MAT : S. 80HHC and S. 115JA of Income-tax Act, 1961 : A.Y. 1998-99 : Computation of deduction u/s.80HHC to be worked out on the basis of adjusted book profits u/s.115JA.

II. Reported :

[CIT v. K. G. Denim Ltd., 180 Taxman 590 (Mad.)]

For the A.Y. 1998-99 the assessee-company was assessed
u/s.115JA of the Income-tax Act, 1961. The assessee had computed deduction
u/s.80HHC with reference to book profit ascertained u/s.115JA and the same was
allowed by the Assessing Officer. Subsequently, invoking the powers u/s.263 of
the Act, the Commissioner revised the assessment order and held that the
deduction u/s.80HHC has to be computed with reference to the normal profits
and not with reference to book profits u/s.115JA. The Tribunal set aside the
order of the Commissioner.

On appeal by Revenue, the Madras High Court up-held the
decision of the Tribunal and held as under :

“(i) In CIT v. Rajnikant Schnelder & Associates (P)
Ltd., 302 ITR 22 (Mad.), the High Court held that the Assessing Officer
is not entitled to touch the profit and loss account prepared by the
assessee as per the provisions contained in the Companies Act, while
arriving at the book profit u/s.115JA and the book profit so arrived at
should be the basis for taxation and, therefore, the computation of
deduction u/s.80HHC should be limited to the case of profits of eligible
category only.

(ii) In view of the aforesaid decision, the Tribunal was
right in law, in holding that the deduction u/s.80HHC in a case of MAT
assessment is to be worked out on the basis of the adjusted book profit
u/s.115JA.”