Al-Habib Engineering (I) P. Ltd , Mumbai vs Assessee

ी संजय अरोड़ा, लेखा सद य एवं ी अ मत श ु ला, या यक सद य के सम ।

BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM

आयकर अपील सं./I.T.A. No. 4701/Mum/2008 ( नधा रण वष / Assessment Year: 2005-06)

Al-Habib Engineering (India) Pvt. Ltd. Income Tax Officer-WD 6(1)(2), 91/3, Mohamedali Road, Room No. 503, Aayakar Bhavan, 46/47, Rangoonwala Building, बनाम/ M. K. Road, Mumbai-400 020 Mumbai-400 003 Vs.

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAACA 3379 D (Assessee) : (Revenue) & आयकर अपील सं./I.T.A. No. 3062/Mum/2008 ( नधा रण वष / Assessment Year: 2005-06)

Income Tax Officer-WD 6(1)(2), Al-Habib Engineering (India) Pvt.

Room No. 503, Aayakar Bhavan, Ltd. M. K. Road, Mumbai-400 020 बनाम/ 91/3, Mohamedali Road, Vs. 46/47, Rangoonwala Building, Mumbai-400 003

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAACA 3379 D (Revenue) : (Assessee)

Assessee by : Ms. Aarti Sathe Revenue by : Shri Asghar Zain

ु वाई क( तार)ख / सन : 24.02.2015 Date of Hearing Date of Order : 19.03.2015

आदे श / O R D E R Per Sanjay Arora, A. M.:

2 ITA Nos. 4701 &3062/M um/2008 (A.Y. 2005-06) Al-Habib Engineering (India) Pvt. Ltd.

These are cross Appeals, i.e., by the Assessee and the Revenue, arising out of the Order by the Commissioner of Income Tax (Appeals)-VI, Mumbai ('CIT(A)' for short) dated 05.02.2008, allowing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2005-06 vide order dated 30.08.2007. The issue arising being common, we shall take up the two appeals together.

2. Presenting its' case, it was submitted by the ld. Authorized Representative (AR), the assessee counsel, that the issue arising in the instant appeals is covered squarely in assessee's favour by the decision of apex court in the case of CIT vs. Ajanta Pharma Ltd. [2010] 327 ITR 305 (SC). The apex court, reversing the decision by the Hon'ble High Court (reported at [2009] 318 ITR 252 (Bom)), restored that by the Appellate Tribunal, which had not been agreed to by the hon'ble jurisdictional high court. It clarified that the quantum of deduction u/s.80HHC(1) (or (1A)), which was phased out over a four year period beginning A.Y.2001-02, i.e., from AY 2001-02 to AY 2004-05, would not govern the adjustment to the book profit to be made in respect of export profits deductible u/s.80- HHC, i.e., vide Explanation 1(iv) below s.115-JB(2). The difference between 'eligibility' of profit and its 'deductibility' is to be kept in mind. So however, she further added, that this would be to no avail inasmuch as the assessee is not entitled to any deduction u/s.80HHC(1) or (1A) for the current year. The ld. DR did not dispute the contentions made by the ld. AR.

3. We have heard the parties, and perused the material on record.

The brief facts of the case are that the assessee returned its income for the relevant year on 31.10.2002 at nil, claiming carry forward of unabsorbed depreciation at Rs.9,73,573/-. The computation of book profit u/s.115JB, filed at the instance of the Assessing Officer (AO), bore deduction by way of adjustment of Rs.3,77,958/- on account of export profit, i.e., under Explanation 1(iv) below section 115JB(2), from the book profit of Rs.4,10,237/-. The same did not find favour with the AO inasmuch as the 3 ITA Nos. 4701 &3062/M um/2008 (A.Y. 2005-06) Al-Habib Engineering (India) Pvt. Ltd.

assessee had not furnished the report from an Accountant in the prescribed form along with the return of income filed u/s.139(1) or in response to notice u/s.142(1)(i), as required by section 115JB(4). The assessee's income was accordingly computed under the MAT provisions at Rs.4,10,237/-. In appeal, the ld. CIT(A) allowed relief to the assessee following the decision by the tribunal in Dy. CIT vs. Govind Rubber Pvt. Ltd. [2004] 89 ITD 457 (Mum). The deduction was, however, limited to the amount of deduction to which the assessee was entitled for the relevant year. Aggrieved, the assessee is in appeal, with the Revenue agitating the partial relief allowed by the ld. CIT(A).

A reading of the decision by the apex court in Ajanta Pharma Ltd.(supra) would reveal that the issue raised by the Revenue in the instant case was precisely the issue arising in that case; the Revenue therein limiting the deduction u/s.115JB read with Explanation 1(iv) to 80% of the amount computed with reference to the provision of section 80HHC(3), i.e., as stipulated for that year (A.Y. 2001-02) by section 80HHC(1B), which regulates the quantum of deduction u/s.80HHC(1) or, as a case may be, sec.80HHC (1A). It was explained that section 115JB is a separate code in itself, and the specified adjustments to the profit as disclosed by the annual accounts, which came to be termed by it as upward and downward adjustments, provided under Explanation 1 thereto, is, qua export profits, only of the amount eligible for deduction u/s.80-HHC. The dichotomy between 'eligibility' and 'deductibility' is to be borne in mind if section 115JB is not to cease to be a self-contained code. This issue or aspect of the matter, in view of the said decision, stands settled by the apex court.

However, as observed during the course of the hearing itself, the question of any adjustment on account of export profit under Explanation 1(iv) thereto in the computation of book profit u/s.115JB would arise only where any profit is eligible for deduction u/s.80-HHC. The decision by the apex court in Ajanta Pharma Ltd. (supra) only resolves the issue of the extent, or the quantum, of adjustment, divorcing it from that qualifying for deduction u/s.80-HHC, as it is the eligibility which is determining factor. In that sense, the said decision is squarely against the assessee; no deduction u/s.80HHC arising 4 ITA Nos. 4701 &3062/M um/2008 (A.Y. 2005-06) Al-Habib Engineering (India) Pvt. Ltd.

for the current year, being subsequent to the last of the assessment years (A.Y.2004-05) for which deduction u/s.80HHC was admissible. The assessee, in fact, did not even, and only for that reason, file any report u/s. 80-HHC(2), i.e., for claiming deduction thereunder. This is also the grievance projected by the Revenue per its Ground # 1. The further issue/s raised by the Revenue, necessitating reference to the cited decision by the apex court, do not in fact arise in view of the extant law. The reference to the said decision was thus not required in the facts and circumstances of the case, even as was the admitted position during hearing.

We, accordingly, albeit for different reasons, stated here-in-above, uphold the determination of the books profit as assessed. The Revenue's appeal contesting the partial relief allowed by the ld. CIT(A) would also stand adjudicated in its favour in view of our decision aforesaid. We decide accordingly.

4. In the result, the assessee's appeal is dismissed, and that of the Revenue allowed.

प*रणामतः नधा.*रती क( अपील खा*रज / राज व क( अपील वीकृत क( जाती है ।

Order pronounced in the open court on February 24, 2015

Sd/- Sd/-

(Amit Shukla) (Sanjay Arora) या यक सद य / Judicial Member लेखा सद य / Accountant Member मुंबई Mumbai; 3दनांक Dated : 19.03.2015

न.स./Patel, PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ9 / The Appellant

2. :;यथ9 / The Respondent

3. आयकर आयु त(अपील) / The CIT(A)

4. आयकर आयु त / CIT - concerned

5. >वभागीय : त नAध, आयकर अपील)य अAधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड. फाईल / Guard File 5 ITA Nos. 4701 &3062/M um/2008 (A.Y. 2005-06) Al-Habib Engineering (India) Pvt. Ltd.

आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai