TMI Blog2006 (3) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (Appeals) erred in holding that benefit of deduction under section 80-IA was not permissible to the appellant as the deduction was already allowed under section 80HHC. 5. The ld. CIT (Appeals) did not appreciate that his conclusion as above was not warranted by any provisions of the Income-tax Act, 1961 as in force at the relevant time. 6. The ld. CIT (Appeals) erred in holding that insertion of section 80-IA (9) though prospective, has been mainly to clarify or declare the earlier existing provisions." 2. The first ground is regarding exclusion of freight and insurance from direct cost of trading goods. The CIT(A) had decided the issue against the assessee by following his order for the assessment year 1996-97. This order came up for consideration before ITAT in ITA No. 2347/Mum./04. Vide their order dated 11-7-2005, Hon ble ITAT observed as under : "We have considered the rival submissions and we are inclined to agree with the contention of the ld. counsel for the assessee that freight and insurance attributable to the transport of goods beyond the custom station cannot be added to the direct cost of the goods as the same is already excluded from the export turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der both sections 80MM and 80-IA can be claimed. 5. The CIT(A) considered the submission of the assessee and held that an assessee could not claim deduction on the same profits twice under two different sections. Assessee has got 100 per cent deduction under section 80HHC or profits and if further deduction is allowed then total deduction would be more than 100 per cent. The ld. CIT(A) relied on the observation of Hon ble Supreme Court in Escorts Ltd. v. Union of India [1993] 199 ITR 43 1 given in the context of claim of deductions under sections 10(2)( vi ) and 10(2)( xiv ) of 1922 Act, i.e., usual depreciation as well as special allowance for scientific research. Hon ble Supreme Court held that two deductions on same asset or expenditure could not be allowed. Further where two deductions are to be allowed then same should be specifically provided in the statute. In absence of specific provision in the statute, two deductions on the same asset/expenditure could not be provided. 6. The ld. CIT(A) further observed that the Hon ble Judges of Apex Court in Escorts Ltd. s case ( supra ) also expressed their view on the insertion of legislation and held that "in our vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under section 80HHC is claimed in respect of profits whereas deduction under section 80-IA is allowable only on income. Hence there is no double deduction as such on the same income or profits. The bases for working out the deductions under two sections are different. 8. On the other hand, the ld. DR relied on the orders of the authorities below and submitted that in any case there is a double deduction. On same income/profit which is not permissible in view of Hon ble Supreme Court decision in Escorts Ltd. s case ( supra ). Further, sub-section (9A) of section 80-IA should be held declaratory as it intended to explain the intention of the Legislature. Finally, the ld. DR submitted that, without prejudice to above arguments, the total deductions under Chapter VIA should not exceed the gross total income worked out before deductions under this Chapter. 9. We have heard the rival submission; case laws cited by the parties and perused the material on record. Following issues arise in this case. ( i ) How is the capping under section 80-IA (9A) is workable ( ii ) whether introduction of sub-section (9A) in section 80-IA is prospective or retrospective or whether it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Chapter VI-A, which consists of sections 80A to 80V of the Income-tax Act, 1961, becomes operative on reaching the last stage of computation of income from different sources. The expression "gross total income", in various sections of Chapter VI-A, has been assigned a special meaning to mean total income computed in accordance with the provisions of the Income-tax Act, 1961, except any provision under Chapter VI-A. Computation of gross total income of the industrial undertaking for the purpose of deduction under section 80HH and section 80-I operates independently and has to be made without making any deduction under Chapter VI-A. The language and intent of the provisions of sub-section (9) of section 80HH make it clear that the three deductions, viz., under section 80HH, section 80-I and section 80J, are simultaneously permissible and not mutually exclusive. The provision only fixes the priority of order in which deduction under each provision is to be adjusted in the gross total income derived from such industrial undertaking to which section 80HH or section 80-I or section 80J respectively apply simultaneously. In case any industrial undertaking falls in the category of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the said section, the profits to that extent shall not qualify for deduction for any assessment year under any other provision of Chapter VI-A and in no case shall exceed the eligible profits of the industrial undertakings or hotel, as the case may be. This amendment will take effect retrospectively from 1st April, 1991, and will, accordingly, apply to the assessment year 1991-92 and subsequent years." 12. Memorandum explaining the provisions of the Finance Bill reads out as under : "Therefore, the object of insertion of section 80-IA(9A), which later became 80-IA(9) in the present section, was to prevent deduction of more than 100 per cent of profits and gains of the undertaking by claiming multiple deduction. The object of insertion of section 80-IA(9A) was not to prevent claim of deduction under more than one section, under Chapter VI-A, where the assessee satisfies conditions of these sections, but only to ensure that the sum total of the deductions so claimed by the assessee does not exceed the profits and gains of the undertaking in respect of which deductions are allowable." 13. However, when bill was passed, the amendment was made effective from 1-4-1999. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 16. Thus the computation of total deduction is to be done independently without being affected by each other. However, thereafter the provisions of section 80A would come into operation and restriction on total deduction under two sections will be placed. One of the two restrictions (one being that total deductions under two sections together would not exceed the higher of the two after 1-4-1999) is that the total deduction under two sections will not exceed total profits and gains of the industrial undertaking i.e., it will not be more than 100% of the profits of industrial undertaking. It has been elaborately discussed in the decision of ITAT in Mittal Clothing Co. v. Dy. CIT [2005] 4 SOT 626 (Bang.) wherein it has held as under : "The object of insertion of section 80-IA(9A), which later became section 80-IA(9), the present section, was to prevent deduction of more than 100 per cent of profits and gains of the undertaking by claiming multiple deduction. The object of insertion of section 80-IA(9A) was not to prevent the claim of deduction under more than one section under Chapter VI-A, where the assessee satisfies the conditions of those sections, but only to ens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding in conformity with the assessee that the appellant was not entitled to deduction under section 80-IA of the Income-tax Act, 1961. 2. The appellant submits that the omission of the above ground of appeal in the original memo of appeal was not wilful and the same has been now raised as advised by simply raises a purely legal grounds which does not involved fresh investigation of facts." 22. We admit the same as it is an elaborative of the grounds already taken. And in view of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) as no investigation is required. The ground is disposed of in accordance with the discussion held in respect of ground No. 2. This ground is accordingly allowed. 23. The appeal of the assessee is therefore allowed. ITA 5289/Mum./01 (Assessment year 1998-99) 24. In this year the assessee has raised following grounds : 1. The ld. CIT(A) erred in holding that the appellants were not entitled to deductions under section 80HHC. 2. The ld. CIT(A) erred in not appreciating the facts with regard to deduction of freight and insurance from export turnover. 3. The ld. CIT(A) erred in dismissing the ground of appeal levy of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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