TMI Blog2010 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, if the interpretation suggested by Ms. Kapila is accepted, it will not only do violence to the clear mandate of Section 80 IA (9) but shall have the effect of rendering that provision redundant though specifically introduced by the Legislature with the purpose of achieving clear objective. For the purpose of computing deduction under Section 80 HHC of the Act, deduction already allowed under Section 80-IA has to be reduced. The question of law thus stands answered in favour of the Revenue and against the assessee. - 267/1316/906/1002/2008/4/907/2009 - - - Dated:- 29-11-2010 - A.K. SIKRI , REVA KHETRAPAL, JJ. Appellant represented by: Mr. Kanan Kapoor, Ms. Shashi M. Kapila Respondent represented by:Ms. Prem Lata Bansal, A.K. SIKRI, J. 1. In all these appeals, we are concerned with the manner in which profits and gains of the business are to be ascertained before computing the relief under Section 80HHC of the Income Tax Act (hereinafter would be referred to as the Act‟). There are certain deductions which are allowed under Section 80IA of the Act as well. Therefore, to put it precisely question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductions in respect of profits and gains from business. A reading of the provisions falling in Part-A would demonstrate that deductions under this Chapter are to be made from "the gross total income". Various kinds of deductions are provided in Part B and C. However, the general provision contained in Section 80A mandates that the aggregate amount of deductions under this Chapter would not exceed "the gross total income" of the assessee. Section 80 A reads as under:- "Section 80A - Deductions to be made in computing total income-(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U. (2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. (3) Where, in computing the total income of an association of persons or a body of individuals, any deduction is admissible under section 80G or [section 80GGA or section 80GGC] or section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA [or section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been made at the market value of such goods or services as on that date. Explanation.--For the purposes of this sub-section, the expression "market value",-- (i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any.] [(7) Where a deduction under any provision of this Chapter under the heading "C.--Deductions in respect of certain incomes" is claimed and allowed in respect of profits of any of the specified business referred to in clause (c) of sub-section (8) of section 35AD for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year. " 4. The "gross total income" is defined in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from April 1, 1974, was inserted. Section 80I was inserted in its present form by the Finance (No. 2) Act, 1980, with effect from April 1, 1981, and by the same Finance (No. 2) Act, Section 80HH(9) was amended and the words "Section 80I or" were inserted to make the said provision applicable to Section 80I as well. However, no provision was made in Section 80I to provide for deduction of the gross total income by deduction allowed under Section 80HH for the purpose of allowing deduction under Section 80I. It would, thus, be seen that when Section 80J already existed in Sub-section (9) of Section 80HH, an amendment was made in Section 80J in the year 1974 but no such provision was made in so far as Section 80I was concerned. This clearly centra-indicates that Sub-section (9) of Section 80HH by itself meant that deduction allowed under Section 80HH is to be reduced from the gross total income for granting the benefit of Section 80J and, for that matter, of Section 80I. It was provided in Section 80J itself by later amendment while no such provision was made in Section 80I even though inserted on a later date. The provision of law is, therefore, clear that in so far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Mittal Appliances P. Ltd. {2004} 270 IUTR 65 (MP); CIT v. Rochiram and Sons {2004} 271 ITR 444 (Raj); CIT v. Prakash Chandra Basant Kumar {2005} 276 ITR 664 (MP); CIT v. S.B. Oil Industries P. Ltd. (2005) 274 ITR 495 (P H); CIT v. SKG Engineering P. Ltd. {2005} 119 DLT 673 and CIT v. Lucky Laboratories Ltd. {2006} 200 CTR 305 (All). Since the special leave petitions filed against the judgment of the Madhya Pradesh High Court have been dismissed and the Department has not filed the special leave petitions against the judgments of different High Courts following the view taken in those judgments cannot be permitted to take a contrary view in the present case involving the same point. According, the civil appeal is dismissed. No costs." 9. It is thus clear that the consistent view taken by various High Courts was affirmed by the Supreme Court. It is not necessary to discuss all these judgments. However, we would like to reproduce certain observations from the judgment of Rajasthan High Court in CIT Vs. Chokshi Contacts P. Ltd., 251, ITR 587 (Raj.) as it discusses the issue in greater details and in fact discusses the scheme of the Act in short and highlights Chapter VIA in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries in backward areas. We in the present case are concerned with specific deductions to be made in computing total income of the assessee under that Chapter. It is further significant to notice that Chapter VIA becomes operative on reaching the last stage of computation of income from different sources until Chapter VI. While ultimately net taxable income for any assessment year is determined only after reaching net result after applying all provisions, as are applicable in respect of different matter. Yet each Chapter deals with independent subject matter al different stages. As noticed briefly above, the Chapter IV sets the stage for computing income from different sources. On computing income from each different sources, and income of other persons in certain cases to be added in total income, stage is reached for making adjustments of losses of the current year from any sources as well as losses carried forward from previous year to be adjusted against income of current year." 11. Reading various provisions of this Chapter together, the Court was of the view that specific provisions were made that the gross total income computed before reaching the stage of invoking th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be computed without making any reducing it by deduction permitted u/S. 80-HH or 80-1 or for that matter under any other provision of the Chapter VIA, and taken to be basis on the basis of which prescribed percentage is to deduct from such income of the assessee. The question then arises whether Section 80-HH(9) to which reference has been made and reliance has been placed by the learned counsel for the revenue, provides anything to contrary and militates against our above conclusion. That provision reads as under: "80-HH (9): In a case where the assessee is entitled also to the deduction under Section 80-I or Section 80-J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section applies, effect shall first be given to the provisions of this Section." The language and intent of this provision is clear in itself. While envisaging that all the three deductions viz. u/S. 80-HH, 80-1 and 80-J are simultaneously permissible, and not mutually exclusive, the provision only fixes priority of order in which deduction under each provision is to be adjusted in the gross total income derived from such industrial undertaking to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the language in which the question of law is framed in different appeals. However, essence remains the same and, therefore, our purpose would be served by reproducing the question of law framed in one of these cases. In ITA 267/2008, the question of law has been formulated in the following words:- "Whether the Income Tax Appellate Tribunal was correct in law in holding that the business profits as per Explanation (baa) of Section 80 HHC of the Income Tax Act, 1961 was to include the amount of deduction allowable under Section 80 IB of the Act for the purpose of computing deduction under Section 80 HHC of the Act" 16. The contention of the learned counsel for the assessees is that the aforesaid insertion has not made any change in so far as the manner of computation and deduction is to be made under various provisions of Part -C in Chapter VIA. According to them, the only thrust of this provision is that the total deduction to be allowed under various provisions in Part-C is not to exceed the profits and gains. Total accumulation should not exceed the profits and gains and, therefore, the principle as interpreted in JP Tabacco (supra) and other judgments and affirmed in Mandid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to take note of the submissions advanced by the various counsels who appeared in these cases on behalf of the assessees. 22. Ms. Kapila who led the team of assessees‟ counsels submitted that interpretation given by Special Bench in Hindustan Mint (supra) had the effect of rendering the provisions of Section 80 AB, 80B (5) and 80HHC Explanation (4) clause (baa) inert, lifeless and redundant. She pointed out that Section 80 AB of the Act begins with a non-obstante clause and was therefore to prevail over Section 80 IA (9). She thus submitted that there appeared to be a head on collision between Section 80AB/80B(5)/80HHC on the one hand and Section 80IA(9)/80IB (13) on the other hand, if rule of literal interpretation is applied. She argued that Section 80AB and Section 80IA (9) operate in same field, viz deductions under Division C of Chapter VI-A. Section 80AB begins with a non-obstante clause, and is the governing controlling section for operating deduction under Division C of Chapter VI-A. The very foundations of computation of deduction under Chapter VI-A is "gross total income" This was glossed over by the Tribunal. The consequence of the interpretation of Section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insertion of Section 80-IA (9), was to prevent deduction of more than 100 per cent of profits and gains of the undertaking by claiming multiple deductions under different sections. It was not to dilute claims of deduction under more than one section, under Chapter VI-A, but only to ensure that the sum total of the deductions so claimed by the assessee under different sections does not exceed the profits and gains of the undertaking in respect of which deductions are allowable. 25. This has been explained in CBDT Circular No. 772, dated 23.12.1998 extracted herein under:- "1 Under the provisions of Chapter VI-A of the Income Tax Act, various deductions from the profits and gains are allowed to specified appellants, subject to fulfilling certain requirements specified under the relevant sections. The total deductions under Chapter VIA of the IT Act are restricted to the gross total income in respect of the appellant as a whole. 2. However, it was noticed that certain assessees claimed more than 100 per cent deduction on such profits and gains of the same undertaking, when they were entitled to deductions under more than one section of Chapter VI-A. With a view to providing suitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "It has already been seen that a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between a section and other parts of the statute. It is the duty of the Courts to avoid a "head on clash" between two sections of the same Act and whenever it is possible to do so to construe provisions which appear to conflict so that they harmonise". 29. He also referred to various judgments of the Apex Court in this behalf, namely; Raj Krishna Bose Vs. Binod Kanungo, AIR 1954 SC 202, Sultana Begum Vs Prem Chand Jain, AIR 1997 SC 106, Siraj-ul-Haq and Others Vs. The Sunni Central Board of Waqf U.P. AIR 1959 SC 198 and D. Sanjeevayya Vs. Election Tribunal AIR 1967, SC 1211. 30. He thus reiterated the submissions made by Ms. Kapila namely that the a avowed objective of inserting sub Section (9) of Section 80 IA was limited to the extent that it ensures that the total deductions under Chapter VI A of the Act are restricted to the gross total income̶ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... projected by the department now and it was restricted only to ensure that total deduction claimed under various provisions should not exceed total gross profit. 34. Mr. Vohra additionally submitted that Section 80 HHC was a complete Code in itself and sub Section (3) thereof prescribed as to how the profits are to be computed. It could not be circumscribed or influenced by an altogether different provision namely sub Section (9) of Section 80-IA which provided totally different basis of the computation. He referred to the judgment of Godrej Agrovet Ltd. Vs. Asstt. Commissioner of Income Tax. 290 ITR 252. The Arguments: Revenue: 35. Onslaught of all these submissions of the assessees‟ counsel was bravely faced by Ms.Prem Lata Bansal who appeared on behalf of the department in all these cases and emphatically countered them. She heavily relied upon the detailed analysis of these provisions by the five members of Special Bench of the Tribunal in Hindustan Mint (supra) and submitted that the Tribunal had rightly appreciated and answered the controversy. Her argument was that Section 80-IA/80IB of the Act provides for deduction of specific percentage of profits and gains deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Chapter VI-A of the Act. The first stage is computation of deduction under the relevant section and the second stage is allowance of deduction in accordance with the scheme of the Act. The provisions of sub-section (9) of Section 80IA of the Act, it was submitted only governs the second stage, i.e. allowance of deduction and does not regulate/govern the first stage, viz.,computation of deduction. The first stage, i.e. computation of deduction, is primarily regulated by the formulae/method prescribed in the section under which deduction is being computed. 39. She argued that the third limb of sub-section (9) of Section 80 IA only carves out a further condition in the form of an outer circle to provide that the total deduction claimed in respect of profits of the same undertaking, viz 80 IA/80 IB as well as other sections of Chapter VIA- C, shall not exceed the total profits of the said undertaking. Our Analysis: 40. We have considered the aforesaid elaborate submissions made by counsel for various parties appearing in these matters. We have stated in detail the scheme of Chapter VI-A of the Act and case law up to the stage of amendment, explaining the said Scheme. No do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese cases. 42. When we make an attempt to understand this provision, by reading the plain language as it appears i.e. applying the test of literal construction, it manifestly evidence the following status:- (a) Once an assessee is allowed deduction under Section 80 IA, "to the extent of such profits and gains" he is not to be allowed further deductions under Chapter-C; (b) In no case the deduction shall exceed the profits and gains of such eligible business of Undertaking or Enterprise, as the case may be. 43. The expressions in these provisions are very crucial which are "deduction to the extent of such profits" and the word "and" occurring therein. The first expression very clearly signifies that if an assessee is claiming benefit of deduction of a particular amount of profits and gains under Section 80 IA, to that extent profits and gains are to be reduced while calculating the deduction under the Heading-C of Chapter VI A of the Act. Further the word "and" is disjunctive which would mean that the other provision is independent and the first one namely total deductions should not exceed the profits and gains in a particular year. Even a layman who has some proficiency i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Tribunal rightly held, as discussed by us as well, that there are two restrictions in the statutory provisions contained in Section 80 IA (9) which are:- "(a) Where an assessee is allowed deduction under this section (80-IA or 80 IB), deduction to the extent of such profits and gains shall not be allowed under any other provision of this chapter (Heading "C.-Deduction in respect of certain incomes"), and (c) Deduction shall in no case exceed the profits and gains of the undertaking or hotel as the case may be" 47. In the process, the Tribunal also dealt with CBDT Circular 772 and repelling the contention of the assessees based thereupon expounded the position contained in the said Circular as under: "It is seen that the Central Board of Direct Taxes 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, ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80 HHA, 80HHA (5), 80 HHA (6) providing manner of deductions or preferential treatment to one deduction over another when the assessee is entitled to deduction under more than one section of Chapter VI-A. It is provided that effect shall first be given to a particular section. All the sections are to be read together harmoniously. The fact that section 80 AB starts with a non-obstante clause does not make any difference as we see no conflict in 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 non-obstante 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re with the purpose of achieving clear objective. 50. We are not in a position to subscribe to the contention of the learned counsel for the assessees that where the Legislature intended to deduct the amount out of some other deduction a different phraseology was used as noticed above. This was sought to be demonstrated by referring to sub Section (5) of Section 80 HHB, sub Section (4) of Section 80 HHBA and sub Section (4) of Section 80- IE etc. which provisions start with the use of a non-obstante clause. Merely because section 80-IB is not worded in a similar fashion would not mean that we have to do the violence with the plain language used in that provision, which is capable of only one meaning. A particular section of an enactment, the intention of which is otherwise manifest, cannot be read by adopting such an insidious approach, by referring to other sections. It is well known that the legislature adopts different ways and means in order to achieve its goal and there is no justification for insistence of identical language. Likewise, as rightly point out by the Special Bench of the Tribunal, the notice and objects of accompanying reasons are only an aid to construction. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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