JUDGMENT

S.H. KAPADIA, CJI Leave granted.

2. Assessee was a MAT company at the relevant time. On 30.10.2001, it filed its return of income for assessment year 2001-02. The said return was accompanied by statutory audit report claiming deduction under Section 80HHC of the Income-tax Act, 1961 (for short, "the 1961 Act"). While computing the "book profits" under Section 115- JB of the 1961 Act, the assessee claimed reduction, under clause (iv) of Explanation to Section 115JB, of 100% export profits. Vide assessment order dated 27.2.2004 the AO allowed only 80% of the export profits in terms of Section 80HHC(1B), as being allowed for reduction of "book profits" under clause (iv) of Explanation to Section 115JB of the 1961 Act. Being aggrieved by the assessment order, assessee moved before the CIT(A). Vide order dated 30.7.2004, the CIT(A) held that 100% export profits earned by the assessee as computed under Section 80HHC(3) was eligible for reduction under clause (iv) of Explanation to Section 115JB. This order of CIT(A) was upheld by the Tribunal which took the view that the amount of profit eligible for deduction would not be governed by Section 80HHC(1B) since there is no reference to the said sub-section in clause (iv) of the Explanation to Section 115JB. Against the concurrent finding the Department carried the matter in appeal to the Bombay High Court. By the impugned decision dated 7.5.2009 the Department's appeal under Section 260A of the 1961 Act stood allowed. Hence this civil appeal.

3. The question of law raised in this civil appeal is : whether for determining the "book profits" in terms of Section 115JB, the net profits as shown in the P&L Account have to be reduced by the amount of profits eligible for deduction under Section 80HHC or by the amount of deduction under Section 80HHC?

4. To answer the above question we need to quote hereinbelow Section 115-JB as inserted by Finance Act, 2000, w.e.f. 1.4.2001 which reads as follows:

"115-JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2001, is less than seven and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent. (2) Every assessee being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). Provided ... Provided further ... Explanation : For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by - (a) to (f) ... If any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by - (i) to (iii) ... (iv) the amount of profits eligible for deduction under Section 80HHC, computed under clause (a) or clause (b) or clause (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." (emphasis supplied)

5. We also quote hereinbelow Section 80HHC as inserted by the Finance Act, 1983 w.e.f. 1.4.83. Sub-section (1B) thereof was inserted by Finance Act, 2000, w.e.f. 1.4.2001, the relevant portion of the said provisions reads as follows:

"80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this