A.C.I.T. - BHARUCH CIRCLE vs. NARMADA CHEMATUR PETROCHEMICALS LTD

TAXAP/248/2010HC GujaratGJHC24026311201021 June 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA4 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed an order dated February 6, 2009, by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench. The appeal concerned the assessment year 2000-01. The assessee, Narmada Chematur Petrochemicals Ltd., claimed a deduction of Rs. 94,65,636/- under Section 80HHC of the Income Tax Act, 1961, from its book profit computed under Section 115JB. The Assessing Officer disallowed this deduction, arguing that Section 80HHC(4)(haa) limited the deduction to profits computed under the head 'profits and gains of business and profession', not book profits under Section 115JB, especially when the returned income was a loss. The Commissioner of Income Tax dismissed the assessee's appeal, leading to the ITAT appeal.

What did the High Court hold?

The High Court held that the appeal was meritless as the issue was covered by the Supreme Court's decision in Commissioner of Income-tax v. Bhari Information [340 ITR 593]. This Supreme Court decision upheld the Tribunal's view in Deputy CIT v. Syncome Formulations (I) Ltd. The principle laid down, though concerning Section 80HHE, was held to squarely apply to Section 80HHC. The Tribunal's reasoning, affirmed by the Supreme Court, was that the deduction under Section 80HHC (or 80HHE) should be worked out on the basis of adjusted book profits under Section 115JA (or 115JB), not on the basis of regular income-tax profits. The Court noted that the law itself permits further deductions from adjusted book profits, making it clear that computation for such deductions needs to be based on adjusted book profit when Section 115JA (or 115JB) is applicable. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that while computing book profit under Section 115JB, deduction under Section 80HHC is allowable though the returned income is a loss? (Question of law) Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Assessing Officer argued that Section 80HHC(4)(haa) restricts the deduction to profits computed under the head 'profits and gains of business and profession' and not book profits under Section 115JB. Furthermore, since the assessee declared a loss in its return, the deduction under Section 80HHC was not admissible. The Revenue relied on the plain reading of the provision.

Which sections of the Income-tax Act were involved?

Section 115JB,Section 80HHC,Section 80HHE,Section 115JA

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAPJ/2482/0103 1/4

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 248 of 2010 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= A.C.I.T. - BHARUCH CIRCLE - Appellant(s)

Versus NARMADA CHEMATUR PETROCHEMICALS LTD - Opponent(s) ========================================================= Appearance : MR KM PARIKH for Appellant(s) : 1, MR MANISH J SHAH for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 21/06/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA)

The present appeal preferred by

The order continues below.

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