Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income Tax vs Syncome Formulations (I) Ltd. on 14 March, 2007
Equivalent citations: [2007]106ITD193(MUM), [2007]292ITR144(MUM), (2007)108TTJ(MUM)105
ORDER
1. This Special Bench has been constituted by the Hon'ble President of the Tribunal under Section 255(3) of the IT Act, 1961, to decide the following issue:
Whether, on facts and in law, the assessee, while computing book profits under Section 115JA of the IT Act, 1961, is entitled to reduce the net profit as per P&L a/c by-
(i) the profits eligible for deduction under Section 80HHC actually computed under Clauses (a), (b) or (c) of Sub-section (3) of Sub-section (3A) as the case may be OR
(ii) the profits eligible for deduction under Section 80HHC computed with reference to book profits (after adjustments) in the manner specified in Sub-section (3) or Sub-section (3A)of Section 80HHC.
2. The appeal filed by the Revenue in ITA No. 2711/Mum/2003 in the case of M/s Syncom Formulations (I)(P) Ltd., is the basis for constituting this Special Bench. The said appeal was placed before Tribunal Mumbai 'H' Bench for hearing. In the course of hearing, the Bench found that the computation of deduction under Section 80HHC vis-a-vis the implication of Section 115JA have been considered by various Benches of the Tribunal and have come to conflicting views. The Bench observed that in the following decisions, the Tribunal has taken the view that the assessee is entitled to work out the deduction under Section 80HHC on the taxable book profit arrived at under Section 115JA:
(i) Starchik Specialities Ltd. v. Dy. CIT (2004) 90 TTJ (Hyd) 546 : (2004) 90 ITD 34 (Hyd)
(ii) Dy. CIT v. Govind Rubber (P) Ltd. (2004) 82 TTJ (Mumbai) 615 : (2004) 89 ITD 457 (Mumbai)
(iii) Tushako Pump Ltd. v. Asstt. CIT (2005) 2 SOT 556 (Mumbai)
(iv) Alok Industries Ltd. ITA No. 5208 and 5209/Mum/2002, dt. 4th April, 2005.
3. The Bench observed on the other hand that, in the case of G.P. Electronics, ITA No.310/Bom/1994, dt. 25th Nov., 2005, the Bombay Bench of the Tribunal has held that for the purpose of computing the deduction under Section 80HHC, the normal taxable profit worked under the provisions of the IT Act has to be taken into consideration and not the book profit worked out under Section 115JA. The offshoot of the decision is that if an assessee is not found eligible for deduction under Section 80HHC for want of profits when computed under the regular provisions of the IT Act, then the assessee would not be entitled for the deduction under Section 80HHC, even if for the purpose of taxation, a higher amount is conceived under Section 115JA.
4. The Bench seriously acknowledged the argument of the Revenue that the assessee was entitled under the old provisions of Section 115J, Expln. (iii) to reduce the book profit by the profit eligible for deduction under Section 80HHC, which were to be computed with reference to book profit as per P&L a/c inasmuch as such old provisions specifically provided that deduction was to be computed in the similar manner in which deduction is computed under Section 80HHC(3). However, there is a considerable change under the new provisions of Section 115JA, Expln. (viii), which now specifically provides that the deduction has to be computed on the profit eligible for deduction under Section 80HHC computed under Clauses (a), (b) or (c) of Sub-section (3) thereof. Hence, first it has to be determined whether the assessee is entitled to deduction under Section 80HHC. If he is entitled to such deduction, then that amount of deduction under Section 80HHC should be reduced from the book profit.
5. The Bench also observed that the various decisions held otherwise and in favour of the assessee, rendered by the Tribunal were either rendered in the context of the old provisions of Section 115J or without considering the implication of the change brought in by Section 115JA. The Bench further observed that the decision of the Kerala High Court in the case of CIT v. GTN Textiles Ltd. relied on by the Tribunal to hold the matter in favour of the assessee, was also rendered in the context of the old provisions of Section 115 J.
6. The Bench hesitated to accept the contention of the assessee that there is no difference between the language of Section 115J, Expln. (iii) and Section 115JA, Expln. (viii). In the circumstances, the Bench has fairly referred the following question to the Hon'ble President for constituting a Special Bench:
Whether, on facts and in law, the assessee, while computing book profits under Section 115JA of the IT Act, 1961, is entitled to reduce the net profit as per P&L a/c by-
(i) the profits eligible for deduction under Section 80HHC actually computed under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) as the case may be;
or the profits eligible for deduction under Section 80HHC computed with reference to book profits (after adjustments) in the manner specified in Sub-section (3) or Sub-section (3A)of Section 80HHC.
7. Apart from the appeal by Revenue in the case of M/s Syncome Formulations (I) Ltd. (ITA No. 2711/Mum/2003) which has caused the constitution of this Special Bench, the remaining three assessees, M/s Crystal Granite & Marble Ltd., M/s Bhushan Steel & Strips Ltd. and M/s Thirumalai Chemicals Ltd., have impleaded in the proceedings before the Special Bench, in the capacity of interveners.
8. The appeal in ITA No. 2711/Mum/2003 in the case of M/s Syncome Formulations (I) Ltd. has been filed by the Revenue. Shri Ashok Kotangle, the learned standing counsel for the IT Department appeared for the Revenue and argued the case. The learned standing counsel contended that initially there was no provision for deduction under Section 80HHC out of the book profit considered for Minimum Alternate Tax (MAT). Thereafter, Expln. (iii) to Section 115J was introduced to provide Section 80HHC deduction computed in the manner prescribed under Section 80HHC(3). He explained that Section 115J remained operative in the statute book for the asst. yrs. 1988-89 to 1990-91. Thereafter, it was omitted from the statute book. As far as Section 115J is concerned, there is no dispute that the deduction under Section 80HHC has to be worked out on the book profit adopted for Section 115J. But when Section 115JA was introduced for the asst. yrs. 1997-98 to 2000-01, a remarkable change has been brought in the law so as to make it clear that the deduction if any available to the assessee under Section 80HHC has to be worked out on the profits available in accordance with the computation made under regular provisions and the deduction cannot be made out of the book profit considered for Section 115JA.
9. The learned standing counsel explained that the deduction under Section 115J had to be given for the amount computed in the manner specified in Section 80HHC(3) or (3A). He explained that the deduction provided in Expln. (viii) below Sub-section (2) to the new Section 115JA and the wordings of the Explanation are remarkably different from the former Explanation provided under Section 115J. As per the new Explanation, the amount of profit eligible for deduction under Section 80HHC has to be worked out under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) and also subject to the conditions specified in Sub-sections (4) and (4A). The elucidation of the computation of the deductible amount has a definite purpose to be served for which it is necessary to read the difference between the Explanation given under the old Section 115J and the new Section 115JA.
10. The learned standing counsel submitted that as far as the appeal in the matter of M/s Syncome Formulations (I) Ltd., is concerned, the assessment year is 1999-2000 to which Section 115JA applies. In the case of interveners, M/s Crystal Granite & Marble Ltd., so also M/s Thirumalai Chemicals Ltd., the assessment year is 1999-2000 where again the applicable provision is that of Section 115JA. But in the case of the intervener, M/s Bhushan Steel & Strips Ltd., the assessment year is 2003-04 to which the latest provision of Section 115JB is applicable.
11. In the above scenario of different assessment years and differently worded sections, the learned standing counsel further explained that the position canvassed by the Revenue has been empathetically made clear in the provisions contained in Section 115JB which is applicable from the asst. yr. 2001-02 onwards. He stated that Section 115JB provides for deduction under Section 80HHC in its Sub-section (2)(iv) which provides that the amount of deduction shall be computed as stated in Section 115JA further coupled with the fetter that subject to the conditions specified in Section 80HHC. By making a reference to the conditions specified in Section 80HHC, Section 115JB has made it very clear that the amount deductible from the book profit under Section 80HHC should be the same amount worked out with reference to the profits calculated on the basis of the regular provisions of computation of business income from Sections 28 to 44DA.
12. The learned standing counsel explained that the oft-quoted decision of the Kerala High Court in the case of CIT v. GTN Textiles Ltd. (supra) was rendered in the context of the old law contained in Section 115J. The Court had no occasion to consider the changes brought in the statute through the subsequently inserted Sections 115JA and 115JB. Therefore, any decision rendered relying on the decision of the Kerala High Court in the case of GTN Textiles (supra) is not applicable to the cases falling under Sections 115JA or 115JB.
13. The learned standing counsel further explained that the assessee has to first work out the deductible amount under Section 80HHC on the basis of the profit calculated under the normal provisions of the IT Act, applicable to the computation of profit and gains of business or profession. If any amount of positive profit is available and thereby the assessee is entitled for deduction under Section 80HHC, the deductible amount must be first computed in the light of the normal income-tax profit. That computation aspect has nothing to do with the book profit mentioned under Sections 115JA/115JB. It is a class separate. Thereafter when the book profit is adopted for the purpose of Sections 115JA/115JB, the amount of deduction computed earlier under the normal provisions of the IT Act, if any, has to be deducted. The law does not provide for the recomputation of the quantum of deduction under Section 80HHC once again in the light of the book profit worked out under Sections 115JA/115JB. He explained that the deductible amount under Section 80HHC cannot be worked out twice; once under the normal provisions of the IT Act and secondly with reference to the book profit. The deductible amount has to be worked out once for all and only once under the normal provisions of the IT Act in total disregard of the book profit adopted under Sections 115JA/115JB.
14. The learned standing counsel relied on the decision of the Supreme Court in the case of Karnataka Small Scale Industries Development Corporation Ltd. v. CIT (2003) 179 CTR (SC) 1 : (2003) 126 Taxman 121 (SC) to explain the basis of the presumption necessary to be drawn while considering various exemptions provided under the regular provisions of the Act and the working out of book profit under Sections 115JA/115JB. In the said case, the assessee company, which was entitled to various deductions from its total income, was liable under Section 115J to pay tax under MAT. The assessee company contended that it could not be said that the benefits of deduction which assessee had claimed had actually been allowed and therefore the assessee should have been permitted to carry forward the unabsorbed investment allowance or depreciation claimed for the relevant previous year. The Tribunal however held that the amount of business loss, unabsorbed depreciation, unabsorbed investment allowance were required to be adjusted/set off to the extent of such brought forward business loss, unabsorbed depreciation etc. which would have been adjusted and set off, had the assessee been assessed to tax in the regular way in accordance with the provisions of Sections 28 to 43 and not by way of application of the provisions of Section 115J. The proposition declared by the Tribunal was upheld by the High Court. While confirming the judgment of High Court, the Supreme Court held that all that Section 115J Sub-section (2) provides is to preserve the right to carry forward the balance of the unabsorbed deductions from the relevant previous year to the next assessment year; but does not create any right nor does it serve to allow all the deductions taken into consideration for determining whether the total income should be quantified under Section 115J Sub-section (1) to be carried forward under Section 115J(2). The learned standing counsel explained that this judgment has made it very clear that whatever deductions for which an assessee is entitled to, those deductions must be made from the profits worked out under the regular method of assessment in accordance with the provisions of Sections 28 to 43 and the deductions could not be shifted on to the camp of MAT under Sections. 115J or 115JA or 115JB as the case may be. He explained that this judgment declared beyond all doubt that the profit for the purpose of deducting the benefit available under Section 80HHC in the context of a MAT assessment is the regular business profit computed under the normal provisions of the law and not the deemed profit worked out from the book profit as required under Sections 115JA/115JB.
15. Thereafter, the learned standing counsel referred to the decision of the Supreme Court in the case of JPCA Laboratory Ltd. v. Dy. CIT . He explained that in the said judgment, the Supreme Court has made it clear that Section 80HHC does not prevail over Section 80AB or any other provisions of the Act under Chapter VI-A for the reason that Section 80AB has been given an overriding effect on all other sections, in Chapter VI-A. The learned standing counsel, therefore, explained that the computation of deduction available under Section 80HHC needs to be worked out on the basis of the business profits calculated in the regular provisions of law from Section 28 onwards, which forms part of the gross total income and not the deeming profit under Sections 115JA/115JB. He also explained that the reliance placed by the assessee as well as the Appellate Commissioners in certain orders on the decision of the Bombay High Court in the case of CIT v. Shirke Construction Equipments Ltd. is no more good law on the character of Section 80HHC as the said judgment of the Bombay High Court has been disapproved by the Supreme Court in the above decision rendered in the case of IPCA Laboratory Ltd. (supra).
16. The learned standing counsel further invited our attention to a recent ruling given by Authority for Advance Rulings in the case of Rashtriya Ispat Nigam Ltd., In re . In the said case, the Authority was examining the claim of an assessee company to reduce the MAT profit by deducting partly by business loss carried forward and partly by unabsorbed depreciation. The Authority ruled that current year's profit for the purpose of Sections 115JA or 115JB cannot be reduced in a manner more beneficial to the assessee; but can be reduced only in the manner provided under the Act. The Authority held that in computing the income for the purpose of Section 115JB, the assessee did not have the option of reducing the current year's profit by the loss brought forward or unabsorbed depreciation for the purpose of carry forward under Section 115JB in its account in a manner different from the manner adopted for determining the "book profit" under Section 115JB. It held that the assessee did not have any discretion to reduce the current year's profit either by the loss brought forward or unabsorbed depreciation. The lesser of the two was required to be reduced from the current year's income. After making the reduction in one year, the assessee could not adopt a different method in a subsequent year. The learned standing counsel in the light of the above ruling submitted that assessees are choosing the book profit for the purpose of claiming deduction under Section 80HHC in the MAT scheme for availing higher benefits, which is not permissible in law. The Supreme Court has made it clear in the case of KSSIDC Ltd. (supra) that deductions available to an assessee under the normal provisions of law cannot be made from the book profit under Section 115JA, but has to be made under the normal business profit and in such circumstances it is presumed that all the deductions are allowed. If the above proposition is understood in the light of the Ruling of the Authority for Advance Rulings in the case of Rashtriya Ispat Nigam Ltd. (supra) that the assessee cannot choose a more beneficial method of calculation, it is more than clear that the profit for the purpose of computing deduction under Section 80HHC is the normally computed business profit both under regular scheme of assessment and MAT scheme of assessment. Therefore, he submitted that the profit eligible for deduction under Section 80HHC cannot be computed with reference to book profit but has to be computed under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) of Section 80HHC.
17. Dr. K. Shivaram appearing for the respondent assessee in the case of M/s Syncome Formulations (I) Ltd. has argued at length on the proposition highlighted by him that once an assessee is covered by MAT regime, the profit for the purpose of Section 80HHC is nothing but the same adjusted book profit. He argued that Section 115JA begins with a non obstante clause "notwithstanding anything contained in any other provisions of this Act... " which declares that Section 115JA is a separate code within itself. He relied on the decision of Andhra Pradesh High Court in the case of CIT v. Nav Bharat Enterprises (P) Ltd. to explain the relevance of non obstante clause wherein the Court has held that a non obstante clause is generally used in a provision to indicate that the provision should prevail despite anything to the contrary. It was decided by Rajasthan High Court in the case of CIT v. ONGC that a non obstante clause has to be understood in the light of the rules laid down by the Supreme Court in South India Corporation Ltd. v. Secretary, Board of Revenue 15 STC 74 (SC). The learned Counsel relied on the decision of the Constitution Bench of the Supreme Court in South India corporation Ltd. v. Secretary Board of Revenue (supra) to bring out the distinction between the expression "subject to other provisions" and the expression "notwithstanding anything contained in any other provisions of the Act". The Court held that the expression "subject to" conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject. The learned Counsel has further relied on the Full Bench decision of the Gujarat High Court in the case of CUT v. Gujarat State Fertilizers Co. Ltd. and the decision of the Supreme Court in the case of Vishin N. Khanchandani v. Vidya Lachmandas Khanchandani .
18. It is the contention of the learned Counsel that where regular provisions are not applicable and tax is to be levied on book profit subject to the adjustments prescribed, any reference made to profits in that part of the section need to be construed as the profits contemplated under Section 115JA, as the book profit and not the profit computed under the regular provisions of the IT Act.
19. The learned Counsel contended that Section 115J which introduced the concept of MAT has treated profits for the deduction under Section 80HHC as the book profits and the said position has not been changed in spite of subsequent sections inserted in the Act viz., 115JA and 115JB, in place of erstwhile 115J. The learned Counsel explained that all the three sections start alike "notwithstanding anything contained in any other provisions of the Act... " and have maintained the character of non obstante. In such circumstances, there is no provocation to go to Section 29 so as to understand the true meaning of "profits and gains" in the context of MAT. As there is a reference to export relief under Section 80HHC/80HHD/80HHE, the reliefs have to be calculated under those provisions. Section 29 by itself is not a part of the provisions granting relief. If various provisions under Sections 28 to 44D are to be applied even in a MAT case, then what is computed is not the book profit but again the profits under the regular provisions of the IT Act relating to the computation of profits and gains of business or profession. Such a proposition defeats the basic nature of Section 115JA/115JB. The learned Counsel explained that in computing the taxable income of a MAT assessee, there cannot be a mixture of heterogeneous items unless the law has specifically provided to blend such heterogeneous items. When the scheme of taxation under MAT is anchored in the concept of book profit and that too in the light of non obstante clause, there is no option to go back to the regular income-tax profits. He explained that the basic character is similar in all the three Sections 115J, 115JA and 115JB. Every type of adjustments whether upwards or downwards prescribed under the provisions of Sections 115JA/115JB referred to the book profit and therefore, the adjustments by way of deduction in respect of Section 80HHC alone cannot be different from book profit.
20. The learned Counsel has made a comparison of Sections 115J and 115JA in the following manner:
In Section 115J even though initially it was not there, the deduction under Section 80HHC was later provided and that too with reference to the book profit. In Section 115JA also, the speech of the Finance Minister expressed the same understanding by stating that export profits would be exempted from MAT and would be eligible for full deduction under Section 80HHC. The CBDT circulars also provided that export profits would be deductible under Section 80HHC or Section 80HHE from the purview of MAT. Again circular issued by the CBDT stated that as the intention was that 100 per cent export profit would be exempted, the profits exempt under Sections 80HHC and 80HHD would be excluded from Section 115J.
21. He explained that all the basic features of erstwhile Section 115J have been religiously protected in the subsequently inserted Sections 115JA/115JB. What has been further explained in the subsequent provision is only the manner in which the quantum of the relief has to be worked out. Section 115J(1A) Expln. (iii) required that the relief should be computed "in the manner specified". The said expression is absent in the provisions of Section 115JA. Section 115JA has provided for specific expression that the amount of profit eligible for deduction under Section 80HHC would be computed under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A). Therefore, it is evident that what has been elucidated in Section 115JA compared to Section 115J is only the manner in which the quantum of relief has to be worked out. In all the circulars issued by CBDT in the context of Sections 115J, 115JA and 115JB, the substance were the same that 100 per cent exemption given to export should not be taken away under MAT scheme. When two sections are in pari materia the same, all the relevant circulars would apply to the issue as held by Calcutta High Court in the case of CIT v. P.K. Engineering & Forging (P) Ltd. (1996) 87 Taxman 101 (Cal).
22. The learned Counsel has explained that the decisions delivered by the different Benches of the Tribunal in various cases in favour of the assessee (already mentioned in this order) have held that the deduction under Section 80HHC has to be granted with reference to the adjusted book profit of the assessee company. He argued that as there is no difference in the intent and purpose and the text contained in all Sections 115J, 115JA and 115JB are analogous, the decision of the Kerala High Court in the case of CIT v. GTN Textiles Ltd. (supra) is applicable not only in a case falling under Section 115J but also in cases falling under Sections 115JA and 115JB. He also submitted that there are no contrary decisions to the above decision of the Kerala High Court and as held by the Gauhati High Court in the case of CIT v. Highway Construction Co. (P) Ltd. that when there is a decision of a different High Court and there is no contrary decision, it would be just and proper for the Tribunal to follow the said decision.
23. The learned Counsel further contended that the reliance placed by the Revenue on the decision of the Supreme Court in the case of IPCA Laboratory Ltd: v. Dy. CIT (supra) cannot be held relevant in the present case only for the reason that in the said decision, the Supreme Court has disapproved the judgment of the Bombay High Court in the case of CIT v. Shirke Construction Equipments Ltd. (supra) which case was relied on by the assessees and considered by the Tribunal. The decision of the Supreme Court in the case of IPCA Laboratory Ltd. (supra) has to be read in the facts and circumstances of that particular case and in the light of the particular issue raised before the Court and considered by the Court. The real concern of the Supreme Court in the case of IPCA Laboratory (supra) was not with Section 80AB but in the matter of computing the relief under Section 80HHC.
24. He further explained that the various decisions relied on by the Revenue including Dy. CIT v. Omnitex Industries (I) Ltd. ITO v. B.D.H. Industries Ltd., G.P. Electronics Ltd. and Vipul Dye Chem Ltd. v. Asstt. CIT are not applicable to the present case. He, accordingly submitted that the deduction under Section 80HHC need to be allowed on the basis of the book profit for the computation of income under Section 115JA.
25. Shri Arvind Sonde, the learned Counsel who appeared for one of the interveners, M/s Crystal Granite & Marble Ltd. argued the case again at length relying on the text of the provisions of law contained in Sections 115J, 115JA and 115JB in the light of the respective speech of the Finance Minister, Memorandum explaining the clauses of the Finance Bill, Notes on Clauses, final provisions in the Act and the relevant CBDT circulars.
26. The learned Counsel explained that the provisions of law contained in Sections 115J, 115JA and 115JB create an artificial charge based on adjusted book profits. The adjustment to increase or reduce the book profits contained in Clauses (a) to (f) and that contained in Clauses (iv) to (ix) must have the same character as that of "book profit". Orange can be added to a barrel of apples but only apple can be collected from the barrel containing apples. Therefore, the reduction from book profit must necessarily bear the nature of book profit. He explained that there is one important expression consistently used in Clauses (iv) to (ix) under Explanation to Section 115JA(2), that "the amount of profits". This expression used in Clauses (iv) to (ix) must have the same meaning throughout the Explanation as the same word used in the same section and the same clause or Explanation must bear the same meaning. For this proposition, he relied on the decision of Andhra Pradesh High Court in the case of CIT v. Dredging Coipn. of India (1989) 75 CTR (AP) 104 : (1988) 174 FTR 682 (AP) where the Court has held that while interpreting the taxing statutes, definition of expression should prevail for all the provisions in the Act unless the context requires otherwise. The relevant Explanation under Section 115JA(2) in Clause (iv) provides for the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power. Section 80-IA, Sub-section (4), Clause (iv) provides for a deduction in respect of a power project which may go upto 100 per cent depending on various conditions such as the date of commencement etc. But anyhow in Expln. (iv), no such conditions are prescribed under Section 115JA(2). The next Clause (v) provides for exemption of the amounts of profits derived by an industrial undertaking under Section 80-IB. This provision also deals with book profit but subject to the conditions relating to the location of the project and the period of exemption. Clauses (vi) and (vii) similarly exempt the book profit of the undertakings specified thereon. The sum and substance of the above pattern of expression is that the amount of profits, reduced from the book profit may not have any relation to the amount of deduction contemplated in Chapter VI-A. The imbalance between the deduction under Chapter VI-A and deductions under Clauses (i) to (ix) of the Explanation to Section 115JA is inherent in the statute itself. The learned Counsel therefore submitted that in all the clauses under the Explanation under Section 115JA, the amount of profits always referred to the book profit and in the case of the deduction under Section 80HHC provided in Clause (viii) alone it cannot be construed on a different footing.
27. The learned Counsel thereafter highlighted certain changes brought in the words and expressions of Sections 115JA and 115JB. The expression in Section 115J is "amounts" whereas the expression in Sections 115JA and 115JB is "amount". The word "amounts" used in Section 115J is changed over to the word "amount" in Sections 115JA and 115JB because Section 115J referred to both Sections 80HHC and 80HHD whereas Section 115JA only to Section 80HHC. In the case of Section 115J another expression with reference to profit is that "attributable to the business, the profits from which are eligible for deduction... ". In Sections 115JA and 115JB, there is no such expression. But the reference made to Section 80HHC(3) or Sub-section (3A) has been widened by adding Clause (a), (b) or (c) of Sub-section (3). It was necessary in the context of Section 115J to employ the expression "attributable to the business, the profits from which are" for the reason that the reductions contemplated in Sections 80HHC and 80HHD were to be reduced from the total income attributable to the business whereas in Section 115JA, the reference was only to Section 80HHC. The expression "computed in the manner specified in Sub-section (3)" found in Section 115J has been replaced by Clause (a), (b) or (c) in Sections 115JA and 115JB. This is because Section 115J stood up to the asst. yr. 1990-91 and at that point of time, no reference was there to any other definitions in Section 80HHC sub-section (3) relating to incentives etc. But by the time Section 115JA was introduced w.e.f. asst. yr. 1997-98, Section 80HHC itself was amended with detailed clarifications to Clause (a), (b) and (c). This change made in Section 80HHC necessitated a corresponding change in expression in Sections 115JA/115JB.
28. Except for the above cosmetic changes necessitated on account of the reference to other section like 80HHD or on account of the language employed in Section 80HHC, there is no difference in the concept and meaning of the deduction under Section 80HHC provided in Sections 115J, 115JA and 115JB. The expression enacted in Section 115JA in Clause (viii) is interpreted by the Revenue as "the amount of profits eligible for deduction under Section 80HHC". This interpretation given by the Revenue would have the effect of attributing surplusage or tautology to the legislation because the interpretation does not recognise the introduction of Clause (a), (b) or (c). This is not permissible in the interpretation of statute as no words must be embedded while interpreting a section of no emphasis either be made or supplied. The learned Counsel relied on the following, in support of the above proposition:
(i) Mohammad Ali Khan and Ors. v. CWT (1997) 139 CTR (SC) 335: (1997) 224 ITR 672 (SC)
(ii) Dalmia Biscuits Ltd. v. CIT (1991) 98 CTR (P&H) 182 : (1992) 194 ITR 749 (P&H)
29. He explained that therefore the interpretation placed by the Revenue on Clause (viii) would cause injustice either to Revenue or to assessee because of the absurdity in introducing the concept of regular profit in the provisions relating to book profit.
30. The learned Counsel explained how injustice could be done to the Revenue, if the arguments of the Revenue are to be accepted. There are number of disallowances made in computing the taxable income under the normal provisions of the Act. For example, excise duty may be debited in the P&L a/c but not paid in the previous year. It would be added back to the taxable income under Section 43B, resulting in the profits computed under the regular provisions going up and consequently the quantum of deduction under Section 80HHC going up. If the interpretation of revenue is to be accepted, the book profit would be going down further because of the higher amount of deduction under Section 80HHC. This would result in double deduction available to the assessee, which is not the intention of Clause (viii). It is equally possible to inflict injustice to the assessee, as well. An assessee might be entitled for the deduction under Section 80-IA/80-IB. The deduction under Section 80HHC could be reduced/denied by invoking Sections 80-IA(9) and 80-IB(13). There is no corresponding provision available to reduce the book profit in respect of certain industrial units who are hit by the provisions contained in Sections 80-IA(9) and 80-IB(13). If one is to accept the interpretation of the Revenue, the assessee would not get a deduction under Section 80HHC under the normal provisions and for that matter he would not get the deduction from the book profit either. The learned Counsel accordingly submitted that the interpretation given by the Revenue to the "profits of the export business" is erroneous in the context of MAT and a harmonious interpretation of all the relevant clauses clearly demands that for the purpose of deduction under Section 80HHC, in the context of MAT regime, the profit is the adjusted book profit.
31. The learned Counsel further contended that the emphasis placed by the Revenue on the word "eligible" as "being equivalent to admissible", is misplaced. He stated that eligibility has many aspects such as qua-person, qua-activity, qua-nature of export, qua-conditions etc. In Section 115JA, the condition for the deduction is the stipulations made in Sub-sections (4) and (4A) of Section 80HHC. In Section 115JB, the conditions to be specified are taken care of through the expressions "and subject to the conditions specified in that section". Thus, where Section 115JA mentions only the conditions of Sub-sections (4) and (4A), Section 115JB requires other conditions of Section 80HHC also to be complied. In both the cases, it does not distract from the expression "eligible", which deals in different phases explained above. He has also made a reference to Section 80G to bring out the distinction between "eligibility" and "admissibility". In that section, "eligibility" would cover requirements such as trust or the certificate under Section 80G, whether the assessee has made the contribution etc. etc. The "admissibility" on the other hand is 50 per cent of the amount so contributed with a further limit of 10 per cent of gross total income.
32. The learned Counsel summed up that under Sections 115J, 115JA and 115JB, the legislative intention in respect of the deduction available to an assessee under Section 80HHC always remained the same in spite of certain consequential amendments brought in certain expressions. He explained that there is no dispute on the fact that the book profit were to be considered for the purpose of deduction under Section 80HHC when the MAT regime was governed by Section 115J. The position continued in Section 115JA also as evident from the speech of the Finance Minister, Explanatory Note issued by the CBDT and also by the plain reading of the law contained in Section 115JA. This is the case with Section 115JB also. What has been more categorically stated in Section 115JA and/or 115JB is the mode of computation of the deduction within the meaning of Section 80HHC, once the business profit is ascertained. But the basis of ascertaining the quantum of business profit has not been changed in Sections 115JA or 115JB. That always remained as the book profit as was undisputably in the case of Section 115 J.
33. Shri Hiro Rai appearing for the intervener M/s Thirumalai Chemicals Ltd., contended that the interpretation given by the Revenue to Clause (viii) under Explanation to Section 115JA(2) does not reflect the legislative intention of the amendments as argued by them. If the legislative intention was to restrict the profit for the purpose of Section 80HHC to that of the profits computed under the normal provisions of the Act, the legislature would have stated in Clause (viii) that the assessee is entitled for "deduction under Section 80HHC allowed to the assessee". It presupposes that the deduction under Section 80HHC has already been worked out under the normal provisions of computation and there is nothing to be done further in the light of the book profit adopted for the purpose of Section 115JA. The fate of the deduction under Section 80HHC quantumwise is sealed by the normal provisions of the Act itself and if that was the intention, the expression would have been that the deduction would be "the amount under Section 80HHC allowed to the assessee". It means, the deduction is to be allowed under the normal provisions of the Act and therefore, that issue need not be carried to, Section 115JA. He submitted that, the expression relating to deduction under Section 80HHC has not been provided in the above style.
34. The learned Counsel explained further, if that was the intention, there was no provocation for the legislature to give a specific provision in Clause (viii) so as to entitle the assessee to claim the deduction under Section 80HHC. It means, the process of computing the profits for the purpose of Section 80HHC did not stop with the computation of the income of the assessee under the normal provisions of the Act. The process of the computation transcends to MAT scheme also whereby the book profit comes into play. When the computation of the deduction under Section 80HHC is to be made even under the MAT scheme, the real implication of the law is that the profit for the purpose of Section 80HHC would be the book profit under Section 115JA, wherever it is applicable.
35. The learned Counsel further explained that the law has categorically specified which are the items to be added to the book profit as per Schedule. VI to the Companies Act and what are the items to be deducted from such profit to arrive at the book profit under Section 115JA. In addition to that, the law has provided that unabsorbed depreciation or brought forward losses whichever is less may further be reduced. The scope of flexibility granted in the operation of the Section 115JA ends there. As held by the Supreme Court in the case of Apollo Tyres Ltd. v. CIT , assessing authority has no authority to make any other adjustments. While computing the tax liability of an assessee under the MAT scheme, all the deductions provided under Section 115JA have to be invariably worked out within the light of the book profit. If the assessing authority is substituting the book profit to any other profit, it amounts to violation of the principles laid down by the Supreme Court in the case of Apollo Tyres, which is quite impermissible.
36. Shri Ashwini Kumar, the learned chartered accountant appearing for the intervener M/s Bhushan Steel & Strips Ltd., advanced his arguments in furtherance of the cause of the assessees. He explained that under Section 115JA, MAT is levied with reference to the book profit disclosed in the P&L a/c prepared in accordance with the provisions of the Companies Act. It is different from "profit and gains of business or profession" computed according to the provisions of the IT Act. In this context, the Supreme Court in the case of Apollo Tyres Ltd. v. CIT (supra) has held that the AO does not have the jurisdiction to go behind the profit as per the Companies Act adjusted to the items provided in the section.
37. The learned chartered accountant explained that Section 115J is in pari materia to Section 115JA. The CBDT has issued Circular No. 559 and 680 for the purpose of Section 115J. The circulars have clarified that the amounts arrived after the prescribed adjustments, are the profits eligible for deduction under Section 80HHC or Section 80HHD. It is to be seen that the circulars have clarified that what has to be decided first is whether the assessee carries on the business, the profit, which are eligible for deduction under Section 80HHC. If the answer is positive, the deduction needs to be computed with reference to adjusted book profit. If the entire business consisted of exports, such entire amount should be allowed as deduction, otherwise should be allowed proportionately. It means subject to the modality of computing the deduction under Section 80HHC, the deduction has to be worked out with reference to the adjusted book profit.
38. The learned chartered accountant referred to the Budget speech of the Finance Minister in the year 2000-01 dt. 29th Feb., 2000. The Finance Minister was mentioning the sunset of the deduction available under Section 80HHC where again the Finance Minister has categorically stated that exporters would continue to enjoy exemption from MAT, till the full phase out.
39. The learned chartered accountant further referred to the decision of Kerala High Court in the case of GTN Textiles Ltd. (supra) and other decisions of the Tribunal and contended that even if many of the decisions were rendered in the context of Section 115J, nonetheless the proposition laid down in those decisions equally applies to cases falling under Sections 115JA/115JB for the reason that all the provisions are similar in text and content.
40. The learned chartered accountant further relied on the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. to bring home the point that where two views are possible, the view beneficial to the assessee needs to be followed. In support of the above proposition, he again relied on the decision of Gauhati High Court in the case of CIT v. Maskara Tea Estate and the decision of Supreme Court in the case of Asstt. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC). The learned chartered accountant further submitted that this proposition is more relevant in the case of a deeming provision such as Section 115JA of the Act, which seeks to levy tax on artificial income, where there is otherwise no liability to tax. A deeming fiction needs to be strictly construed and in the case of a conflict in interpretation, the interpretation that leaves the subject with a lighter burden, needs to be preferred.
41. Shri N.N. Mishra, the learned CIT who appeared for the Revenue along with the standing counsel sought to reply the contentions advanced by the counsel appearing for the assessee and the interveners. Shri Mishra explained that no word or expression embedded in an enactment is redundant or superfluous. It is a matter of no dispute that the expressions used in Section 115JA/115JB are materially different from the expressions used in Section 115J. There cannot be an argument that these changes have been brought in to serve no purpose. On the other hand, it is to be construed that the changes brought in are for discharging certain legislative intentions, manifest by those expressions. Therefore, there is no substance in the argument of the counsel that in spite of the repetitive amendments, Sections 115J, 115JA and 115JB are of the same character and substance.
42. Shri Mishra argued in the light of the above submission that almost all the decisions relied on by the counsel are those decisions rendered in the context of Section 115J and not in the context of Section 115JA/115JB. Therefore, those decisions are not relevant in deciding the implications of the law contained in Section 115JA/115JB.
43. The learned CIT further explained that Clause (viii) provided under Explanation to Section 115JA(2) clearly mentions to "the income-tax profit", different from "the book profit" mistakenly relied on by the assessees. By making the matter more crisp and clear, the provisions of law contained in Section 115JA/115JB has declared it leaving no room for doubt that in computing the deduction available to an assessee under Section 80HHC in the context of Section 115JA/115JB, the profit to be adopted is the profit worked out according to the normal provisions of computation and not the adjusted book profit grafted for the purpose of Section 115JA/115JB.
44. Shri Mishra further explained that the substance of the amendments is that if an assessee is not entitled for any deduction under Section 80HHC under the normal provisions of computation for want of profits, then, the assessee would not get an undue enrichment by claiming deduction under the adjusted book profit adopted for the purpose of Section 115JA/115JB. He explained that the eligibility of an assessee is to be looked into in the light of the normal provisions and not in the light of MAT scheme. What the law contemplates is that if an assessee is otherwise entitled for the deduction under Section 80HHC, the assessee should not be deprived of that deduction only for the reason that the assessee is governed by the provisions of law contained in Section 115JA/115JB. He explained that the saving clauses provided under Section 115JA/115JB only protect the normal deduction available to an assessee under Section 80HHC and do not enhance the amount of deduction at par with the book profit adopted for MAT purposes. Therefore, he submitted that the contentions of the counsel appearing for the assessee are not tenable in law and may be dismissed accordingly.
45. We heard both sides in detail. In the course of hearing of this matter, the counsel appearing for the assessees have sought to explain on the facts of the respective cases and the aspects of the computation of the deduction under Section 80HHC, in the respective files. But we may not be able to scan through the facts of the individual cases. This is because, this Special Bench is constituted to decide the specific issue whether deduction under Section 80HHC is to be worked out on the basis of regular income-tax profit or adjusted book profit in a case where Section 115JA is applicable. This question alone is to be considered and decided by this Special Bench. The adjudication of the specific grounds on the basis of the facts raised in the individual appeals will be considered and disposed by the respective regular division Benches before which the files will be placed along with the order of this Special Bench. Therefore, we make it clear that factual aspects of the appeals participated in the proceedings have not been considered by us.
46. The theme of the argument of the Revenue may be briefed as under:
1 That Section 115J prevailed for the asst. yrs. 1988-89 to 1990-91 stood as follows as far as the matter of Section 80HHC deduction is concerned:
(iii)... The amounts [as arrived at after increasing the net profit by the amounts referred to in Clauses (a) to (f) and reducing the net profit by the amounts referred to in Clauses (i) and (ii)] attributable to the business, the profits from which are eligible for deduction under Section 80HHC or Section 80HHD; 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....
2 That the above explanation brought under Section 115J(1A) by the Direct Tax Laws (Amendment) Act, 1989 with effect from the asst. yr. 1989-90 has provided for deduction under Section 80HHC on the basis of the adjusted book profit worked out for Section 115J.
3 That the amounts are to be computed in the manner specified in Sub-section (3) or Sub-section (3A) of Section 80HHC explained only the manner of computation and not the amount itself which would be imported into Expln. (iii) under Section 115J.
4 That therefore the contention of the assessee regarding the profit which is to be considered for working out the deduction under Section 80HHC was acceptable under the old provisions of Section 115J which prevailed upto the asst. yr. 1990-91.
5 That Section 115J has been dispensed w.e.f. asst. yr. 1991-92; thereafter Section 115JA was introduced which prevailed for the asst. yrs. 1997-98 to 2000-01.
6 That the relevant Explanation provided under Section 115JA has brought in substantial amendment in the concept of profit necessary to work out the deduction under Section 80HHC in a case of MAT assessment. That the relevant Explanation reads below:
(viii) The amount of profit eligible for deduction under Section 80HHC computed under Clauses (a), (b) or (c) of Sub-section (d) or Sub-section (3A) as the case may be, or that section and subject to the conditions specified in Sub-section (4) and Sub-section (4A) of that section.
7 That in the new Section 115JA, the reference has been enlarged to Clauses (a), (b) and (c) in addition to Sub-section (3) and Sub-section (3A) embodied in the old Section 115J.
8 That further conditions in Sub-sections (4) and (4A) of Section 80HHC also need to be complied with.
9 That this elaboration of the conditions has made it different from the provisions of Section 115J. As specific reference has been made to Clauses (a), (b) or (c), it is apparent to read that the profit to be considered for working out the quantum of Section 80HHC, deduction is the profit worked out under the normal provisions of the IT Act and not the adjusted book profit under Section 115JA.
10 That this process of clarification by way of amendment has been made more apparent in Section 115JB brought in the statute book from the asst. yr. 2001-02 onwards wherein the explanation has been given as:
(iv) The amount of profits eligible for deduction under Section 80HHC computed under Clauses (a), (b) or (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;
11 That the above Explanation provided under the new Section 115JB has made the intention of the legislature more clear by stating that in addition to the application of Clauses (a), (b) or (c), the deduction shall be subject to the conditions specified in Section 80HHC, which means that the deduction shall be computed only on the basis of the profit computed under the regular provisions of the IT Act.
12 That in Section 115J, the deduction under Section 80HHC was available on the basis of the adjusted book profit but this position has been amended through the modifications brought in by Section 115JA and further strengthened by the explanation brought under Section 115JB.
13 That it clearly declares that the computation of deduction under Section 80HHC has been delinked from the adjusted book profit as it was in the case of Section 115J and the computation has been clubbed with the profit worked out under the normal provisions of the IT Act.
14 That this process of delinking has been emphatically made clear by the successive modifications brought in by Sections 115JA and 115JB.
15 That the above development of law brought in by successive amendments have made it clear that the deduction under Section 80HHC in a MAT assessment is to be worked out only from the profit computed under the normal provisions and not from the book profit worked out for the purpose of Section 115JA/115JB.
47. On the other hand, the points of arguments advanced by the counsel are as follows:
(1) That reading of the words and expressions of Sections 115J, 115JA and 115JB does not make out any case that the object of the provision relating to the deduction under Section 80HHC has been amended in any way so as to touch the basic character of the deduction. The subsequent amendments brought in by Sections 115JA and 115JB have not taken away the character of the deduction under Section 80HHC envisaged in Section 115J. The true intendment of the Explanations remained the same in all the three sections.
(2) That the additional reference made to Clauses (a), (b) or (c) in Expln. (viii) to Section 115JA are only highlighting the method of computing the deduction, that it should be in accordance with the manner provided in Section 80HHC. Those references do not provide even remotely that the basis of the computation should be regular income-tax profit instead of adjusted book profit. Those expressions have nothing to do with the character of the profit considered for the deduction. The relevance is only in respect of the method of computation.
(3) That it is the position even with the Section 115JB wherein the Explanation has not only referred to Clauses (a), (b) or (c) but also provided an overall restriction that the computation shall be subject to the conditions specified in that section. This new Explanation also does not bring in any new concept but only reiterates that the computation of deduction shall be in the manner provided in Section 80HHC. In the earlier, Section 115JA, references have also been made to Sub-sections (4) and (4A). In the new Section 115JB, those references have been taken out and instead a blanket declaration has been brought in, that the computation shall be subject to the conditions specified in Section 80HHC. This amendment is in fact brought to take care of any conditions that may exist or may be imposed further in the matter of computation of deduction under Section 80HHC. It has nothing to do with the character of profit which is to be considered for the purpose of granting the deduction which always remained the adjusted book profit worked out for the MAT regime.
(4) That the intention of the legislature is clear in the speeches of the Finance Minister while introducing Sections 115J, 115JA and 115JB where it has been emphatically confirmed and reconfirmed that the legislature is intending to give full deduction to assessees under Section 80HHC in respect of the MAT scheme. The circular issued by the CBDT in the light of Section 115J therefore applied to Sections 115JA as well as 115JB. In the Notes on Clauses or Memorandum explaining the finance bill, there is no mention of any change in approach in the matter of Section 80HHC while introducing Sections 115JA and 115JB. The speeches of the Finance Minister, Explanations, the Notes on Clauses all consistently declared that in spite of the three different Sections 115J, 115JA and 115JB existed for different assessment years, the deduction provided under Section 80HHC even in a case of MAT assessment means full deduction and full deduction will be available only if the adjusted book profit is considered for the computation of Section 80HHC.
48. The concept of "minimum alternate tax" was introduced by the Finance Act, 1987 w.e.f. 1st April, 1988, through Section 115J under Chapter XII-B of the IT Act, 1961. This provision remained in the statute book for the period from the asst. yrs. 1988-89 to 1990-91. Section 115J as originally introduced by the Finance Act, 1987 did not provide any exemption to export profits under Section 80HHC. At the same time Section 80HHC of the IT Act provided 100 per cent deduction in respect of export profits earned by the exporters or supporting manufacturers. Section 80HHC and similar provisions were brought in the Act to encourage the earnings and savings of Foreign Exchange Resources. Therefore, 100 per cent tax deduction in respect of the profits from such activities have been given, but Section 115J brought in a new situation whereby exporters and other similar beneficiaries who enjoyed deductions under Sections 80HHC and 80HHD etc. were required to pay, nevertheless a minimum tax of 30 per cent on their profits. This situation diluted the scope of exemption available to them under Section 80HHC and other similar sections.
49. In order to overcome the above impasse, the Direct Tax Laws (Amendment) Act, 1989 brought in Expln. (iii) under Section 115J(1A), which provided for deduction under Section 80HHC etc. even in a MAT assessment. The deduction was to be computed in the manner specified in Sub-section (3) or Sub-section (3A) of Section 80HHC. This amendment was to be effective from asst. yr. 1989-90 onwards, which of course ended with asst. yr. 1990-91.
50. Thereafter, after a gap of seven years, the concept of minimum alternate tax was revived in Section 115JA by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997. This new provision of Section 115JA was operative till the asst. yr. 2000-01. The deduction available to exporters under Section 80HHC has been retained in Expln. (viii) provided under Section 115JA(1). In the new explanation, the computation has to be made under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) as the case may be. This expression is in the place of the Explanation existed under Section 115J that the computation shall be made in the manner prescribed under Sub-section (3) or Sub-section (3A). The MAT regime has been again amended to a new Section 115JB from the asst. yr. 2001-02 onwards. This new provision has been introduced by the Finance Act, 2000. This section also retained the deduction available under Section 80HHC under Expln. (iv) provided under Section 115JB(1). In the new Explanation, the computation has to be made similar to the Explanation under Section 115JA, i.e. under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) and further subject to the conditions specified in that section.
51. The above narration is the literal legislative history of minimum alternate tax scheme introduced in the IT Act, 1961. There was a predecessor to this scheme. In 1983, a new Section 80WA was inserted in the Act so that all profitable companies pay some tax. Anyhow, the operation of this section was not successful and was later withdrawn. Thereafter, the minimum alternate tax regime was introduced on the lines of American Alternate Minimum Tax Scheme, for the asst. yr. 1988-89 by introducing Section 115J. This was again withdrawn and remained dormant for asst. yrs. 1991-92 to 1996-97. Thereafter the scheme was reintroduced in Section 115JA for the asst. yrs. 1997-98 to 2000-01 and thereafter continues under Section 115JB for asst. yr. 2001-02 onwards.
52. The cause of the dispute cropped up in these cases is the difference of opinion reflected in interpreting certain modifications brought in the Sections 115JA and 115JB. In the earlier provisions, Section 115J, the computation of deduction had to be made in the manner prescribed in Section 80HHC. It was a simple overall statement. In Section 115JA, the law elaborated little further and stated that the computation shall be made under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) of Section 80HHC with a further, liability of restriction under Sub-sections (4) or (4A). The elaboration of the method of computation from the general expression "in the manner prescribed" to Clauses "(a), (b) or (c)" made the Revenue to argue that even though deduction under Section 80HHC is retained in Section 115JA, the rules of computation and the basis of the computation have been changed. According to the Revenue in the old provision, Section 115J, the deduction under Section 80HHG was to be computed with reference to the adjusted book profit but in the new Section 115JA, the computation has to be made with reference to the regular profit worked out under the normal provisions of the IT Act. The Revenue stated that the elaboration Clauses (a), (b) or (c) have been made to achieve this particular purpose so that the assessees are not getting undue benefits by claiming higher amount of deduction on the basis of an enhanced book profit. The change reflected in the latest Section 115JB is that in addition to the applicability of Clauses (a), (b) or (c) etc., the computation has to be further monitored within the provisions of Section 80HHC itself. In the light of the latest section, the Revenue further contends that the expression "in accordance with the provisions of Section 80HHC" has made it very clear that the deduction needs to be computed always on the regular income-tax profit and not on the basis of the adjusted book profit.
53. In fact, this controversy was raised even at the time of the old provisions contained in Section 115J. That necessitated the issue of Circular No. 680, by the CBDT on 21st Feb., 1994 [(1994) 117 CTR (St) 215 : (1994) 2061TR (St) 297\. It is stated in the circular that certain doubts have been expressed as to whether the amount quantified under Section 80HHC Sub-section (3) or Sub-section (3A) or Section 80HHD Sub-section (3) itself should be deducted under Expln. (iii) under Section 115J or whether only on the manner of computation specified in those sections should be followed to quantify the amount of deduction. After discussing the matter in detail, the circular concluded that it is only the manner of computation specified in the reference made to Section 80HHC Sub-section (3) or Sub-section (3A) or Section 80HHD and not the amount themselves that should be imported into Expln. (iii) under Section 115J. The circular clarified that the quantum of computation is to be worked out on the basis of the adjusted book profit. The Revenue has also accepted the above position for the purpose of Section 115J. Now the question is whether the subsequent changes brought in the words and expressions in Sections 115JA and 115JB have brought any deviation from the position existed under Section 115J. Both Sections 115JA and 115JB start with a non obstante clause "notwithstanding anything contained in any other provisions of this Act". This was the case with Section 115J also. Therefore, it is not necessary to call upon to look into any other provisions of the IT Act to conceive the meaning of "profits and gains" including Section 29 where the concept of profits and gains is explained for the computation of profits and gains of business or profession. The reference has been made in all the three Sections 115J, 115JA and 115JB to export relief under Section 80HHC etc. that the relief have to be calculated in the light of those enabling provisions itself, which are again Sections 115J, 115JA and 115JB alone. This is because Section 29 itself is not part of the scheme of the relief. As argued by the counsel, if various provisions under Sections 28 to 44D are to be applied, then what is computed is not book profit, but again statutory profits with the result that there will be a disparity in considering statutory profits for the purpose of deduction, when the entire exercise is with reference to book profit. A deviation from the above position is permissible only if the law has specifically provided that and that too in clear words that the deduction shall be reckoned with the statutory profits and not with the adjusted book profit. As argued by Shri Sonde, the reference made to profit and gains in Sections 115J, 115JA and 115JB with reference to various items are always to book profit and therefore the reference cannot be switched over to statutory profit only in respect of deduction available under Section 80HHC.
54. The omission of the word "in the manner of" given under Section 115J has sometimes been considered as justifying an adverse inference against the assessee. But if the omission had occurred, while repeating the earlier clause, some meaning would require to be assigned to such omission. But what has happened is that the earlier clause under Section 115J dealt with both the relief under Section 80HHC and under Section 80HHD by a single clause provided under Explanation. But thereafter it was decided to extend the relief to Section 80HHE as well. Therefore, it became necessary that the entire clause to be redrafted.
55. When the MAT was reintroduced with effect from the asst. yr. 1997-98, it was considered necessary to omit the relief for Tourism Industry under Section 80HHD and to include relief for software industry under Section 80HHE. It was in this context that the language had necessarily to be different. The law has made it clear by having two different Sub-clauses and also referred to the manner in which it has to be computed so that it was not necessary to import the words "in the manner of".
56. When the book profit tax under Sections 115J/115JA was substituted by Section 115JB, it was decided to add relief for export in respect of entertaining industry under Section 80HHF with slight alteration in the language, so that such language could be identical for all the reliefs though in different clauses Therefore, it is clear from the successive changes brought in the statute that the relief with reference to book profit tax erstwhile given under Section 115J has been extended in more clearly spoken words in subsequent Sections 115JA and 115JB. In Section 115JA, it has been clearly stated that the relief will be computed under Section 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 certified by a chartered accountant. As for the manner of calculation, it is very necessary to see that the reference is made only to Sub-sections. (3) and (3A), where there is Expln. (b) to Sub-section (3) referring to the adjusted profit of the business, which is required for the purposes of ascertaining proportionate profits in respect of manufactured goods to be understood by the definition of adjusted profits of business. The expression "in the manner" provided under Clause (b) of Sub-section (3) only refers to ascertainment of actual profits in trading goods and reducing the same from the profits. As far as the manner of ascertainment of trading goods, the resultant profits either for book profit tax or for statutory relief will be the same. In fact, it is book profit which is the basis for ascertainment of export profits in trading goods, when the law has provided that the direct and indirect cost relating to such exports should be deducted from the export turnover. It is only Expln. (baa) to Sub-section (4B) of Section 80HHC requires profits and gains to be computed according to the provisions of the statute under the head "Profits and gains of business or profession". Sub-section (4B) has been excluded from the purview of the Explanation to Section 115JA. Sub-section (4B) of Section 80HHC and the Explanations thereto apply for whole Section 80HHC requiring, inter alia, computation of eligible relief for the purpose of relief based on statutory income. Explanation (iv) of Section 115JB Sub-section (2) confines its references to Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A), which provided for the manner of computation requiring the same manner as for Section 115J to be followed for Section 115JA/115JB for which book income as per Sub-section (2) of Section 115JA/115JB will alone will be relevant.
57. As per Section 115JB, the cross-reference is to the same sub-sections as for Section 115JA, which reference even to Sub-sections (4) and (4A) were not considered necessary, so that the omission of the words "in the manner of" in the section, which was in general terms, does not adversely effect the relief available to an assessee under Section 80HHC.
58. The relevant circular issued by the CBDT has not only made a reference to the expression "in the manner of", but also made reference to the fact that the entire exercise for computing book profit tax is with reference to the book profit so that the intention is to base the relief only on book profit. The above discussion makes it clear that this reasoning given for Section 115J continues to be good even in the case of Sections 115JA/115JB. The intention explained in Circular No. 559, dt. 4th May, 1990 [(1990) 85 CTR (St) 1] as explained in Circular No. 680, dt. 21st Feb., 1994 cannot be treated as having been given up in the substituted tax on book profit, when they were reintroduced practically on the same basis with very nominal modifications as regards computation of income.
59. The above proposition is further supported by the respective speeches made by the Finance Minister while introducing Sections 115J, 115JA and 115JB. It has been made very clear while introducing Clause (iii) to Explanation under Section 115J that the MAT scheme should not take away the benefits given under Section 80HHC. This position was made clear in the Notes on Clauses and in the relevant circulars issued explaining the features of the Finance Act. When Sections 115JA and 115JB were reintroduced and substituted later, the same object was declared by the Finance Minister in the Parliament which again reflected in similar terms in the relevant circulars and Notes on Clauses and the Memorandum explaining the objects of amending the provisions. In the case of Section 115JB, the Finance Act has made it very clear that the deduction under Section 80HHC would be available in its entirety to an assessee even if the relief under Section 80HHC is being eliminated in a phased manner. The relevance of Finance Minister's speech in appreciating the objective of a fiscal statute was considered by the Supreme Court in the case of Kerala State Industrial Development Corporation Ltd. v. CIT . The Court held that Finance Minister's speech before Parliament could be relied upon to throw light on the object and purpose of particular provisions. It was considered in the context of interpretation of Interest-tax Act, 1991. In fact, the Supreme Court was following its own earlier decision in the case of K.P. Varghese v. ITO .
60. The concept of book profit is the product of MAT, introduced in Section 115J, similar to the concept of Alternate Minimum Tax under the United States Federal Laws. The intention was to tax zero-tax companies on the basis of book profit so that those companies which declare dividend out of their book profit and which do not pay taxes on the basis of the reliefs claimed by them, begins to pay some amount of tax to the Government. This is on the principle of ability to pay tax which is based on the principle of equity. When it was initially introduced in Section 115J, it was a steel-frame that the tax shall be payable on the book profit subject to certain adjustments of additions and deductions. No further deductions were available from the said adjusted book profit. It was the ultimate amount on which the company has to pay taxes. But later on, the legislature itself thought it fit to protect the concessions given to exporters etc. so that the exporters are not compelled to pay tax under MAT. Therefore, even the steel-frame of Section 115J was mended by the legislature by providing exemption to export profits. The legislature itself has thus declared that the adjusted book profit worked out under MAT scheme need not be the ultimate amount on which an assessee has to pay tax but deductions are still available in respect of export incentives etc.
61. Once the law itself has declared that the adjusted book profit is amenable for further deductions on specified grounds, in a case where Section 80HHC is operational, it becomes very clear that the computation for the deduction under Section 80HHC needs to be worked out on the basis of the very same adjusted book profit. The above proposition is manifest in the fact that the deduction under Section 80HHC has been provided in Sections 115J, 115JA and 115JB themselves instead of making a reference in Section 80HHC itself. It is made so because the nexus between the deduction under Section 80HHC and the profit in a MAT regime is between the deduction and the adjusted book profit.
62. When the law itself has given deductions out of adjusted book profit, there is no force in the argument of the Revenue that the assessee should not get a higher amount of deduction worked out on the basis of book profit. The apprehension expressed by the Revenue is that in such circumstances, the assessee may get undue advantage of higher amount of deduction, which would not have been available to it if the quantum was worked out under the normal provisions of computation. As rightly pointed out by Shri Sonde, the incompatibility reflected in the scheme of deduction under Section 80HHC in the MAT regime is inherent by the nature of the legislation itself. The law itself has provided that in spite of the liability to pay tax under MAT scheme, the exporter is entitled to claim deduction under Section 80HHC. The legislature itself has diluted the rigours of the law on the subject. When the law itself has made the MAT regime so flexible, there is no ground to argue that the assessee should not get the benefit of deduction under Section 80HHC on the basis of the adjusted book profit. If the assessee is getting any such advantage, it is the inherent consequence of the provisions of law.
63. The position of law as to requirement that income has to be computed under company law is said to be finally decided by Supreme Court in Apollo Tyres Ltd. v. CIT (supra) which held that the AO is bound to accept the authenticity of the accounts with reference to the provisions of Companies Act, which obligates the company to maintain its accounts in the manner provided in that Act certified by the statutory auditor approved by the shareholders in general meeting and filed before Registrar of Companies. The decision in Cochin Cadalas (P) Ltd. v. CIT (2002) 125 Taxman 47 (Ker) holding that there is no authority to modify book profits as shown in the P&L a/c now stands approved. Therefore, the AO is not permitted to deviate from book profit while computing the deduction under Section 80HHC.
64. The grievance of the Revenue is that the interpretation now proposed would be providing unexpected benefit to the assessee. That grievance is created by the legislature itself. MAT is a deeming provision to levy tax on the book profit of the companies, overriding the provisions of deductions provided under the statute. Still the legislature thought it fit to extend certain deductions to the assessees governed by book profit tax, in the matter of Section 80HHC etc. Therefore, the apprehension pointed out by the Revenue is quite inherent.
65. While interpreting provisions of statute, it is not necessary to read down the law, unless the context demands, to make the provision workable. The expression used in Section 115J as "in the manner specified in Sub-section (3) or Sub-section (3A) of Section 80HHC"; the expression used in Section 115JA as "under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A) Subject to the conditions specified in Sub-sections. (4) and (4A)..." and the expression used in Section 115JB as "under Clauses (a), (b) or (c) of Sub-section (3) or Sub-section (3A)... and subject to the conditions specified in that section..."; when compared and read together do not give any intention or expound any purpose that Section 115JA is different from Section 115J and Section 115JB is different from Section 115JA in the character and purpose of deduction under Section 80HHC in a case of MAT assessment. When the amendments do not bring out any case of such differentiation in their plain interpretation, there is no justification to strain the language and imbibe to extra-contextual meaning.
66. The deduction under Section 80HHC in a MAT scheme is from the taxable income, which is otherwise the adjusted book profit. If no deduction is available to an assessee, the gross total income itself is the taxable income of the assessee. MAT scheme does not provide for deductions. Therefore, the interpretation is that the adjusted book profit of a company itself is the gross total income of that assessee company. The deduction under Section 80HHC is in that way given out of gross total income in a case falling under MAT. This in turn means that Section 80HHC should be computed on the adjusted book profit. Sees. 115J, 115JA and 115JB come into operation, as the regular profits has been substituted by the book profit. Once the substitution is over, there is no way to go back to the normal computation process of statutory profit, which has already been overwhelmed by Sections 115J, 115JA and 115JB. This reconciles the alleged incompatibility pointed out by the Revenue that the deduction available to an assessee under Chapter VI-A is subject to Section 80AB. Therefore, we find that the deduction under Section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profits and gains of business or profession.
67. The question referred to the Special Bench is in the light of Section 115JA of the IT Act, 1961. But while passing this order, we have also made reference to Section 115JB as if Section 115JB also has been placed before the Special Bench. As Sections 115J, 115JA and 115JB deal with the same subject, it is indispensable for us to consider the provisions of section not only under Section 115JA but also under Section 115JB. Further, in the case of one of the interveners before us, M/s Bhushan Steel & Strips Ltd., the relevant assessment year is 2003-04 to which Section 115JB is applicable. Therefore, we make it clear that by discussing the law contained in Section 115JB, we have not exceeded our brief. In fact we have decided the issue in the light of Section 115JA, but only thing is that the discussion on Section 115JB is an inherent fallout of the case before us.
68. Now the files will go back to the regular Benches, which will pass appropriate orders on the basis of the grounds raised in the respective appeals.