COMMISSIONER OF INCOME TAX Vs. ORCHARD MICROSYSTEMS LTD

JUDGEMENT

(1.) BY formulating the following Substantial Question of Law, the Revenue is on appeal against the order of the Income Tax Appellate Tribunal, Madras "B" Bench, dated 5.10.2007 made in ITA.No.1186/Mds/2006. The relevant assessment year is 2000-2001.

(2.) THE facts as culled out from the statement of facts in the memorandum of grounds are as follows: THE assessee company is engaged in the business of Software Development. For the assessment year 2001-02, the assessee filed its return declaring loss. However, the assessee had paid tax under Section 115JB of the Income Tax Act at 7.5% plus surcharge. It was noticed that the assessee had arrived at taxable book profit after reducing the deduction under Section 80HHC. THE Assessing Officer proposed to reassess the same under Section 147 of the Act but dropped the proceedings. THE Commissioner of Income Tax found that the order dropping the proceedings was erroneous and prejudicial to the Revenue and revised the same. THE Assessing Officer held that that the assessee company was not eligible for deduction under Section 80-HHC, as there was no business profits on computation of total income under normal provisions. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). THE Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer by holding that the computation of deduction under Section 80HHC is to be worked out on the basis of adjusted book profit, since this is a MAT assessment. THE correctness of the said order is now canvassed before this Court by filing this appeal.