- (1.) Assessee filed its return of income for asst. yr. 2000-01. Assessee claimed deduction under Section 80HHE to the extent of Rs. 1,56,33,719 against net profit as per P&L a/c amounting to Rs. 3,07,84,105 to arrive at the book profit of Rs. 1,51,50,386 under Section 115JA of the Income Tax Act, 1961 (See: Vol. R/1 of I.A. paper book--p. 6).
(2.) This claim for deduction made by the Assessee was rejected by the AO saying that since in normal computation there is no profit after carry forward loss, deduction under Section 80HHE to the extent of Rs. 1,56,33,719 for computing book profit under Section 115JA was not admissible. According to the AO since in the present case in normal computation no net profit was left after the brought forward losses of the earlier years got adjusted against the current year's profit, the Assessee was not entitled to deduction under Section 80HHE to the extent of Rs. 1,56,33,719.
(3.) In appeal, the CIT(A) upheld the order of the AO. The Assessee went in appeal, against the order of the CIT(A), before the Tribunal which, following the judgment of the Special Bench of the Tribunal in the case of Dy. CIT v. Syncome Formulations (I) Ltd.,2007 108 TTJ 105 took the view that the MAT scheme which includes Section 115JA did not take away the benefits given under Section 80HHE. The said judgment of the Special Bench was with regard to computation of deduction under Section 80HHC which, like Section 80HHE, falls under Chapter VI-A of the Income Tax Act, 1961. In the said judgment of Special Bench, which squarely applies to the facts of the present case, the Tribunal held that the deduction under Section 80HHC (s. 80HHE also falls in Chapter VI-A) is to be worked out not on the basis of regular income-tax profits but it has to be worked out on the basis of the adjusted book profits in a case where Section 115JA is applicable. In the said judgment the dichotomy between regular income-tax profits and adjusted book profits under Section 115JA is clearly brought out. The Tribunal in the said judgment rightly held that in Section 115JA relief has to be computed under Section 80HHC(3)/(3A). According to the Tribunal, once the law itself declares that the adjusted book profit is amenable for further deductions on specified grounds, in a case where Section 80HHC (80HHE in the present case) is operational, it becomes clear that computation for the deduction under those sections needs to be worked out on the basis of the adjusted book profit. [See: para 61 of the judgment of the Tribunal in Syncome Formulations ].;