2010 (9) TMI 472 - HC - Income Tax

Deduction u/s 80HHC and u/s 80IA - Held that The restriction under s. 80-IA(9) is not only that the total deduction should not exceed profits and gains there is a further restriction that deduction allowed under s. 80-IA or s. 80-IB will be a bar to claim deduction under any other provision of the chapter. - Decided in favor of revenue.

Summary

Issues:
1. Appeal under IT Act against Tribunal's order.
2. Exclusion of job work charges for deduction under s. 80-IA/80-IB.
3. Calculation of deduction under s. 80-IA and s. 80HHC on the same amount.

Analysis:

Issue 1:
The judgment addresses the appeal under the IT Act against the Tribunal's order. The appellant raised several substantial questions of law, including the specificity of the Tribunal's order and the justification for excluding job work charges from eligible profits for deduction under s. 80-IA/80-IB. The Court found that questions (i) and (v) were general and not substantial. However, the Court delved into question (ii) regarding the exclusion of job work charges.

Issue 2:
Regarding the exclusion of job work charges for deduction under s. 80-IA/80-IB, the Court examined the facts and arguments presented. The assessee claimed deduction based on income derived from industrial activity but faced disallowances by the AO and CIT(A) for job work charges not related to manufacturing or producing articles. The Court upheld the findings that job work charges were not eligible for deduction under s. 80-IA as they were not directly linked to manufacturing or production activities.

Issue 3:
The judgment also dealt with the calculation of deduction under s. 80-IA and s. 80HHC on the same amount. The appellant argued for entitlement to deductions under both sections, but the AO and CIT(A) upheld that the deduction under s. 80-IA should be reduced from the business profits before computing the deduction under s. 80HHC. The Tribunal supported this view, citing relevant case laws and statutory provisions. The Court agreed with the Tribunal's decision, emphasizing the restriction that deductions under s. 80-IA or s. 80-IB would bar claiming deductions under any other provision.

In conclusion, the Court dismissed the appeals, stating that no substantial question of law arose in the case. The judgment provides a detailed analysis of the issues raised, specifically addressing the exclusion of job work charges and the calculation of deductions under different sections of the IT Act.