ACIT, Bangalore V. M/s Hindustan Aeronautics Ltd., Bangalore

ITA 1460/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51308 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: MADHUKAR DHAKAPPA
• Keywords: Rectification of order
• Section: 143(3); 80HHC; 115JB; 154

Judgement Text

PAGE 1 OF 6 ITA NO.1460/BANG/201 0 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS.1460/BANG/2010 (ASST. YEAR 2003-04) THE ADDL. COMMISSIONER OF INCOME TAX, CIRCLE-11(4), BANGALORE. - APPELLANT VS M/S HINDUSTAN AERONAUTICS LTD., NO.15/1, CUBBON ROAD, BANGALORE. - RESPONDENT PA NO.AAACH 3641R DATE OF HEARING : 03/10/2011 DATE OF PRONOUNCEMENT : 07/10/2011 APPELLANT BY : SHRI G V GOPALA RAO, CIT-I RESPONDENT BY : SHRI MADHUKAR DHAKAPPA, C.A. O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-I, BANGALORE DATED 15/09/20 10.. THE RELEVANT ASST. YEAR IS 2003-04. 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE READ S AS FOLLOWS:- I) THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT WHILE COMPUTING THE TAXABLE BUSINESS PROFIT U/S 115JB OF THE I T ACT, 1961, THE DEDUCTION U/S 80HHC COMPUTED ON THE BASIS OF THE BOOK PROFITS IS REQUIRED TO BE REDUCED FROM PAGE 2 OF 6 ITA NO.1460/BANG/201 0 2 THE NET PROFIT AS PER THE ASSESSEES PROFITS AND LO SS ACCOUNT AND NOT THE DEDUCTION ALLOWABLE U/S 80HHC COMPUTED AS PER THE REGULAR PROVISIONS OF THE I T A CT, 1961. II) THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING TH AT AS PER CLAUSE (IV) OF THE EXPLANATION TO SECTION 115JB , WHAT IS REQUIRED TO BE REDUCED FROM THE NET PROFIT, AS P ER THE ASSESSEES PROFIT AND LOSS ACCOUNT, IS THE AMOUNT O F PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC COMPUTED AS PER CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (3) OR SUB- SECTION (3A) OF SECTION 80HHC AS THE CASE MAY BE AND SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 80HHC. 3. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING. I T IS ENGAGED IN THE DESIGN, DEVELOPMENT AND MANUFACTURE OF AIRCRAFT AND ALSO UNDERTAKES REPAIR AND OVERHAUL THEREOF. FOR THE CONCERNED A SST. YEAR, RETURN OF INCOME WAS FILED ON 28 TH NOVEMBER, 2003 DECLARING A TOTAL INCOME OF RS.25,51,29,690/- UNDER THE NORMAL PROVISIONS OF TH E INCOME TAX ACT, 1961 AND ADJUSTED BOOK PROFITS OF RS.3,86,54,09,516/- UN DER THE PROVISIONS OF SECTION 115JB OF THE ACT. SCRUTINY ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 27 TH MARCH, 2006. DEDUCTION U/S 80HHC WAS RECOMPUTED DUE TO THE REDUCTION OF AMOUNT WRITTEN B ACK AS PROVISION NO LONGER REQUIRED OF RS.51,91,38,000/- FROM THE PROF ITS ELIGIBLE U/S 80HHC OF THE ACT. THE ASSESSEE COMPANY FILED AN APPEAL BEFOR E THE COMMISSIONER (APPEALS) ON 24.4.2006 AGAINST THE SAID ORDER. 3.1 THEREAFTER, THE AO PASSED A RECTIFICATION ORD ER U/S 154 OF THE ACT ON 30 TH NOVEMBER, 2007. IN THE RECTIFICATION ORDER PASSED , THE AO DID NOT ACCEPT THE PEA OF THE ASSESSEE TO COMPUTE THE D EDUCTION U/S 80HHC BY PAGE 3 OF 6 ITA NO.1460/BANG/201 0 3 CONSIDERING BOOK PROFIT U/S 115JB OF THE ACT AS PRO FITS OF THE BUSINESS. THE AO ALSO DID NOT ACCEPT THE PRAYER OF THE ASSESSE E FOR REVISION IN COMPUTATION OF MINIMUM ALTERNATE TAX U/S 115JB OF T HE ACT BY REDUCING THE PROVISION FOR DEFERRED TAX. 4. AGGRIEVED BY THE ORDER OF THE AO PASSED U/S 154 (DATED 30.11.2007), THE ASSESSEE FILED AN APPEAL BEFORE TH E CIT(A) ON 12.12.2007. 5. BOTH APPEALS FILED BY THE ASSESSEE WERE TAKEN UP FOR DISPOSAL TOGETHER BY THE FIRST APPELLATE AUTHORITY. DURING TH E COURSE OF HEARING, THE ASSESSEE DID NOT PRESS THE APPEAL FILED AGAINST THE ORDER OF THE AO PASSED U/S 143(3) (DT.27.3.2006), SINCE THE GROUNDS OF APP EAL DID NOT HAVE AN IMPACT ON THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AS AGAINST THE O RDER OF THE AO PASSED U/S 154 OF THE ACT. THE CIT(A) FOLLOWED THE ORDER O F THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.581/BANG/2006 DATED 1 3/2/2009 FOR THE ASST. YEAR 2002-03. THE RELEVANT FINDING OF THE CIT (A) READS AS FOLLOWS:- 8. I HAVE GONE THROUGH THE SUBMISSION AS WELL AS T HE REMAND REPORT. THE ISSUE HAS NOW BEEN SETTLED IN F AVOUR OF THE APPELLANT BY THE DECISION OF THE ITAT BENCH B, BANGALORE IN ITA NO.581/BANG/2006 DATED 13.2.2009 I N ASSESSEES OWN CASE PERTAINING TO THE AY 2002-03 WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSMENT IS TO BE MADE ON BOOK PROFIT CALCULATED U/S 115JB OF I T ACT , THEN THE DEDUCTION U/S 80HHC HAS ALSO TO BE COMPUTE D ON THE BASIS OF ADJUSTED BOOK PROFITS AS REQUIRED B Y SECTION 115JB ITSELF. THE AO IS DIRECTED THEREFOR E TO RECOMPUTE THE DEDUCTION U/S 80HHC OF I T ACT AND NO T TREAT THE SAME AS NIL, AS HAS BEEN DONE BY HIM IN TH E PAGE 4 OF 6 ITA NO.1460/BANG/201 0 4 ORDER U/S 154 DATED 30/11/2007. APPEAL IS ALLOWED ON THIS GROUND. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. AT THE VERY OUTSET IT WAS SUBMITTED BY THE LEARNE D COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. V CIT 327 ITR 305 AND ALSO BY THE ORDER OF THE MUMBAI SPECIAL BENCH IN THE CASE OF DCIT V SYNCOME FORMULATIONS (I) LTD. 292 ITR (AT) 14 4. IT WAS FURTHER SUBMITTED THAT IN ASSESSEES OWN CASE FOR THE IMMED IATELY PRECEDING ASST. YEAR, NAMELY 2002-03, THE ISSUE HAS BEEN DECIDED IN F AVOUR OF THE ASSESSEE COMPANY VIDE ORDER OF THE TRIBUNAL CITED SUPRA. 8. THE LEARNED DR FAIRLY SUBMITTED THAT THE ISSUE I S COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE CI TED SUPRA. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2002-03 (ITA NO.581/2006 DT.13.2.2009) HELD THAT THOUGH NO DEDUCTION U/S 80HHC IS ALLOWABLE TO THE ASSESSEE IF THE ELIGIBLE PROFITS A RE COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT, IF THE ASSESSMENT IS TO BE MADE ON BOOK PROFIT CALCULATED U/S 115JB, THEN THE DEDUCTION U/S 80HHC HAS ALSO TO BE COMPUTED ON THE BASIS OF THE ADJUSTED BOOK PROFIT A S REQUIRED BY SECTION 115JB ITSELF . THE RELEVANT FINDING OF THE TRIBUNAL AT PARA 8 READS AS FOLLOWS:- PAGE 5 OF 6 ITA NO.1460/BANG/201 0 5 8. SO FAR AS THE MERITS OF THE ADDITIONAL GROUND I S CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL, MUMBAI BENCH IN DCIT & OTHERS V SYNCHOME FORMULATIONS INDIA LTD., AND OTHER CASES REPORTED I N (2007) 292 ITR (AT) 144. IN THIS ORDER, IT HAS BEE N HELD THAT SECTION 115JB HAS OVERRIDING EFFECT AND THE SP ECIAL DEDUCTION U/S 80HHC IS TO BE CALCULATED ON THE ADJU STED BOOK PROFIT AND NOT ON PROFITS CALCULATED UNDER OTH ER PROVISIONS OF THE ACT. THE GIST OF THE SPECIAL BEN CH ORDER IS THAT ONCE THE LAW ITSELF HAS DECLARED THAT THE ADJUSTED BOOK PROFIT IS AMENABLE FOR FURTHER DEDUCT IONS ON SPECIFIED GROUNDS, IN A CASE WHERE SECTION 80HHC IS OPERATIONAL, THE COMPUTATION FOR THE DEDUCTION U/S 80HHC NEEDS TO BE WORKED OUT ON THE BASIS OF THE VE RY SAME ADJUSTED BOOK PROFIT AND THAT THIS IS MANIFEST FROM THE FACT THAT THE DEDUCTION U/S 80HHC HAS BEEN PROVIDED IN SECTION 115JB ITSELF INSTEAD OF MAKING A REFERENCE IN SECTION 80HHC. ACCORDING TO THE SPECI AL BENCH IT IS MADE SO BECAUSE THE NEXUS BETWEEN THE DEDUCTION U/S 80HHC AND THE PROFIT IN A MINIMUM ALTERNATE TAX REGIME IS BETWEEN THE DEDUCTION AND T HE ADJUSTED BOOK PROFIT. ACCORDINGLY, THE SPECIAL BENCH OBSERVED THAT IT IS INHERENT IN THE LAW ITSELF WHIC H GIVES DEDUCTIONS OUT OF ADJUSTED BOOK PROFIT THAT THE ASS ESSEE GETS A HIGHER AMOUNT OF DEDUCTION WORKED OUT ON THE BASIS OF THE BOOK PROFIT WHICH DEDUCTION WOULD NOT HAVE BEEN AVAILABLE TO IT IF THE QUANTUM OF THE DEDUCTIO N IS WORKED OUT UNDER THE NORMAL PROVISIONS OF COMPUTATI ON OF INCOME. THE LAW ITSELF HAS PROVIDED THAT IN SPITE OF THE LIABILITY TO PAY TAX UNDER THE MINIMUM ALTERNATE TAX SCHEME, THE EXPORTER WOULD BE ENTITLED TO THE DEDUC TION U/S 80HHC. THE CONTROVERSY IN THE PRESENT CASE IS T HUS COVERED IN FAVOUR FO THE ASSESSEE BY THE ABOVE ORDER OF THE SPECIAL BENCH. IT IS THE CASE OF THE ASSESSEE BEFORE US THAT THOUGH NO DEDUCTION U/S 80HHC IS ALLOWABLE TO THE ASSESSEE IF THE ELIGIBLE PROFITS ARE COMPUTED U NDER THE NORMAL PROVISIONS OF THE ACT, IF THE ASSESSMENT IS TO PAGE 6 OF 6 ITA NO.1460/BANG/201 0 6 BE MADE ON BOOK PROFIT CALCULATED U/S 115JB, THEN T HE DEDUCTION U/S 80HHC HAS ALSO TO BE COMPUTED ON THE BASIS OF THE ADJUSTED BOOK PROFIT AS REQUIRED BY SEC TION 115JB ITSELF. THIS CONTENTION HAVING BEEN ACCEPTED BY THE SPECIAL BENCH IN THE ORDER CITED SUPRA, RESPECT FULLY FOLLOWING THE SAID ORDER WE ALLOW THE ADDITIONAL GR OUND FILED BY THE ASSESSEE AND DIRECT THE ASSESSING OFFIC ER TO ALLOW THE DEDUCTION U/S 80HHC WHILE COMPUTING THE B OOK PROFIT U/S 115JB IN THE MANNER LAID DOWN BY THE SPEC IAL BENCH. THE FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING T HE COORDINATE BENCH DECISION OF THE TRIBUNAL, WE DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. THEREFORE, WE HOLD THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND WE AFFIRM THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DAY OF OCTOBER, 2011 SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1.THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCE RNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.