TMI Blog2013 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... over of the unit of the assessee, having benefit under Section 10A of the Act, and on which profits and gains derived, are not to be included in total income of the assessee - For deduction under Section 80HHC the turn over of the assessee of the industrial undertaking in Free Trade Zone of which profits and gains are exempt under Section 10A of the Act is not to be taken into consideration – Decided in favor of Revenue. - Income Tax Appeal No. - 64 of 2000, Income Tax Appeal No. - 63 of 2000, Income Tax Appeal No. - 274 of 2000, Income Tax Appeal Defective No. - 87 of 2000 - - - Dated:- 4-10-2013 - Hon'ble Sunil Ambwani And Hon'ble Surya Prakash Kesarwani,JJ. For the Appellant : Shambhu Chopra, A. Kumar,A. N. Mahajan,B. J. Agarwal, D. Awasthi,G. Krishna, R. K. Upadhyay For the Respondent : S. K. Garg, Amit Shukla,R. S. Agarwal ORDER We have heard Shri Sambhu Chopra, appearing for the income tax department. Shri Ashish Bansal appears for the respondent-assessee. In all these connected income tax appeals relating to assessment years 1992-93; 1993-94; 1994-95 and 1995-96 common questions of law have been raised for consideration of the Court as follows:- "1. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exclusively for export. In Kanpur Head Office the assessee had export as well as domestic sales of manufactured goods and traded goods. Separate accounts of both the Head Office and Branch Office were maintained. The Assessing Officer held that the profits of NOIDA unit located at NOIDA Export Promotion Zone would be treated exempt under Section 10A of the Income Tax Act, 1961 (the Act) and the same would not be included in the asessee's total income. For the assessment year 1992-93 the assessee worked out an income of Rs.40,39,493/- relating to NOIDA unit. In the course of the assessment proceedings the Assessing Officer found that the expenses relating to Directors' remuneration had been exclusively debited to Kanpur Head Office and that no part of it was debited to NOIDA unit accounts. The Assessing Officer observed that this was not acceptable as both the Directors looked after both the units. He adopted the turnover of both the units as the guide for proportionate allocation of expenses on account of the expenses on account of Directors' remuneration and allocated them to Kanpur Head Office and NOIDA units separately. The effect of allocation was that while the income of Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal involving question of deduction under Section 80HHC of the Act. The ITAT following its order for the assessment year 1991-92 and held that the deduction under Section 80HHC should be worked out by taking the turn over and profit of both the units together and directed the A.O. to consider the profit, as computed by him under the head Profit and Gains of the business and not the profit shown by the assessee. For the assessment year 1993-94 the Assessing Officer worked out deduction under Section 80HHC of the Act at Rs.95,996/- as against the deduction of Rs.5,41,093/- claimed by the assessee. On the same grounds namely that the export turn over of NOIDA unit will not be taken into consideration in computing the deduction under Section 80HHC of the Act. In appeal filed by the assessee the CIT (A) observed that it was settled concept of law that when two or more provisions in the Act related to the same income or expenditure, the special provision would over ride the general provision. He held that income from export of a unit located in the free tread zone, the operative provisions were in Section 10A of the Act and not in Section 80HHC of the Act. The ITAT allowed the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ITAT in allowing the appeal directed the A.O. to compute the deduction under Section 80HHC after taking into consideration the turn over of the NOIDA unit. It is submitted by Shri Shambhu Chopra appearing for the income tax department that the Income Tax Appellate Tribunal has not considered the effect of Section 80AB, which provide for deduction to be made with reference to the income included in the gross total income. He submits that Section 80AB falls in Chapter VI A and which provides that deduction to be made in computing total income. Section 80AB is in Sub-Chapter A-General and which provides for deduction to be made with reference to the income included in gross total income. Section 80AB is quoted as below:- "80AB. Where any deduction is required to be made or allowed under any section [* * *] included in this Chapter under the heading "C.?Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." Section 80B(5) is also relevant. Section 80B(5) provides that "gross total income" means total income computed in accordance with the provisions of the Income Tax Act. Section 80AB is also in Chapter VI-A. It starts with the words "where any deduction is required to be made or allowed under any Section of this Chapter". This would include Section 80HHC. Section 80AB further provides that "notwithstanding anything contained in that Section". Thus Section 80AB has been given an overriding effect over all other Sections in Chapter VIA. Section 80HHC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB. Decisions of the Bombay High Court and the Kerala High Court to the contrary cannot be said to be the correct law. Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act. If the income has to be computed in accordance with the provisions of the Act, then not only profits but als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere any such doubts, the provision would have to be interpreted to fulfill the objective of giving a benefit to the assessee who indulges in exports. Looked at in any manner, we are of the opinion that the export turnover from the unit in the EPZ is not to be excluded while computing the deduction under Section 80HHC. The deduction that is to be computed is without reference to the total ITR 10/2000 Page No.8 of 9 income. Once the deduction is computed in terms of the formula prescribed in Section 80HHC(3), the amount so arrived at is to be deducted from the total income. However, while computing the deduction, reference to total income' is not called for." Shri Ashish Bansal has also relied upon the judgment of Bombay High Court in CIT v. Galaxy Surfactants Ltd., (2012) 343 ITR 108 (Bom); the judgment of this Court in CIT v. M/s Bhillama, Chhotalal Lohamandi, Agra, ITA No.76 of 2003 decided on 28.2.2012 in submitting that the exclusion under Section 10A would not make any difference for giving benefit under Section 80HHC and which provide for total income of the assessee for giving benefits under sub-section 1A and 1B of Section 80HHC. He submits that the benefit under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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