M/s RINL., Visakhapatnam V. The ACIT, Circle-3(1)., Visakhapatnam

ITA 222/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7127 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 24-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Depreciation; Bad and doubtful debts; Unabsorbed depreciation; Set aside
• Section: 43B; 80HHC; 115JB; 10B; 195; 43D; 80HH; 32; 12; 28; 10; 154; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.222&223/VIZAG/2007 ASSESSMENT YEARS : 2003-04 & 2004-05 RESPECTIVELY M/S. RASHTRIYA ISPAT NIGAM LTD. VISAKHAPATNAM ACIT, CIRCLE-3(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AABCR 0435L APPELLANT BY: SHRI K.C. DEVDAS, CA RESPONDENT BY: SHRI SUBRATA SARKAR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE RESPECTIVE ORDERS OF THE CIT(A) PERTAINING TO THE ASSESSMENT Y EAR 2003-04 & 2004-05. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF THROUGH THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUND NOS.1 TO 3 IN BOTH THE APPEALS RELATE TO DISALLOWANCE OF DEPRECIATION ON RAILWAY LINE AND SIDINGS. IN THIS REGARD, IT IS REPORTED THAT ASSESSEE COULD NOT OBTAIN THE PERMISSION FROM THE C OD (COMMITTEE OF DISPUTES) FOR PROSECUTING THESE APPEALS. AS SUCH, THESE GROUNDS ARE DISMISSED FOR WANT OF CODS PERMISSION. 3. THE NEXT GROUND RELATE TO THE COMPUTATION OF BOO K PROFIT U/S 115 JB OF THE ACT. ON THIS ISSUE THE ASSESSEE HAS RAISED 3 G ROUNDS IN BOTH THE APPEALS AND FOR THE SAKE OF REFERENCE WE EXTRACT THE GROUND S RAISED IN ITA NO.222 OF 2007 AS UNDER: COMPUTING BOOK PROFIT U/S 115JB 1. THE LD. CIT(A) ERRED IN COMPUTING BOOK PROFIT U/S 1 15JB BY SETTING OFF THE BROUGHT FORWARD BUSINESS LOSS OF RS.5,41,80,16,449/- PRIOR TO SET OFF OF ADMISSIBLE DEDUCTION U/S 2 80HHC OF RS.54,01,02,420/- (RS.44,55,20,309/- AS PE R AMENDMENT OF 2005 W.E.F. 1.4.98) 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ELIGIB LE EXPORT PROFITS FOR THE PURPOSES OF DEDUCTION PERMISSIBLE U /S 115JB READ WITH CLAUSE (IV) EXPL. TO THE SAID SECTION IS THE A CTUAL EXPORT PROFIT AND NOT THE DEDUCTION ELIGIBLE U/S 80HHC UND ER NORMAL PROVISION. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE BOOK P ROFIT IS TO BE COMPUTED STRICTLY IN ACCORDANCE WITH PROVISION OF S EC. 115JB AND WHILE COMPUTING BOOK PROFIT U/S 115JB THE AMOUN T REPRESENTING PROFIT ELIGIBLE FOR DEDUCTION U/S 80HH C SHOULD BE EXCLUDED UNDER EXPL. (IV) TO SEC. 115JB. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3.1 THE ASSESSEE HAS ALSO RAISED ONE ADDITIONAL GRO UND AS UNDER: 1. THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961 MUST BE COMPUTED WITH REFERENCE TO BOOK-P ROFITS OF THE APPELLANT AND NOT ON THE PROFITS AS COMPUTED UN DER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 AS HE LD BY THE SPECIAL BENCH H OF THE HON'BLE INCOME TAX APPELLA TE TRIBUNAL, MUMBAI IN THE CASE OF THE DCIT, RANGE 8(3), MUMBAI VS. M/S. SYNCOME FORMULATIONS (I) LTD. AND OTHERS REPORTED IN 106 ITD 193 (SB). 3.2 SINCE THE GROUND IS LEGAL WE ADMIT THE SAME AND ADJUDICATE IT ALONG WITH OTHER GROUNDS RAISED ON MERIT. 4. THESE GROUNDS RELATE TO NON-REDUCTION OF DEDUCTI ON ADMISSIBLE U/S 80HHC OF THE ACT BEFORE SETTING OFF THE BROUGHT FOR WARD DEPRECIATION OR UNABSORBED BUSINESS LOSS WHICHEVER IS LESS FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THE ASSESSING OF FICER IN THE ORIGINAL ASSESSMENT ORDER HAS NOT DISCUSSED ANYTHING RELATIN G TO THE ADMISSIBLE DEDUCTION U/S 80HHC OF THE ACT. SUBSEQUENTLY, THE ASSESSEE FILED PETITION U/S 154 OF THE ACT AND SAME WAS DISPOSED OFF BY THE A.O. VIDE ORDER DATED 14.11.2006 WHEREIN ASSESSEES PETITION U/S 154 WAS REJECTED. AS PER THE A.O., TO ARRIVE AT TAXABLE INCOME U/S 115JB DEDUCTI ON U/S 80HHC HAS TO BE DECREASED FROM THE BOOK PROFITS UNDER CLAUSE (IV) O F EXPLANATION TO 115JB. BEFORE GIVING THE DEDUCTION, IT IS NECESSARY TO RED UCE THE ACCUMULATED BUSINESS LOSS OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER CLAUSE (III) OF THE EXPLANATION. IN THE CASE OF THE ASSESSEE WH EN THE PROVISION OF CLAUSE (III) WAS APPLIED, THE BOOK PROFIT GOT ELIMINATED A ND HENCE THE QUESTION OF 3 COMPUTATION OF DEDUCTION U/S 80HHC DOES NOT ARISE. THE A.O. FURTHER HELD THAT SECTION 80HHC IS ALSO GOVERNED BY SECTION 80AB AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. VS . DCIT 266 ITR 521. 5. RELYING UPON THE JUDGEMENT OF THE M.P. HIGH COUR T IN THE CASE OF B.P. SOLVENTS PRODUCT LTD. VS. CIT 273 ITR 107 A.O. HAS HELD THAT CARRY FORWARD AND SET OFF OF BUSINESS LOSS HAS TO BE GIVEN EFFECT TO WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE AND IT IS FROM SUCH IN COME DEDUCTION U/S CHAPTER VIA HAS TO BE GIVEN. THUS THE ASSESSEE IS NOT ENTI TLED TO A DEDUCTION ADMISSIBLE U/S 80HHC OF THE ACT. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT SECTION 115 JB PROVIDES FOR COMPUT ATION OF PAYMENT OF TAX BY CERTAIN COMPANIES. ACCORDING TO THE SECTION 80A B, AN ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION UNDER CHAPTER VIA INCLUDI NG SECTION 80HHC IN CASE WHERE GROSS TOTAL INCOME IS NIL OR NEGATIVE. THIS RESTRICTION IS PLACED BY SECTION 80AB AND IS APPLICABLE IN A CASE OF COMPUTA TION OF INCOME UNDER NORMAL PROVISIONS OF THE ACT. THE JUDGEMENT OF THE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. WAS ALSO COMMENTED BY THE LD . COUNSEL FOR THE ASSESSEES WITH THE SUBMISSION THAT IN IPCA LABORATO RIES IT WAS CLARIFIED THAT WHEN THE ASSESSEE IS HAVING LOSS IN ONE EXPORT DIVI SION, THE LOSS SHOULD NOT BE IGNORED AND IS TO BE SET OFF AGAINST THE PROFIT IN OTHER DIVISION BEFORE WORKING OUT THE ELIGIBLE DEDUCTIONS U/S 80HHC OF TH E ACT. IT DOES NOT MEAN THAT BROUGHT FORWARD DEPRECIATION OR BUSINESS LOSS ALSO SHOULD BE DEDUCTED FROM THE PROFIT OF THE ASSESSEES OF THAT PARTICULAR YEAR SO AS TO WORK OUT THE ELIGIBLE DEDUCTION U/S 80HHC OF THE ACT. IN SUPPOR T OF THIS CONTENTION HE HAS PLACED A RELIANCE UPON THE VARIOUS JUDGEMENTS. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF JUDGEMENT OF THE APEX COURT I N THE CASE OF IPCA LABORATORIES LTD. (SUPRA) AND CIT VS. GOGINENI TOBA CCO LTD. 288 ITR 970 BUT WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSE SSEES AND CONFIRMED THE ORDER OF THE A.O. AFTER HAVING OBSERVED THAT SECTIO N 80AB SPECIFIES THAT FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT S ECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THIS 4 ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER ) CLEARLY MEANS THAT WHATEVER DEDUCTIONS IS TO BE MADE AS PER THE PROVIS IONS OF THE ACT SHOULD BE MADE BEFORE MAKING THE SPECIFIED ADJUSTMENT AS PER THAT SECTION. THE CIT HAS ALSO OBSERVED THAT AS PER WORDING OF CLAUSE (BA A) OF EXPLANATION TO SECTION 80HHC AS WELL AS THE RATIO LAID DOWN THE AP EX COURT IN THE CASE OF IPCA LABORATORIES LTD. (SUPRA) IT IS A SETTLED POSI TION OF LAW THAT BROUGHT FORWARD LOSSES HAD TO BE TAKEN INTO CONSIDERATION B EFORE COMPUTING THE ELIGIBLE DEDUCTION U/S 80HHC OF THE ACT. 7. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS REITERATED ITS CONTENTIONS AS RAISED BEFORE THE CIT (A). HE HAS ALSO CONTENDED THAT ELIGIBLE EXPORT PROFIT FOR THE PURPOSE OF DEDU CTION PERMISSIBLE U/S 115JB READ WITH CLAUSE IV OF THE EXPLANATION TO THE SAID SECTION IS THE ACTUAL PROFIT AND NOT THE DEDUCTION ELIGIBLE U/S 80HHC AS PER NOR MAL PROVISIONS. THE BOOK PROFIT IS TO BE COMPUTED STRICTLY IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 115JB AND THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCT ION U/S 80HHC SHOULD BE EXCLUDED AS PER EXPLANATION IV TO SECTION 115JB. H E HAS ALSO PLACED A RELIANCE UPON THE FOLLOWING JUDGEMENTS: 1) CIT VS. K.G. DENIM LTD. 180 TAXMAN 592 MADRAS HIGH COURT 2) CIT VS. RAJNIKANTH SCNELDER AND ASSOCIATES PVT. LTD . 302 ITR 220 MADRAS HIGH COURT 3) CIT VS. GTN TEXTILES LTD. 248 ITR 372 KERALA HIGH C OURT 4) DCIT VS. M/S. SYNCOME FORMULATION (I) LTD. AND OTHE RS 106 ITD 193 SPECIAL BENCH. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO TRIED TO DISTINGUISH THE JUDGEMENT OF THE BOMBAY HIGH COURT IN THE CASE OF C IT VS. AJANTA PHARMA LTD. REPORTED IN 180 TAXMAN 494 WHICH HAS OVERRULED THE LEGAL PROPOSITIONS LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. SYNCOME FORMULATION INDIA LTD. (SUPRA) AND DCIT VS. GOVIND RUBBER PVT. LTD. 82 TTJ 615 (MUMBAI) WITH THE SUBMISSION THAT IN AJANTA PHARMA LTD. THE ISSUE BEFORE THE HIGH COURT WAS; WHETHER FOR THE PURPOSE OF CALCULAT ING BOOK PROFIT U/S 115JB OF THE ACT, THE EXPORT PROFIT WHICH IS TO BE EXCLUD ED FROM BOOK PROFIT WOULD BE THE EXPORT PROFIT ALLOWED AS A DEDUCTION U/S 80H HC AFTER RESTRICTING THE DEDUCTIONS AS PER PROVISIONS OF SUB-SECTION 1B OF S ECTION 80HHC OF THE 5 ACT OR THE EXPORT PROFITS CALCULATED AS PER SUB-SEC TION 3 AND 3A OF SECTION 80HHC BEFORE APPLYING THE RESTRICTION CONTAINED IN SUB-SECTION 1B OF SECTION 80HHC. AS SUCH THE LAW LAID DOWN THROUGH THIS JUDG EMENT BY THE BOMBAY HIGH COURT CANNOT BE APPLIED IN THE PRESENT FACTS O F THE CASE AS THEY ARE DISTINGUISHABLE ON FACTS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT JUDGEMENT OF AJANTA PHARMA LTD. WAS CONSIDERED BY THE TRIBUNAL OF BOMBAY BENCH IN THE CASE OF DCIT VS. GLENMARK LABOR ATORIES DECIDED ON 25.11.2009 BUT THE COPY OF THIS ORDER IS NOT PLACED BEFORE US FOR PERUSAL. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT WHERE TWO VIEWS ARE POSSIBLE THE VIEW FAVOURABLE TO THE ASSESSEES SHOUL D BE ADOPTED FOLLOWING THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. REPORTED IN 88 ITR 192. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. THE CONTROVERSY RAISED BEFORE US IS WITH REGARD TO THE AMOUNT OF PR OFITS ELIGIBLE FOR DEDUCTION U/S 80HHC FOR THE PURPOSE OF COMPUTING BOOK PROFIT AS PER EXPLANATION 1 OF SECTION 115 JB OF THE ACT. WHETHER DEDUCTION ADMIS SIBLE U/S 80HHC IS BEFORE SET OFF OF UNABSORBED BUSINESS LOSS OR DEPRECIATION WHICHEVER IS LESS OR THE ELIGIBLE DEDUCTION U/S 80HHC SHOULD BE WORKED OUT A FTER REDUCING THE BROUGHT FORWARD DEPRECIATION ALLOWANCE AND BUSINESS LOSS. A DISPUTE WAS ALSO RAISED WITH REGARD TO THE APPLICABILITY OF THE RESTRICTIONS PLACED BY SECTION 80AB IN COMPUTATION AND ENTITLEMENT OF DEDUCTIONS U NDER CHAPTER VIA INCLUDING SECTION 80HHC OF THE ACT. 10. SO FAR AS APPLICABILITY OF PROVISIONS OF SECTIO N 80AB IS CONCERNED THE CONTROVERSY HAS BEEN SET AT REST BY THE HON'BLE SUP REME COURT THROUGH ITS JUDGEMENT IN THE CASE OF IPCA LABORATORIES LTD. VS. DCIT 266 ITR 521 (SC) IN WHICH THEIR LORDSHIP HAVE CATEGORICALLY HELD THA T SECTION 80AB HAS BEEN GIVEN OVER RIDING EFFECT OVER ALL OTHER SECTIONS IN CHAPTER VIA. SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO PREVAIL OVER SECTION 80AB OR OVER ANY OTHER PROVISIONS OF THE ACT. SECTION 80HHC WOU LD THUS BE GOVERNED BY SECTION 80AB. THE APEX COURT ACCORDINGLY OVERRULED THE LEGAL PROPOSITIONS LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF C IT VS. 6 SHIRKE CONSTRUCTION EQUIPMENTS LTD. 246 ITR 429 AND OF ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. GOGINENI TOBACCO LTD. 238 ITR 970 AND ALSO OF THE GUJARAT HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. ARVIND MILLS LTD. 254 ITR (GUJ) 529. NOW THE CONTROVERSY REMAINS FOR OUR CONSIDERATIONS IS; WHAT WOULD BE THE AMOUNT OF PROFITS ELIGIBLE FOR DE DUCTION U/S 80HHC OF THE ACT. 11. WE HAVE PERUSED THE JUDGEMENT OF THE KERALA HIG H COURT IN THE CASE OF GTN TEXTILES (SUPRA) AND THE SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF DCIT VS. SYNCOME FORMULATION INDIA LTD. (SUPRA). T HE CITATION GIVEN FOR THE JUDGEMENTS OF CIT VS. K.G. DENIM LTD. AND CIT VS. R AJNIKANTH SCNELDER AND ASSOCIATES PVT. LTD. WERE FOUND TO BE WRONG AND WE COULD NOT LAY OUR HANDS ON THESE JUDGEMENTS. THE LD. COUNSEL FOR THE ASSES SEE HAS ALSO MADE A REFERENCE TO JUDGEMENT OF TRIBUNAL OF BOMBAY BENCH IN THE CASE OF DCIT VS. GLENMARK LABORATORY BUT COPY OF THE SAME WAS NOT PL ACED ON RECORD. WE THEREFORE, COULD NOT TAKE COGNIZANCE OF THIS ORDER. WE HOWEVER, HAVE CAREFULLY EXAMINED THE JUDGEMENT OF THE KERALA HIGH COURT IN THE CASE OF GTN TEXTILES LTD. (SUPRA) AND THE ORDER OF THE SPEC IAL BENCH IN THE CASE OF DCIT VS. SYNCOME FORMULATION LTD. AND WE ARE OF THE VIEW THAT THE RATIO LAID DOWN IN THE CASE OF SYNCOME FORMULATION LTD. WAS OV ERRULED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AJANTA PHARMA LTD . 180 TAXMAN 494. THE APPEAL IN THE CASE OF AJANTA PHARMA LTD. WAS DISPOS ED OFF BY THE TRIBUNAL FOLLOWING THE ORDER OF THIS SPECIAL BENCH IN THE CA SE OF SYNCOME FORMULATION INDIA LTD. AND WHILE DEALING WITH THE ISSUE, THE HO N'BLE HIGH COURT HAS EXAMINED THE LEGAL PROPOSITIONS LAID DOWN BY THE TR IBUNAL IN THE CASE OF SYNCOME FORMULATION (I) LTD. BEING NOT CONVINCED W ITH THEIR LORDSHIP HAVE OVERRULED IT. WHILE OVERRULING THE LEGAL PROPOSITI ON LAID DOWN IN SYNCOME FORMULATION, THEIR LORDSHIP OF THE BOMBAY HIGH COUR T HAVE CATEGORICALLY HELD AS UNDER: WE HAD THE BENEFIT OF GOING THROUGH REASONING AND THE ORDERS OF THE TRIBUNAL IN SYNCOME (SUPRA) AS ALSO IN THE CASE OF DCIT VS. GOVIND RUBBER PVT. LTD. (SUPRA). IT IS NOT POSSIBLE TO AGREE WIT H THE VIEW TAKEN BY THE BENCHES. THOSE DECISIONS IN VIEW OF THIS JUDGEMENT STAND OVER-RULED. 7 IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESS EE THAT THE ISSUE BEFORE THE MUMBAI HIGH COURT IS ENTIRELY DIFFERENT THAN THE ISSUE RAISED IN THE CASE OF SYNCOME FORMULATION (I) LTD. BUT BOTH THE Q UESTIONS RAISED BEFORE THE BOMBAY HIGH COURT RELATE TO THE CALCULATION OF THE AMOUNT OF PROFIT TO BE EXCLUDED FROM THE NET PROFIT FOR COMPUTING THE BOOK PROFIT U/S 115 JB OF THE I.T. ACT. WHILE DEALING WITH THEIR LORDSHIP OF THE HON'BLE HIGH COURT OF BOMBAY HAD OCCASION TO EXAMINE THE ORDER OF THE SPE CIAL BENCH OF THE TRIBUNAL IN THE CASE OF SYNCOME FORMULATION INDIA L TD. AND THE PROPOSITIONS LAID DOWN THEREIN. HAVING NOT AGREED WITH THE LEGA L PROPOSITIONS LAID DOWN IN THE CASE OF SYNCOME FORMULATION (I) LTD. THEIR LORD SHIPS OF THE BOMBAY HIGH COURT HAVE OVER RULED THIS ORDER IN SO MANY SPECIFI C WORDS. ONCE THE JUDGEMENT OF THE SPECIAL BENCH HAS BEEN OVER RULED BY ITS JURISDICTIONAL HIGH COURT IT LOOSES ITS BINDING FORCE OVER OTHER BENCHE S OF THE TRIBUNAL. WE THEREFORE OF THE VIEW THAT THE QUESTION POSED BEFOR E US SHOULD BE EXAMINED INDEPENDENTLY WITHOUT BEING INFLUENCED WITH THE PRO POSITIONS LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF SYNCOME FORMULATIO N (I) LTD. (SUPRA). 12. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGEMENT O F THE KERALA HIGH COURT AND WE FIND THAT THE JUDGEMENT WAS RENDERED IN 2000 AND THAT TOO IN RESPECT OF COMPUTATION OF BOOK PROFIT U/S 115 J OF THE I.T. ACT. SECTION 115J AND 115JB ARE NOT IDENTICAL. THERE ARE DIFFERENCES IN BOTH THE SECTIONS. THE LANGUAGE USED IN CLAUSE (III) OF EXPLANATION BELOW SECTION 115J(1A) AND CLAUSE IV OF EXPLANATION BELOW SECOND PROVISO OF SUB-SECTI ON 2 OF SECTION 115 JB ARE NOT SIMILAR. FOR THE SAKE OF REFERENCE, WE EXTRACT THE PROVISIONS OF CLAUSE (III) OF EXPLANATION OF 115J AND CLAUSE (IV) OF THE EXPLA NATION 115 JB AS UNDER: SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES. 115J (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSE SSEE BEING A COMPANY [(OTHER THAN A COMPANY ENGAGED IN THE BUSIN ESS OF GENERATION OR DISTRIBUTION OF ELECTRICITY)], THE TO TAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1988 [BUT BEFORE THE 1 ST DAY OF APRIL, 1991] (HEREAFTER IN THIS 8 SECTION REFERRED TO AS THE RELEVANT PREVIOUS YEAR), IS LESS THAN THIRTY PER CENT OF ITS BOOK PROFIT, THE TOTAL INCOME OF SU CH ASSESSEE CHARGEABLE TO TAX FOR THE RELEVANT PREVIOUS YEAR SH ALL BE DEEMED TO BE AN AMOUNT EQUAL TO THIRTY PER CENT OF SUCH BOOK PROFIT. [(1A) EVERY ASSESSEE, BEING A COMPANY, SHALL, FOR T HE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT F OR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 195 6).] EXPLANATIONFOR THE PURPOSES OF THIS SECTION, BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCO UNT FOR THE RELEVANT PREVIOUS YEAR [PREPARED UNDER SUB-SECTION (1A)], AS INCREASED BY . . . [IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (F) IS DEBITED OR, AS THE CASE MAY BE, THE AMOUNT REFERRED TO IN CLAUSES (G) AND (H) IS NOT CREDITED] TO THE PROFIT AND LOSS ACCOUNT, AND AS RE DUCED BY,-- . . . [(III) THE AMOUNTS [AS ARRIVED AT AFTER INCREASING THE NET PROFIT BY THE AMOUNTS REFERRED TO IN CLAUSES (A) TO (F) AND R EDUCING THE NET PROFIT BY THE AMOUNTS REFERRED TO IN CLAUSES (I) AN D (II)] ATTRIBUTABLE TO THE BUSINESS, THE PROFITS FROM WHICH ARE ELIGIBL E FOR DEDUCTION UNDER SECTION 80HHC OR SECTION 80HHDL; SO; HOWEVER, THAT SUCH AMOUNTS ARE COMPUTED IN THE MANNER SPECIFIED IN SUB -SECTION (3) OR SUB-SECTION (3A) OF SECTION 80HHC OR SUB-SECTION (3) OF SECTION 80HHD, AS THE CASE MAY BE; OR] .. .. .. 115JB (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSE SSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOM E AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2001, IS LESS THAN SEVEN AND ONE-HALF PER CENT OF I TS BOOK PROFIT, [SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL I NCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUC H TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RATE OF SE VEN AND ONE- HALF PER CENT]. (2) EVERY ASSESSEE, BEING A COMPANY, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR TH E RELEVANT PREVIOUS 9 YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956): PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT,-- (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DE PRECIATION, SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS A CCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT, 1956 (1 OF 1956): PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THI S ACT,- (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUN TING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPREC IATION WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLU DING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUC H FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION(1)FOR THE PURPOSES OF THIS SECTION, B OOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOS S ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION ( 2), AS INCREASED BY (A) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE P ROVISION THEREFORE; OR (B) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NA ME CALLED [OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC] ; OR (C) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES; OR (D) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBSID IARY COMPANIES; OR (E) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOSED ; OR (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO A NY INCOME TO WHICH SECTION 10 [(OTHER THAN THE PROVISIONS CON TAINED IN CLAUSE (23G) THERE)] OR SECTION 10A OR SECTION 10B OR SECT ION 11 OR SECTION 12 APPLY. IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (F) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY 10 .. ....... (IV) THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR C LAUSE (C) OF SUB-SECTION (3) OR SUB-SECTION (3A), AS THE CASE MA Y BE, OF THAT SECTION, AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION; OR .. .. .. (VII) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FO R THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COM PANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVIS IONS) ACT, 1985 (1 OF 1986) AND ENDING WITH THE ASSESSMENT YEAR DUR ING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO O R EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, NET WORTH SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (G A) OF SUB- SECTION(1) OF SECTION 3 OF THE SICK INDUSTRIAL COMP ANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986). 13. IN CLAUSE (III) WHAT IS TO BE WORKED OUT IS THE PROFITS FROM WHICH ARE ELIGIBLE FOR DEDUCTION U/S 80HHC OR SECTION 80HHD; SO HOWEVER, THAT SUCH AMOUNT ARE COMPUTED IN THE MANNER SPECIFIED IN SUB- SECTION (3) OR SUB- SECTION 3A OF SECTION 80HHC OR SUB-SECTION 3 OF SEC TION 80HHD AS THE CASE MAY BE. BUT IN CLAUSE (IV) WHAT IS TO BE COMPUTED IS THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC COMPUTED IN CLAUSE (A) CLAUSE (B) CLAUSE (C) OF SUB-SECTION (3) OR (3A) AS THE CASE MAY BE OF TH AT SECTION AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION. SINCE TH E LANGUAGE USED IN BOTH THE CLAUSES OF EXPLANATIONS ARE DIFFERENT THE PROPOSITI ON LAID DOWN BY THE KERALA HIGH COURT IN THE CASE OF GTN TEXTILES LTD. CANNOT BE APPLIED TO COMPUTE THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 14. FROM A PLAIN READING OF SECTION 115 JB VIS--VI S SECTION 80HHC OF THE ACT WE FIND THAT U/S 115JB STARTS WITH NON-OBSTANTE CLAUSE AND HAS OVERRIDING EFFECT OVER THE OTHER PROVISIONS OF THE ACT AND MAK E ALL THOSE COMPANIES 11 LIABLE TO PAY TAXES WHO OTHERWISE ARE SHOWING THEIR INCOME AT NIL OR LOSSES UNDER THE INCOME TAX ACT. AS PER THIS SECTION, WHE RE THE ASSESSEE BEING A COMPANY, THE INCOME TAX PAYABLE ON THE TOTAL INCOME COMPUTED UNDER THE INCOME TAX ACT IN RESPECT ANY PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER FIRST DAY OF APRIL, 2001 IS LESS THAN 7 % OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO THE TOT AL INCOME OF THE ASSESSEES AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL I NCOME SHALL BE AMOUNT OF INCOME TAX @ 7 1/2 % OF SUCH BOOK PROFIT. THE BOOK PROFIT IS TO BE COMPUTED AS PER EXPLANATION GIVEN IN THE SECTION. IN THIS EXPLANATION, THE BOOK PROFIT HAS BEEN DEFINED AND ITS MODE OF COMPUT ATION WAS ALSO GIVEN. FOR COMPUTING THE BOOK PROFIT, THE NET PROFIT IS TO BE WORKED OUT FROM THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART 2 &3 OF SCHEDULE IV OF THE COMPANIES ACT, 1956. ONCE THE NET PROFIT IS DETERMINED IT HAS TO BE INCREASED BY DIFFERENT AMOU NTS REFERRED TO IN CLAUSE (A) TO (F) IF IT IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THE RESULTANT WOULD FURTHER BE REDUCED BY AN AMOUNT SPECIFIED IN CLAUSE I TO VII. THIS IS HOW THE BOOK PROFIT IS TO BE COMPUTED AND ONCE IT IS COMPUT ED, IT WOULD BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEES AND INCOME TAX ON SUCH TOTAL INCOME SHALL BE CALCULATED @ 7 %. THIS SECTION 115JB D OES NOT GOVERN THE MODE OF CALCULATION OF AMOUNT OF PROFITS ELIGIBLE FOR DE DUCTION U/S 80HHC OF THE ACT. AS PER CLAUSE (IV) OF THE EXPLANATION, THE AMOUNT O F PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC IS TO BE REDUCED FROM THE RESUL TANT FIGURE WORKED OUT AFTER THE FIRST STOP I.E. INCREASE OF NET PROFIT BY VARIOUS AMOUNTS SPECIFIED IN CLAUSE (A) TO (F) OF THE EXPLANATION. 15. THOUGH THE LEGAL PROPOSITIONS LAID DOWN BY THE TRIBUNAL IN THE CASE OF SYNCOME PVT. LTD. HAS BEEN OVER RULED BY THE JURISD ICTIONAL HIGH COURT I.E. BOMBAY HIGH COURT IN THE CASE OF AJANTA PHARMA LTD. YET WE HAVE EXAMINED THAT ORDER AND WE FIND THAT TRIBUNAL HAS MADE A REF ERENCE OF THE ADJUSTED BOOK PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE I.T. ACT. THE WORD ADJUSTED BOOK PROFIT HAS BEEN USED FIRST T IME BY THE TRIBUNAL IN ITS ORDER. WE HOWEVER, DO NOT FIND ANY REFERENCE OF TH IS WORD IN ANY OF THE PROVISIONS OF THE INCOME TAX ACT. THE BOOK PROFIT CANNOT BE WORKED WITHOUT COMPLETING BOTH THE STEPS I.E. (1) INCREASE OF NET PROFIT BY THE AMOUNT 12 SPECIFIED IN CL.(A) TO (F) OF EXPLANATION (2) REDUC TION OF THE RESULTANT BY AN AMOUNT SPECIFIED IN CL.(I) TO (VII). WITHOUT COMPL ETING THE PROCESS OF COMPUTATION OF BOOK PROFIT, ADJUSTED BOOK PROFIT CA NNOT BE WORKED OUT IN BETWEEN FOR COMPUTING THE DEDUCTION U/S 80HHC OF TH E ACT. WE THEREFORE OF THE VIEW THAT ADJUSTED BOOK PROFIT HAS NO ROLE TO P LAY FOR COMPUTING THE DEDUCTIONS OR THE ELIGIBLE PROFIT OR THE PROFITS EL IGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. THUS ONCE THE PROFITS ELIGIBLE FOR DED UCTION U/S 80HHC IS WORKED OUT AS PER SECTION 80HHC THE SAME IS TO BE TAKEN IN TO ACCOUNT FOR COMPUTING THE BOOK PROFIT U/S 115JB OF THE I.T. ACT. 16. NOW WE MOVE TO SECTION 80HHC AS TO HOW THE PROF ITS ELIGIBLE FOR DEDUCTION U/S 80HHC IS TO BE COMPUTED. SECTION 80H HC LAYS DOWN ITS OWN FORMULA TO COMPUTE THE PROFITS ELIGIBLE FOR DEDUCTI ON. THE EXEMPTION OF INCOME FROM EXPORT BUSINESS WAS GRADUALLY PHASED OU T FROM THE ASSESSMENT YEAR BEGINNING FROM FIRST DAY OF APRIL, 2001 AND IN THE ASSESSMENT YEAR 2005- 06 THERE WOULD BE NO DEDUCTION U/.S 80HHC OF THE AC T. UNDER SUB-SECTION 3 OF THIS SECTION A FORMULA WAS LAID DOWN TO DETERMIN E THE PROFITS DERIVED FROM EXPORT BUSINESS OF THE ASSESSEES AND IN ITS CLAUSES A, B & C DIFFERENT FORMULAS ARE GIVEN TO DETERMINE PROFITS FROM THE EXPORT BUSI NESS OF THE ASSESSEES. CLAUSE (A) DEALS WITH THE EXPORT OF GOODS OR MERCHA NDISE MANUFACTURED OR PROCESSED BY THE ASSESSEES. CLAUSE (B) DEALS WITH EXPORT OF TRADING GOODS AND CLAUSE (C) DEALS WITH EXPORT OF GOODS MERCHANDI SE MANUFACTURED OR PROCESSED BY THE ASSESSEES AND ALSO OF TRADING GOOD S. IN EXPORT OF TRADING GOODS THE PROFITS DERIVED FROM SUCH EXPORTS SHALL B E THE EXPORT TURN OVER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIR ECT COSTS AND INDIRECT COST ATTRIBUTABLE TO SUCH EXPORT. WHERE THE EXPORT IS O F GOODS OR MERCHANDISED MANUFACTURE OR PROCESSED BY THE ASSESSEES, THE PROF IT DERIVED FROM THE EXPORT SHALL BE THE AMOUNT WHICH BEARS THE PROFIT O F BUSINESS THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SU CH GOODS BEARS TO THE TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE ASSESSE E. WHEN THE ASSESSEE IS INVOLVED IN EXPORT OF MANUFACTURED OR PROCESSED GOO DS OR MERCHANDISE AND ALSO OF TRADING GOODS, THE PROFITS FROM THE EXPORT IS TO BE COMPUTED BY APPLYING BOTH THE FORMULAS. THE PROFIT COMPUTED IN THE AFORESAID MANNER SHALL FURTHER BE INCREASED BY 90% OF EXPORT INCENTI VES. 13 17. THE CONTROVERSY GENERALLY ARISES WHEN THE PROFI TS FROM EXPORT BUSINESS IS TO BE WORKED OUT WHERE THE ASSESSEE IS INVOLVED FULLY OR PARTIALLY IN EXPORT OF MANUFACTURED GOODS OR MERCHANDISE. IN THAT CASE THE PROFITS OF THE BUSINESS IS TO BE TAKEN INTO ACCOUNT TO DETERMINE T HE PROFITS DERIVED FROM THE EXPORT AND THE FORMULA IS AS UNDER: PROFITS DERIVED FROM THE EXPORT = PROFITS OF THE BUSINESS X EXPORT TURNOVER____ TOTAL TURNOVER OF THE BUSINESS 17.1 THE WORD PROFITS OF BUSINESS IS DEFINED IN EXPLANATION (BAA) BELOW SUB- SECTION 4C OF SECTION 80HHC, ACCORDING TO WHICH PRO FITS OF BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE H EAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AS REDUCED BY SUB-CLAUSE 1 A ND SUB-CLAUSE 2. MEANING THEREBY IN ORDER TO COMPUTE OR DETERMINE TH E PROFITS OF THE BUSINESS ONE HAS TO DETERMINE THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THI S HEAD FIND PLACE IN CHAPTER IV AS SUB-HEAD `D I.E. PROFITS AND GAINS OF BUSINE SS OR PROFESSION AND START WITH SECTION 28 WHICH SPECIFIES THAT THE INCOME REF ERRED IN CLAUSE (I) TO (VI) SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD PR OFITS AND GAINS OF BUSINESS OR PROFESSION. SECTION 29 FURTHER CLARIFI ES THAT INCOME REFERRED TO IN SECTION 28 I.E. PROFIT AND GAINS OF BUSINESS OR PRO FESSION SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 30 TO 43D. MEANING THEREBY IN ORDER TO COMPUTE THE PROFITS OF THE BUSI NESS, ONE HAS TO WORK OUT THE PROFITS OF BUSINESS UNDER THE HEAD PROFIT AND G AINS OF BUSINESS OR PROFESSION AS PER SECTION 28 TO 43D OF THE INCOME T AX ACT. NO OTHER PROVISION TO COMPUTE THE PROFITS OF THE BUSINESS UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION ARE PRESCRIBED EITH ER IN THE ACT OR ELSEWHERE. MEANING THEREBY FIRST OF ALL PROFIT OF BUSINESS IS TO BE WORKED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AS PER SECTION 30 TO 43D, THERE AFTER IT IS TO BE REDUCED BY THE AMOUNTS REFERRED I N SUB-CLAUSE 1 OR 2 OF CLAUSE (BAA) OF THE EXPLANATION. THEREAFTER THE PR OFITS OF THE BUSINESS IS AVAILABLE TO BE TAKEN INTO ACCOUNT FOR COMPUTING TH E PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE I.T. ACT. THE RELEVANT PROVISION OF SECTION 80HHC ARE EXTRACTED HEREUNDER: 14 [ DEDUCTION IN RESPECT OF PROFITS RETAINED FOR EXPORT BUSINESS. 80HHC [(1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MER CHANDISE TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDA NCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, [A DEDUCTION TO T HE EXTENT OF PROFITS, REFERRED TO IN SUB-SECTION (1B)] DERIVED B Y THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCHANDISE: .. .. [(3) FOR THE PURPOSES OF SUB-SECTION (1),- (A) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR ME RCHANDISE MANUFACTURED [OR PROCESSED] BY THE ASSESSEE, THE PR OFITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TUR NOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BU SINESS CARRIED ON BY THE ASSESSEE; (B) WHERE THE EXPORT OUT OF INDIA IS OF TRADING GOO DS, THE PROFITS DERIVED FROM SUCH EXPORT SHALL BE THE EXPORT TURNOV ER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIRECT COSTS A ND INDIRECT COSTS ATTRIBUTABLE TO SUCH EXPORT; (C) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR ME RCHANDISE MANUFACTURED [OR PROCESSED] BY THE ASSESSEE AND OF TRADING GOODS, THE PROFITS DERIVED FROM SUCH EXPORT SHALL,- (I) IN RESPECT OF THE GOODS OR MERCHANDISE MANUFACTURED [OR PROCESSED] BY THE ASSESSEE, BE THE AMOUNT WHICH BEA RS TO THE ADJUSTED PROFITS OF THE BUSINESS, THE SAME PROP ORTION AS THE ADJUSTED EXPORT TURNOVER IN RESPECT OF SUCH GOO DS BEARS TO THE ADJUSTED TOTAL TURNOVER OF THE BUSINESS CARR IED ON BY THE ASSESSEE; AND (II) IN RESPECT OF TRADING GOODS, BE THE EXPORT TURNOVER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIR ECT AND INDIRECT COSTS ATTRIBUTABLE TO EXPORT OF SUCH TRADI NG GOODS: PROVIDED THAT THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAU SE (B) OR CLAUSE (C) OF THIS SUB-SECTION SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM RE FERRED TO IN CLAUSE (IIIA) (NOT BEING PROFITS ON SALE OF A LICEN SE ACQUIRED FROM ANY OTHER PERSON) AND CLAUSES (IIIB) AND (IIIC) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. 15 [(BAA) PROFITS OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION AS REDUCED BY- (1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES ( IIIA), (IIIB) AND (IIIC) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RE CEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS; AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA ;] .. .. .. 18. FROM A DETAILED ANALYSIS OF THE RELEVANT PROVIS IONS OF SECTION 80HHC AND 115JB OF THE ACT, WE ARE OF THE VIEW THAT FOR C OMPUTING THE BOOK PROFIT AS PER SECTION 115JB THE PROFITS ELIGIBLE FOR DEDUC TION U/S 80HHC COMPUTED AS PER SUB-SECTION 3 AND 3A AND ALSO SUBJECT TO OTHER CONDITIONS SPECIFIED IN SECTION 80HHC, IS TO BE REDUCED FROM THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PR OVISIONS OF PART 2 & 3 AND SCHEDULE VI OF THE COMPANIES ACT AND FOR COMPUT ING THE AMOUNTS OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC WHERE THE ASSESSEE IS INVOLVED IN MANUFACTURING ACTIVITY THE PROFITS OF THE BUSINESS IS TO BE DETERMINED AS PER CLAUSE (BAA) FOR COMPUTING THE PROFITS DERIVED FROM THE EXPORT OR THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. WHILE COMPUTING THE PROFITS OF THE BUSINESS UNDER THE HEAD PROFIT AND GAINS OF BUS INESS OR PROFESSION THE TOTAL INCOME IS TO BE COMPUTED AS PER PROVISIONS OF SECTION 28 TO 43D OF THE ACT. THE PROVISIONS RELATING TO DEPRECIATION, CURR ENT OR CARRY FORWARD ARE UNDER SECTION 32 WHICH FALLS WITHIN SECTION 28 TO 4 3D OF THE ACT. MEANING THEREBY WHILE COMPUTING THE PROFIT OF THE BUSINESS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION DEPRECIATION EITHER CURRENT OR CARRY FORWARD IS TO BE TAKEN INTO ACCOUNT. SO FAR AS PROVISIONS REL ATING TO CARRY FORWARD BUSINESS LOSS ARE CONCERNED IT IS UNDER SECTION 72 OF THE I.T. ACT WHICH FALLS OUTSIDE THE PURVIEW OF SECTION 28 TO 43D OF THE I.T . ACT. MEANING THEREBY WHILE COMPUTING, THE AFORESAID PROFIT OF THE BUSINE SS UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION, THE CARRY FO RWARD BUSINESS LOSSES CANNOT BE TAKEN INTO ACCOUNT. NOW THE QUESTION COM ES WHAT WOULD THE PROFITS ELIGIBLE FOR DEDUCTION WHETHER IT IS THE EN TIRE PROFIT DERIVED FROM SUCH EXPORT OR THE AMOUNT TO THE EXTENT OF DEDUCTION OF PROFIT AS PER SUB-SECTION 1B OF SECTION 80HHC OF THE ACT. THIS QUERY IS WELL ANSWERED BY THE BOMBAY 16 HIGH COURT IN THE CASE OF AJANTA PHARMA LIMITED (SU PRA) IN WHICH THEIR LORDSHIP HAVE HELD THAT FOR THE PURPOSE OF CALCULAT ING BOOK PROFIT U/S 115JB UNDER EXPLANATION 1 SUB-CLAUSE 4 THE EXPORT PROFITS TO BE EXCLUDED FROM THE BOOK PROFITS WOULD THE EXPORT PROFITS ALLOWED AS DE DUCTION U/S 80HHC AFTER RESTRICTING THE DEDUCTION AS PER THE PROVISIONS OF SUB-SECTION 1B OF SECTION 80HHC AND NOT THE EXPORT PROFIT CALCULATED AS PER S UBSECTION 3 AND 3(A) OF SECTION 80HHC BEFORE APPLYING THE RESTRICTIONS CONT AINED IN SUB-SECTION 1(B) OF SECTION 80HHC. THE RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT IS EXTRACTED HEREUNDER: IN SS. 115J AND 115JA THE EXPRESSION USED WAS PR OFITS ELIGIBLE FOR DEDUCTION UNDER S. 80HHC. SEC. 115JB ALSO USES THE EXPRESSION PROFITS ELIGIBLE FOR DEDUCTION. THERE REALLY CAN BE NO DIFFICULTY IN UNDERSTANDING WHAT THIS MEANS. ONLY THOSE PROFITS WHICH ARE ELIGIBLE AND COMPUTED IN TERMS OF SUB-S. (3) OR SUB-S. (3A) AND QUANTIFIED IN TERMS OF SUB-S. (1B). THE C OMPUTATION WHETHER UNDER SUB-S. (3) OR SUB-S. (3A) IS FOR THE PURPOSE OF SUB-S. (1) OR SUB-S. (1A). SEC. 80HHC(1) PERMITS A DEDUCT ION TO THE EXTENT OF PROFITS REFERRED TO IN SUB-S. (1B). THE ONLY QUESTION IS WHETHER THE EXPRESSION IN CL. (A), (B) OR (C) TO SU B-S. (3) CONSEQUENT ON INTRODUCTION OF SUB-S. (1B) TO S. 80H HC WILL HAVE A MEANING DIFFERENT FROM THE MEANING THAN WHAT WAS OR IGINALLY UNDERSTOOD, CONSIDERING CL. (IV) TO EXPLN. 1 OF S. 115 JB. UNTIL S. 115 JB WAS INTRODUCED, THE WHOLE OF THE PROFITS COM PUTED UNDER S. 80HHC WERE ELIGIBLE FOR REDUCTION FOR COMPUTING THE BOOK PROFITS. PURSUANT TO SUB-S. (1B) DERIVED BY THE ASSESSEE FRO M THE EXPORT OF SUCH GOODS. THE SECTION AS AMENDED HAS BROUGHT IN THE WORDS DEDUCTION TO THE EXTENT OF PROFITS REFERRED TO IN SUB-S. (1B) BY FINANCE ACT, 2000 W.E.F. 1 ST APRIL, 2001. IF THE CONSTRUCTION SOUGHT TO BE GIVEN BY COUNSEL FOR ASSESSEE IS ACCEPTED IT WOULD MAKE SUB- S. (1B) IRRELEVANT FOR THE PURPOSE OF S. 115JB. SU B-S.(1B) PROVIDES FOR DEDUCTION IN TERMS SET OUT THEREIN. SUB-S. (3) SETS OUT THE METHOD OF COMPUTATION OF PROFITS. THE COMPUTATION OF PROFITS IS, THEREFORE, FOR THE PURPOSE OF WORKING OUT THE DEDUC TION OF PROFITS AVAILABLE UNDER S. 80HHC (1B). EARLIER IT WAS IN T ERMS OF SUB-S. (1). NOW S. 80HHC(1) IN TERM REFERS TO SUB-S. (1B). ALL THE PROVISIONS ARE INTER-RELATED AND CANNOT BE READ DE HORS ONE AN D OTHER. IF SUB-S.(1B) IS NOT READ IN SUB-S. (1) THEN THE EXPRE SSION NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE ASSESS MENT BEGINNING ON THE 1 ST DAY OF APRIL, 2005 AND ANY SUBSEQUENT YEAR. SHALL BE RENDERED OTIOSE. IN SO FAR AS S. 115JB(2), EXPLN. 1(IV) IS CONCERNED, IN COMPUTING THE BOOK PROFITS THE EXPORT PROFITS UN DER S. 80HHC HAD TO BE REDUCED. THE OBJECT OF S. 115JB WAS TO I MPOSE TAX ON COMPANIES WHICH ARE KNOWN AS ZERO TAX COMPANIES. T HESE COMPANIES THOUGH MAKING HUGE PROFITS AND PAYING HAN DSOME DIVIDENDS, WERE NOT PAYING ANY TAX. THE OBJECT OF THE SECTION WAS, THEREFORE, THAT THEY PAY TAX NOT IN A MANNER OF TOT AL INCOME 17 COMPUTED BY OTHER COMPANIES, BUT ON THE BOOK PROFIT S WHICH HAD TO BE CALCULATED IN TERMS OF S. 115JB(2). THE ASSE SSEES DO NOT DISPUTE THIS. THEIR ARGUMENT IS THAT REDUCTION MUS T BE OF THE WHOLE OF THE BOOK PROFITS COMPUTED UNDER SUB-S.(3) OR SUB-S.(3A) OF S. 80HHC. THE OBJECT OF S. 80HHC AS ORIGINALLY INTRODUCED WAS TO EXEMPT THE WHOLE OF THE EXPORT PROFITS. BY VIRT UE OF SUB-S. (1B) INTRODUCED W.E.F. 1 ST APRIL, 2001 THE DEDUCTION IS ONLY A PERCENTAGE OF THE EXPORT PROFITS AS ALLOWED THEREIN AND NO RED UCTION AFTER 1 ST APRIL, 2005. THIS BENEFIT OF REDUCTION WAS INITIAL LY NOT MADE AVAILABLE TO MAT COMPANIES, BUT THE BENEFIT WAS EXT ENDED FROM 1 ST APRIL, 1989. (PARAS 22 TO 25) IT IS THEN SOUGHT TO BE CONTENDED THAT THE EXPRESSI ON CONDITIONS IN CL. (IV) OF EXPLN. 1 OF S. 115JB CANNOT BE REFER ABLE TO SUB-S. (1B) OF S. 80HHC AS SUB-S. (1B) IS NOT A CONDITION BUT I N THE NATURE OF COMPUTATION. EVEN IF ONE ACCEPTS THAT SUB-S. (1B) OF S. 80HHC IS NOT A CONDITION AND PROCEEDS ON THAT FOOTING, NEVER THELESS IT IS IMPOSSIBLE OF READING S. 80HHC(3) OR (3A) INDEPENDE NT OF S. 80HHC(1B). THE LANGUAGE IS CLEAR. THE LITERAL MEA NING DOES NOT IN ANY WAY DEFEAT THE OBJECT OF THE SECTION AND/OR LEA D TO AN ABSURDITY. THE OBJECT OF S. 115JB IS TO ALLOW EVEN MAT COMPANIES TO AVAIL OF THE BENEFIT OF DEDUCTION. IF ONE CONSI DERS THE ASSESSEES ARGUMENTS THAT MAT COMPANIES ARE ENTITLED TO FULL D EDUCTION OF EXPORT PROFITS IT WILL LEAD TO ANOMALY, WHEREBY THE COMPANIES WHICH ARE PAYING TAX ON TOTAL INCOME UNDER THE NORMAL RUL ES, FOR THEM THE DEDUCTION OF EXPORT PROFITS WILL BE LESSER THAN WHAT MAT COMPANIES ARE ENTITLED TO. IS THIS A POSSIBLE VIEW ? WHEN S. 115J WAS ORIGINALLY INTRODUCED, MAT COMPANIES WERE NOT E NTITLE4D TO DEDUCTION OF PROFITS UNDER S. 80HHC WHILE WORKING O UT THE BOOK PROFITS. THAT CAME TO BE INTRODUCED BY DIRECT TAX LAWS (AMENDMENT) ACT, 1989 W.E.F. 1 ST APRIL, 1989, A YEAR LATER. PARLIAMENT, THEREFORE, INITIALLY HAD EVEN DENIED TO MAT COMPANIES DEDUCTION UNDER S. 115J. WHEN S. 115JA WAS INTRODU CED W.E.F 1 ST APRIL, 1997, S. 80HHC BENEFITS WERE ONCE AGAIN NOT AVAILABLE FOR MAT COMPANIES. THE AMENDMENT BY FINANCE ACT, 1997 TO GIVE THE BENEFIT WAS W.E.F. 1 ST APRIL, 1998. CAN IT NOW BE ARGUED THAT MAT COMPANIES CONSIDERING S. 115JB(2), EXPLN. 1(IV) ARE ENTITLED TO BE PLACED IN A BETTER POSITION THAN THE OTHER COMPANIE S ENTITLED TO THE EXPORT DEDUCTION UNDER S. 80HHC THOUGH EARLIER THEY CONSTITUTED ONE CLASS? NO RULE OF CONSTRUCTION NOR THE LANGUAG E OF THE S. 80HHC R/W S. 115JB, WILL PERMIT SUCH CONSTRUCTION. IF SUCH CONSTRUCTION IS NOT POSSIBLE THEN BOTH THE CLASSES OF COMPANIES WILL BE ENTITLED TO THE SAME DEDUCTION. THIS WOULD CONT EMPLATE THAT BOTH WOULD BE ENTITLED TO DEDUCTIONS OF PROFITS IN TERMS OF S. 80HHC(1B). SO READ, IT WOULD BE A HARMONIOUS CONST RUCTION. A CLASS OF COMPANIES COVERED BY S. 80HHC CANNOT BE SU B-CLASSIFIED INTO TWO CLASSES, WHEN MORE SO, FOR INTERMITTENT PE RIODS PARLIAMENT HAD EVEN DENIED THE BENEFIT OF S. 80HHC TO MAT COMP ANIES. IF THE ARGUMENT OF THE ASSESSEE IS TO BE ACCEPTED, WHAT TH EN IS THE 18 MISCHIEF THAT S. 115JB SOUGHT TO AVOID? WHAT S. 11 5JB DID WAS TO CONTINUE THE DEDUCTIONS ALSO TO THE MAT COMPANIES. THE ONLY DIFFERENCE WAS THAT INSTEAD OF CALCULATING TAX AT 3 0 PER CENT OF THE BOOK PROFITS AS IN THE CASE OF SS. 115J AND 115JA, IT WAS MADE 7.5 PER CENT AND FROM 1 ST APRIL, 2007 IT IS 10 PER CENT. THE LANGUAGE USED IN CL. (III) TO EXPLN. 1 TO SUB-S. (2) OF S. 1 15J OR CL. (VII) TO EXPLN. 1 OF S. 115JA(2) OR CL. (IV) OF EXPLN. 1 OF S. 115JB (2) IS ELIGIBLE FOR DEDUCTION. THE ARGUMENT OF THE ASSE SSEE IS BASICALLY BASED ON THE MEMORANDUM OF UNDERSTANDING IN THE FIN ANCE BILL, 2000. IT ONLY SAYS THAT EXPORT PROFITS UNDER S. 80 HHC AND OTHERS ARE KEPT OUT OF THE PURVIEWE OF THE PROVISION DURIN G THE PERIOD OF PHASING OUT OF DEDUCTIONS AVAILABLE UNDER THE PROVI SIONS. AT THE SAME TIME, IN THE NOTES OF CLAUSES IT IS CLEARLY ST ATED THAT THE PROFITS WILL BE AS REDUCED BY THE CERTAIN ADJUSTMEN TS WHICH ARE ELIGIBLE FOR DEDUCTION UNDER S. 80HHC. THE PROFITS ELIGIBLE FOR DEDUCTION ARE EXPORT PROFITS IN TERMS OF S. 80HHC(1 B). THERE IS NOTHING IN THE FINANCE MINISTERS SPEECH OF 29 TH FEB., 2000, TO HOLD OTHERWISE. THE NOTES OF OBJECTS AND REASONS IS ONL Y AN AID TO CONSTRUCTION. THAT AID TO CONSTRUCTION IS ONLY WHE N THE LITERAL READING LEADS TO AMBIGUOUS RESULT OR ABSURDITY. CO NSIDERING THE LITERAL LANGUAGE THERE IS NO ABSURDITY OR AMBIGUITY BEING CAUSED OR ANY MISCHIEF SOUGHT TO BE REMEDIED. THE LANGUAGE U SED IN S. 115JB IS DEDUCTION AVAILABLE UNDER S. 80HHC. IT IS DIFFICULT TO CONCEIVE OF ANY RATIONAL REASON AS TO WHY THE LEGIS LATURE SHOULD HAVE THOUGHT TO GIVE MAT COMPANIES ADDITIONAL BENEF ITS THAN THE OTHER COMPANIES WHO ARE PAYING TAX ON TOTAL INCOME AND NOT THE TAX BASED ON BOOK PROFIT AS CALCULATED UNDER S. 115 JB. IS IT POSSIBLE TO CONCEIVE OF ANY DEGREE OF FAIRNESS AND/ OR JUSTICE THAT MAT COMPANIES, WHO FOR SOME PERIODS WERE DENIED THE BENEFIT OF S. 80HHC, BECAUSE OF THE INTRODUCTION OF S. 115JB, EXPLN. 1(IV) ARE ENTITLED TO HAVE THEIR ENTIRE EXPORT PROFITS REDUCE D? THE OBJECT OF S. 115JB OR FOR THAT MATTER S. 115J OR S. 115JA WAS TO IMPOSE TAX ON THOSE COMPANIES WHICH OTHERWISE CONSIDERING VARI OUS EXEMPTIONS OR DEDUCTIONS AVAILABLE UNDER THE ACT, T HOUGH MAKING HUGE PROFITS AND PAYING LARGE DIVIDENDS WERE NOT PA YING ANY TAX. IT IS, THEREFORE, NOT POSSIBLE TO ACCEPT THE CONSTR UCTION AS SOUGHT TO BE ADVANCED ON BEHALF OF THE ASSESSEE, THAT THEY SH OULD BE TREATED ON A DIFFERENT FOOTING IN COMPUTING EXPORT PROFITS UNDER S. 80HHC, FOR THE PURPOSE OF S. 115JB. NO TWO VIEWS ARE POSS IBLE. THE ONLY VIEW AS EXPLAINED EARLIER IS THAT THE MAT COMPANIES ARE ENTITLED TO THE SAME DEDUCTION OF EXPORT PROFITS UNDER S. 80HHC AS ANY OTHER COMPANY INVOLVED IN EXPORT IN TERMS S. 80HHC(1B).D Y. CIT VS. SYNCOM FORMULATIONS (I) LTD. (2007) 108 TTJ (MUMBAI ) (SB) 105: (2007) 106 ITD 193 (MUMBAI (SB) AND DY. CIT VS. GOV IND RUBBER (P) LTD. (2004) 82 TTJ (MUMBAI) 615 OVERRULED ; CIT VS. GTN TEXTILES LTD. (2000) 164 CTR (KER) 185: (2001) 248 ITR 372 (KER) DISTINGUISHED. 19 19. KEEPING IN VIEW THE LEGAL PROPOSITIONS LAID DOW N THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS WE ARE OF THE CONSIDERED OP INION THAT THE AMOUNTS OF PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT IS TO BE DETERMINE D OR WORKED OUT AS PER PROVISIONS OF SECTION 80HHC OF THE I.T. ACT AND WHI LE COMPUTING THE SAME THE PROFITS OF BUSINESS UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSIONS ARE TO BE WORKED OUT AS PER PROVISIONS OF SECTION 2 8 TO 43D. MEANING THEREBY THE CURRENT OR CARRY FORWARD DEPRECIATION A RE TO BE TAKEN INTO ACCOUNT FOR COMPUTING THE PROFITS OF THE BUSINESS F OR DETERMINING THE AMOUNT OF PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC FOR THE PURPOSE OF CLAUSE 4 OF EXPLANATION OF SECTION 115JB AND NOT THE CARRIED FO RWARD LOSSES AS IT FALLS OUTSIDE THE HEAD PROFIT & GAINS OF BUSINESS OR PROF ESSION. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE M ATTER TO THE FILE OF THE A.O. WITH DIRECTIONS TO RE-CALCULATE THE BOOK PROFIT U/S 115JB IN TERMS INDICATED ABOVE. ACCORDINGLY, THE GROUND NOS.4 TO 6 OF THE O RIGINAL GROUNDS OF APPEAL AND ADDITIONAL GROUND ARE DISPOSED OFF IN BOTH THE APPEALS. 20. DURING THE COURSE OF HEARING OF THE APPEAL, THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS WITH THE SUBMISSIONS THAT PROVISIONS FOR BAD AND DOUBTFUL DEBTS, PROVISIONS FOR DOUBTFUL ADVANCES AN D CLAIMS AND PROVISIONS FOR SHORTAGE/DAMAGE/MATERIAL/OBSOLESCENT/NON-MOVING STO RES ARE REQUIRED TO BE DEDUCTED WHILE COMPUTING THE TAXABLE BOOK PROFITS U /S 115JB OF THE I.T. ACT. DURING THE COURSE OF HEARING OF THE APPEAL THE LD. COUNSEL FOR THE ASSESSEE HAS CANDIDLY ADMITTED THAT HE HAS NOT RECEIVED THE PERMISSION FROM THE COD TO PROSECUTE THESE GROUNDS. MOREOVER, THIS ISSUE I S ALSO COVERED AGAINST THE ASSESSEES BY VIRTUE OF AN AMENDMENT BROUGHT TO IN S ECTION 115JB BY INSERTING CLAUSE I TO ITS EXPLANATIONS. IN THESE C IRCUMSTANCES, THE CLAIM OF THE ASSESSEES RAISED THROUGH ADDITIONAL GROUNDS IS HERE BY REJECTED. ITA NO.223 OF 2007: 21. THE ASSESSEE HAS RAISED ONE MORE GROUND WITH RE GARD TO THE POST RETIREMENT MEDICAL AND SETTLEMENT BENEFIT AND EMPLO YEES FAMILY BENEFIT 20 CLAIM. IN THIS REGARD, THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT A SPECIFIC GROUND IN THIS REGARD WAS RAISED BEFORE TH E CIT(A) BUT THE CIT(A) DID NOT ADJUDICATE THE SAME FOR THE SIMPLE REASON THAT THIS CLAIM WAS NOT RAISED BEFORE THE ASSESSING OFFICER AND HE HAS NOT DISCUSS ED ANYTHING IN THIS REGARD IN HIS ASSESSMENT ORDER. THE LD. COUNSEL FOR THE A SSESSEE FURTHER CONTENDED THAT THE RELEVANT DOCUMENTS WITH REGARD TO THE CLAI M WERE PLACED BEFORE THE ASSESSING AUTHORITIES BUT HE DID NOT TAKE ANY COGNI ZANCE THEREOF AND HAS NOT COMPUTED THE BOOK PROFIT ACCORDINGLY. IN SUPPORT O F HIS CLAIM, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COM PANY FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING AND THESE AMOUNTS P ROVIDED IN THE ACCOUNTS ARE BASED ON THE ACTUARIAL VALUATION CERTIFICATE IS SUED BY CONSULTING ACTUARY (FELLOW OF INSTITUTE OF ACTUARIES, LONDON, FELLOW O F ACTUARIAL SOCIETY OF INDIA). THE COPY OF ACTUARIAL CERTIFICATE ISSUED BY THE CON SULTING ACTUARY IN THIS REGARD WAS SUBMITTED BEFORE THE ASSESSING AUTHORITI ES AND HE HAS ALSO PLACED THE SAME AT PAGE 102 TO 106. AS PER THE CERTIFICAT E, THE VALUATION HAS BEEN MADE KEEPING IN VIEW THE PROVISIONS/RULES/CLAIMS GU IDANCE NOTE ISSUED BY ACTUARIAL SOCIETY OF INDIA, LIC MORTALITY TABLE ETC . ACCORDINGLY, THESE AMOUNTS ARE AKIN TO ANY OTHER EXPENDITURE PROVIDED IN THE ACCOUNTS AND ARE NOT COVERED BY THE PROVISIONS UNDER SECTION 43B OF THE IT ACT. IT IS A LIABILITY TOWARDS ASCERTAINED EMPLOYEES COST FOR THE PRESENT SERVICES, DETERMINED BASED ON ACTUARIAL VALUATION I.E. ON A REALISTIC AN D SCIENTIFIC BASIS BUT ONLY THE AMOUNT SHALL BE DISCHARGED AT A FUTURE DATE I.E. AF TER RETIREMENT OF EMPLOYEES. 22. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED TH AT THIS CLAIM WAS NEITHER RAISED BEFORE THE ASSESSING OFFICER NOR IT WAS ADJUDICATED BY THE CIT(A). SINCE THIS ISSUE DOES NOT EMANATE FROM THE ORDER OF THE LOWER AUTHORITIES, IT CANNOT BE ADMITTED BY THE TRIBUNAL AT THIS SECOND APPELLATE STAGE. 23. HAVING CAREFULLY EXAMINED THE MATERIAL AVAILABL E ON RECORD AND THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT BEFORE THE ASSESSING OFFICER ASSESSEE HAS PLACED THE RELEVANT EVIDENCE BUT WE DO NOT FIND ANY DISCUSSION IN THE ASSESSMENT ORDER. THE ASSESSEE HOWEVER, RAI SED A SPECIFIC GROUND 21 BEFORE THE CIT(A) BUT THE CIT(A) DID NOT ADJUDICATE IT ON THE PREMISE THAT IT WAS NOT EXAMINED BY THE A.O. FROM A CAREFUL PERUSA L OF THE RECORD WE FIND THAT ASSESSEE HAS FILED THE RELEVANT EVIDENCE BEFOR E THE A.O. ONCE THE RELEVANT EVIDENCE IS FILED BEFORE THE A.O., IT WAS FOR THE A.O. TO EXAMINE AND ADJUDICATE THE CLAIM OF THE ASSESSEES THOUGH IT WAS NOT RAISED IN SO MANY WORDS. IN FIRST APPEAL WHEN THE ASSESSEE HAS RAISE D A SPECIFIC CLAIM, THE CIT(A) OUGHT TO HAVE EXAMINED THAT CLAIM OR CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER BUT HE DID NOT DO THE SA ME. WE THEREFORE, OF THE VIEW THAT THIS ISSUE REQUIRES A PROPER VERIFICATION OR EXAMINATION BY THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE O RDER OF THE CIT(A) IN THIS REGARD AND RESTORE THE MATTER TO THE FILE OF THE A. O. WITH A DIRECTION TO RE- ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF EVIDENC E PLACED BEFORE HIM. 24. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5.2.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 5 TH FEBRUARY, 2010 COPY TO 1 M/S. RASHTRIYA ISPAT NIGAM LTD., CORPORATE ACCOUN TS SECTION, MAIN ADMINISTRATIVE BUILDING, VISAKHAPATNAM-530 031 2 ACIT, CIRCLE-3(1), VISAKHAPATNAM 3 THE CIT-1, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM FIT FOR PUBLICATION (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER 22