITIES ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 7 OF 10 SIMILARLY, ONLY ELIGIBLE GOODS ARE ENTITLED TO SUCH SPECIAL DEDUCTION UNDER SECTION 80HHC(1). A BARE READING OF SECTION 80AB SHOWS THAT COMPUTATION OF DEDUCTION IS GEARED TO THE AMOUNT OF INCOME, BUT SECTION 80HHC(3), WHICH REFERS TO QUANTIFICATION OF DEDUCTION IS GEARED TO THE EXPORTS TURNOVER AND NOT TO THE INCOME. ON THE OTHER HAND, SECTION 115JB REFERS TO LEVY OF MAT ON THE DEEMED INCOME. THE ABOVE DISCUSSION IS ONLY TO SHOW THAT SECTIONS 80HHC AND 115JB OPERATE IN DIFFERENT SPHERES. THUS, TWO ESSENTIAL CONDITIONS FOR INVOKING SECTION 80HHC(1) ARE THAT ASSESSEE MUST BE IN THE BUSINESS OF EXPORT AND SECONDLY THAT SALE PROCEEDS OF SUCH EXPORTS SHOULD BE RECEIVABLE IN INDIA IN CONVERTIBLE FOREIGN EXCHANGE. HENCE, SECTION 80HHC(1) REFERS TO ELIGIBILITY WHEREAS SECTION 80HHC(3) REFERS TO COMPUTATION OF TAX INCENTIVE. COMING TO SECTION 80HHC(1B) IT IS CLEAR THAT AFTER FINANCE ACT, 2000 W.E.F. ASSESSMENT YEAR 2001-02 EXPORTERS WOULD NOT GET 100% DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORTS BUT THAT THEY WOULD GET DEDUCTION OF 80% IN THE ASSESSMENT YEAR 2001- 02, 70% IN THE ASSESSMENT YEAR 2002-03 AND SO ON. THUS, SECTION 80HHC(1B) DEALS NOT WITH ELIGIBILITY BUT WITH THE EXTENT OF DEDUCTION. A S EARLIER STATED, SECTION 115JB IS A SELF-CONTAINED CODE. IT TAXES DEEMED INCOME. IT BEGINS WITH A NON- OBSTANTE CLAUSE. SECTION 115JB REFERS TO COMPUTATION OF BOOK PROFITS WHICH HAVE TO BE COMPUTED BY MAKING UPWARD AND DOWNWARD ADJUSTMENTS. IN THE DOWNWARD ADJUSTMENT, VIDE CLAUSE (IV) IT SEEKS TO EXCLUDE ELIGIBLE PROFITS DERIVED FROM EXPORTS. ON THE OTHER HAND, UNDER SECTION 80HHC(1B) IT IS THE EXTENT OF DEDUCTION WHICH MATTERS. THE WORD THEREOF IN EACH OF THE ITEMS UNDER SECTION 80HHC(1B) IS IMPORTANT. THUS, IF AN ASSESSEE EARNS RS.100 CRORES THEN FOR THE ASSESSMENT YEAR 2001-02, THE EXTENT OF DEDUCTION IS 80% THEREOF AND SO ON WHICH MEANS THAT THE PRINCIPLE OF PROPORTIONALITY IS BROUGHT IN TO SCALE DOWN THE TAX INCENTIVE IN A PHASED MANNER. HOWEVER, FOR THE PURPOSES OF COMPUTATION OF BOOK PROFITS WHICH COMPUTATION IS DIFFERENT FROM NORMAL ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 8 OF 10 COMPUTATION UNDER THE 1961 ACT/COMPUTATION UNDER CHAPTER VIA. WE NEED TO KEEP IN MIND THE UPWARD AND DOWNWARD ADJUSTMENTS AND IF SO READ IT BECOMES CLEAR THAT CLAUSE (IV) COVERS FULL EXPORT PROFITS OF 100% AS ELIGIBLE PROFITS AND TH AT THE SAME CANNOT BE REDUCED TO 80% BY RELYING ON SECTION 80HHC(1B). THUS, FOR COMPUTING BOOK PROFITS THE DOWNWARD ADJUSTMENT, IN THE ABOVE EXAMPLE, WOULD BE RS.100 CRORES AND NOT RS.90 CRORES. THE IDEA BEING TO EXCLUDE EXPORT PROFITS FROM COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB WHICH IMPOSES MAT ON DEEMED INCOME. THE ABOVE REASONING ALSO GETS SUPPORT FROM THE MEMORANDUM OF EXPLANATION TO THE FINANCE BILL, 2000. 10. ONE OF THE CONTENTIONS RAISED ON BEHALF OF THE DEPARTMENT WAS THAT IF CLAUSE (IV) OF EXPLANATION T O SECTION 115JB IS READ IN ENTIRETY INCLUDING THE LAS T LINE THEREOF (WHICH READS AS 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-SECTI ON (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 EXPLANATION TO SECTION 115JB, IT IS CLEAR THAT BOOK PROFIT SHALL BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 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 ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 9 OF 10 AS MENTIONED IN CLAUSE (IV) OF EXPLANATIN TO SECTIO N 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 COMPUTE D U/S 80HHC (3)/(3A) SUBJECT TO THE CONDITIONS UNDER SUB-CLAUSES (4) AND (4A) OF THAT SECTION. THE CONDITIONS ARE ONLY THAT THE RELIEF SHOULD BE CERTI FIED BY THE CHARTERED ACCOUNTANT. SUCH CNODITION 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 SPECIFIED IN SUB- CLAUSES (4) AND (4A) OF THAT SECTION) TO OBLITERATE THE DIFFERENCE BETWEEN ELIGIBILITY AND DEDUCTIBILITY OF PROFITS AS CONTENDED ON BEHALF OF THE DEPARTMENT . 11. FOR THE ABOVE REASONS, WE SET ASIDE THE IMPUGNED JUDGMENT OF THE HIGH COURT AND RESTORE THE JUDGMENT OF TH TRIBUNAL. ACCORDINGLY THE CIVIL APPEAL OF THE ASSESSEE IS ALLOWED WITH NO ORDER AS TO COSTS. 9. ACCORDING TO THE JUDGMENT OF THE HON'BLE SUPREME COURT, THE TOTAL AMOUNT OF DEDUCTION COMPUTED U/S 80HHC IS TO BE DEDUCTED FROM THE BOOK PROFIT U/S 115JB. THOUGH IT HAS BEEN EXPLAINED ELABORATELY IN THE JUDGMENT OF THE HON'BL E SUPREME COURT INDICATING THAT ULTIMATE DEDUCTION GRANTED TO THE ASSESSEE U/S 80HHC IS NOT THE AMOUNT WHICH IS TO BE REDUCED FROM THE BOOK PROFIT, BUT THE AMOUNT ORIGINALLY COMPUTED FOR DEDUCTION U/S 80HHC HAS TO BE REDUCED, FOR EXAMPLE RS.100/- W AS COMPUTED AS DEDUCTION, ADMISSIBLE U/S 80HHC, BUT AF TER THE FINANCE ACT, 2000, THE RATE OF DEDUCTION HAS BEEN R EDUCED IN PHASED MANNER, FOR EXAMPLE, IF AN ASSESSEE IS ENTIT LED DEDUCTION @ 80%, THEN OUT OF THIS RS.100/-, ASSESSEE WOULD BE ENTITLED ITA NO.1177 AND CO 46 STEER ENGINEERING PVT LTD BAN GALORE PAGE 10 OF 10 RS.80/- AS ACTUAL DEDUCTION. HOWEVER, FOR THE PURPO SE OF BOOK PROFIT RS.100/- IS TO BE REDUCED. THEREFORE, RESPEC TFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT, WE DIREC T THE ASSESSING OFFICER TO REEXAMINE THIS ASPECT AND COMP UTE THE DEDUCTION ADMISSIBLE TO THE ASSESSEE WHILE PREPARIN G THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB. THE GROUND NOS. 2.1 AND 2.2 OF THE CROSS OBJECTION ARE ALLOWED. NO OTHER AR GUMENT WAS ADVANCED BY THE ASSESSEE IN SUPPORT OF GROUND NO.3 RAISED IN THE CROSS OBJECTION. IN VIEW OF THE ABOVE DISCUSSION, T HE APPEAL OF THE REVENUE IS DISMISSED, WHEREAS THE CROSS OBJECTION O F THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER, 2014. SD/- SD/- (JASON P. BOAZ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 14 TH NOVEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE