TMI Blog2014 (4) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... immune from any outside influence, even this effect of sub-section (9) of section 80IA could not be applied - This would completely render the provisions of subsection (9) of section 80IA redundant and meaningless. Sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI - It was neither possible nor expected of the Legislature to make individual matching provisions in large number of statutory provisions recognizing deductions under various situations - Such provisions are often times made for a limited period, new deductions are introduced from time to time and old deductions withdrawn - different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources - at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply - clause (baa) to explanation to section 80HHC defines a term 'profits of the business' - While working out the business profits as specified therein, in terms of sub-section (9) of section 80IA the profit or gain which had already been allowed deduction to the extent mentioned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2001-02, the assessee filed its return of income on 29th October 2001. The assessee claimed deduction of Rs.16.54 lakhs (rounded of) under section 80IA of the Act and of Rs.52.75 lakhs (rounded of) under section 80HHC, and declared total income of rupees nil. The return of the assessee was taken in scrutiny. The Assessing Officer questioned the assessee why in terms of sub-section (9) of section 80IA of the Act, the claim of deduction of the assessee under section 80HHC for the profits from the sale of goods as a supporting manufacturer be not restricted to the extent of deduction already allowed under section 80IA of the Act. 4. In response to such objection of the Assessing Officer, the assessee raised various contentions in written submissions dated 19th March 2004, and opposed the proposal of the Assessing Officer to restrict the assessee's claim of deduction under section 80HHC of the Act. 5. The Assessing Officer, however, held that with the introduction of subsection (9) of section 80IA, statute had barred double deductions. The amount of deduction claimed and allowed under Section 80IA had to be reduced from the profit of industrial undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes' is to be allowed to that extent. (2) Effect of sub-section (9) cannot be restricted to limiting the deduction to hundred per cent of the profit of the eligible business. (3) Board's circular No. 772 dated 23rd December 1998 does not restrict the scope of sub-section (9) of section 80IA. In any case, Board's circular cannot limit the effect of a statutory provision flowing from the plain meaning assigned to it. 9. On the other hand, learned counsel Shri S.N. Soparkar for the assessee firstly placed heavy reliance on the Board's circular No. 772 dated 23rd December 1998 to contend that the sole intention of the Legislature in introducing subsection (9) of section 80IA was to restrict the benefit of deduction under Chapter VI under the heading 'C. Deductions in respect of certain incomes' to a maximum of hundred per cent of the eligible business. No further meaning can be ascribed to the said provision. Secondly, sub-section (9) of section 80IA is not given overriding effect over the other provisions. The said provision, therefore, cannot be applied for computing the deduction under section 80HHC of the Act by substituting the term 'business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates in respect of profits of export business. Sub-section (1) of section 80HHC provides for the basis of such deduction. Sub-section (1B) thereof provides for the extent of deduction made available from time to time. Subsection (3) provides for the formula for working out the profit eligible for such deduction. Different formulae are provided for manufacturing exporters, trader exporters and those who have both kinds of exports. In simple terms, for manufacturing exporter such eligible profit is to be worked out by applying a formula of Profit eligible for deduction under section 80HHC = Profit of the business x Export turnover Total turnover Clause (baa) to the explanation to section 80HHC provides that profits of business means the profits of business as computed under the head 'profits and gains of business or profession' as reduced by (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits and (2) the profits of any branch, office, warehouse or any other estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious Benches of the Income Tax Appellate Tribunal were the first to express their opinions. The issue was considered by a Special Bench of the Tribunal in case of Rogini Garments reported in (2007) 294 ITR (AT) 15 (Chennai) (SB). The Tribunal held that the restriction placed on claim of repetitive deduction contained in section 80IA(9) of the Act is to be made applicable in respect of all deductions under Chapter VIA. Full effect of such a provision is to be given, and wherever an assessee wants to claim deduction, restriction contained in section 80IA(9) is to be read in every provision providing for deduction under Part 'C' of Chapter VIA. Despite this pronouncement by the Special Bench of the Tribunal, different Benches of the Tribunal adopted different interpretations. The question was, therefore, referred to a Larger Bench, which constituted of five members, and its decision was rendered in the case of Asst. C.I.T. v. Hind. Mint and Agro Products reported in (2009) 315 ITR 401 (Delhi) (SB). The Tribunal went deep into the issues, and traced the background for introduction of sub-section (9) of section 80IA. It was noticed that in case of J.P. Tobacco Products Private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit and gain shall not be allowed under any other provision of this chapter (Heading C Deduction in respect of certain incomes ), AND b) deduction shall in no case exceed the profit and gain of the undertaking or hotel as the case may be. 67. The contention on behalf of the assessee and intervener is that total deductions under various sections should not exceed profits and gains of undertaking. We are unable to accept this contention. It is seen that CBDT Circular No. 772 clarified and only dealt with (b) above and did not deem it necessary to make reference to restriction (a). In order to accept the contention of the assessee, we would have to exclude portion of the provision covered by (a) and ignore the restriction placed therein. Why such course should be adopted when words used by the legislature, claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions are quite clear and unambiguous and are to be given effect to as rightly contended by the revenue. The profit or gains of industrial undertaking, which has already been allowed as a deduction u/s 80- IA, such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into account the benefit under Section 80 HH of the Act. The legal position was that the statute did not prescribe any order of priority in which the various deductions are to be allowed as each relief under each section of Chapter -VI A was separate one, the assessee could be entitled to more than one relief, and each relief was required to be independently determined. The question is as to whether insertion of sub Section (a) of Section 80IA and sub-Section (13) of Section 80-IB of the Act has made any difference to this position. Though we have already reproduced these provisions in the earlier part of this judgment, we are extracting these provisions again to maintain proper sequential continuity in our discussion:- 80 IA (9) Where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various provisions. The restriction placed on double deduction of the same eligible profit cannot be read as absurdity or conflict. Having regard to the above provisions, putting ban on allowability of deduction under other sections, computation of deduction under those sections would serve no purpose. It cannot follow from the above that restriction of those sections are not to be given effect to as scheme in those sections is different from scheme of section 80AB which starts with nonobstante clause Notwithstanding anything... Arguments advanced on behalf of the assessee, if accepted, would lead to complications not envisaged by the Legislature. We find it difficult to accept them. Therefore, in a case where deduction under section 80 IA has been allowed, then in the light of the provisions of sub Section (9-A), such profits and gains (to the extent) shall not be allowed under any other provision of the relevant Chapter. For example, if total profit of undertaking is ' 100 and 20 per cent is allowed as a deduction under section 80-IA or 80-IB, then for purposes of other provisions like section 80HHC, on such 20 per cent of profit, no deduction can be allowed. The deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 80IB(13) are read in conjunction with Section 80IA(9) of the Act, it becomes clear that deduction under Section 80HHC of the Act is to be computed on the eligible business profits only after reducing therefrom the portion of profit on which deduction has already been availed by the assessee under this Section i.e., 80IB. In other words, if an assessee has claimed deduction of profit or gains under Section 80IB, deduction to that extent is not to be allowed under Section 80HHC. 20. In the meantime, the issue came up for consideration before the Bombay High Court. In a detailed judgment in case of Associated Capsules P. Ltd. v. Deputy Commissioner of Income-Tax reported in (2011) 332 ITR 42 (Bom), the Court held that effect of sub-section (9) of section 80IA would be to restrict the deduction to a maximum of hundred per cent of the business profit. It was held that section 80IA(9) does not affect the computability of the deduction under various provisions under the heading 'C. Deductions in respect of certain incomes', but it effects the allowability of deductions computed under such provisions so that the aggregate deduction under section 80IA and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. 22. This very issue was also considered by Karnataka High Court in case of Commissioner of Income-Tax v. Millipore India P. Ltd. Reported in (2012) 341 ITR 219 (Karn). The Court sided with the Bombay High Court's view. The decision of Delhi and Kerala High Courts were noticed, but not followed observing as under:- 23. Though the Delhi High Court as well as the Kerala High Court have taken a contrary view of which reliance is placed by the Revenue, in the light of the express provisions contained in sub-section (a) of section 80-IA, clause (baa) to the Explanation to section 80HHC and the explanation in the circular referred to supra and keeping in mind the object with which these provisions are introduced we are of the view that the contention of the Revenue is unsustainable and the Tribunal has committed no illegality, in respect of cases where it had allowed the appeal. 23. It can thus be seen that judicial opinion on the issue is split right down the middle. Delhi, Kerala and Punjab and Haryana High Courts have permitted full operation of section 80IA(9), whereas Bombay and Karnataka High Courts have held that the implication of sub-section (9) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision contained in Part-C of Chapter VI to the extent of profits and gains of an enterprise or undertaking with respect to which deduction under section 80IA is claimed and allowed. The second part provides that in any case, such deduction shall not exceed the profits and gains of eligible business of an undertaking or enterprise. If we accept the interpretation of the assessee that only effect of sub-section (9) of section 80IA would be to limit the maximum permissible deduction under section 80HHC to the profits and gains of the eligible business, we would be completely ignoring the first part of the sub-section. In other words, the earlier part of sub-section would be rendered completely redundant, purposeless and otiose. It is well settled that the Legislature cannot be expected to have used words and expressions, which have no meaning or effect. Limiting the scope of application of sub-section (9) of section 80IA only to restricting the claim of deduction under section 80HHC or for that matter under the provisions of sub-chapter C to Chapter VI would amount to giving no effect to the earlier portion of the subsection, which specifically provides for making a disallowance of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveys entirely different connotation. 25. Having said so, we are actually conscious of the fact that sub-section (9) of section 80IA does not contain a non-obstante clause. Two things thus emerge in our understanding of the said provision. First in plain terms when read as a whole sub-section (9) of section 80IA does not limit its effect only to disallowing deduction over and above the profit or gain of an enterprise or undertaking. Second aspect is that such provision does not have a non-obstante clause. What would be the effect of these two forces emerging from sub-section (9) of section 80IA needs to be appreciated. In our opinion, the combined effect of these two factors would be that sub-section (9) of section 80IA of the Act would operate as along as there is nothing contrary contained in any other provisions of subchapter C of Chapter VI. In the present case, our enquiry would be limited to finding out if there is anything contrary provided in section 80HHC of the Act. Thus, if there is any indication of legislative intent to allow the full deduction under section 80HHC of the Act irrespective of the provision contained in subsection (9) of section 80IA, such legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act. This provision, therefore, necessarily impacts other deduction provisions including section 80HHC of the Act. Nothing contained in section 80HHC suggests that the deduction provided therein was immune from any outside influence or that the provision was impregnable by any other statute or enactment. Accepting any such theory would lead to incongruous results. Even the assessee concedes that sub-section (9) of section 80IA would operate as to limiting the combined deductions to a maximum of the profits and gains from an eligible business of the undertaking or enterprise. If section 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of section 80IA could not be applied. This would completely render the provisions of subsection (9) of section 80IA redundant and meaningless. 28. It is true, as pointed out by the counsel for the assessee that in different provisions the Legislature has used different language for restricting or limiting the claim of deductions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of allowing the deduction. In plain terms subsection (9) of section 80IA disentitles an assessee from claiming deduction under any other provision of sub-chapter C to the extent deduction is already claimed and allowed for certain profit or gain of an undertaking or enterprise under section 80IA. Such provision, therefore, would have to be applied at the very stage to assessee's claim for deduction under section 80HHC of the Act is considered. While computing such deduction the effect of sub-section (9) of section 80IA would have to be given. We do not think that in the process we are tinkering with the formula for computation of eligible profit for deduction under section 80HHC of the Act. We have noticed that different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources. It is, therefore, at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply. It is true that clause (baa) to explanation to section 80HHC defines a term 'profits of the business'. While working out the business profits as specified therein, in terms of sub-section (9) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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