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TMI Blog2011 (2) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... ut hereunder the facts of one case for the proper appreciation of the legal issues involved. 3. The assessee is engaged in the manufacture and export of garments. For the assessment year 2001-02, it filed a return of income. The Assessing Officer proceeded to pass an assessment order under section 143(3) on March 19, 2004. The Commissioner exercising his jurisdiction under section 263 of the Act found that the order of the assessment is erroneous and prejudicial to the interests of the Revenue. It was held that the Assessing Officer in the original assessment order has not reduced the deduction allowable under section 80-IB before computing the deduction admissible under section 80HHC as required under section 80-IB read with section 80-IA(9) of the Act. The Assessing Officer was directed to redo the assess- ment in accordance with the direction as per the order dated December 30, 2004. In terms of the directions issued, the Assessing Officer has passed an order on March 14, 2005. A perusal of the said order shows the total income declared was Rs. 3,53,49,850. The assessee was entitled to a deduc- tion under section 80-IB in a sum of Rs. 88,37,463. While calculating the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent undertakings. Section 80HHC deals with dedu- ctions in respect of profits retained for export. Sub-section (9) of section 80- IA which falls for our interpretation in these batch of appeals reads as under : "Where any amount of profits and gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such pro- fits and gains shall not be allowed under any other provisions of this Chapter under the heading 'C.-Deductions in respect of certain incomes', and shall in no case exceed the profits and gains of such eli- gible business of undertaking or enterprise, as the case may be." 8. Sub-section (13) of section 80-IB provides that the provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, applied to the eligible business under this section. Thus, the aforesaid sub-section (9) of section 80-IA is incorporated in section 80-IB, The aforesaid sub-section is in the nature of a limitation prescribed in so far as the eligibility of the benefit of deduction under more than one provi- sions falling under the heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the contrary, the contention of the assessees is that the deduction under sec- tion 80-IA is not to be deducted out of the "profits and gains" from export business and not out of "profits of the business". 13. In this regard, it is necessary to refer to the decision of the apex court in the case of Joint CIT v. Mandideep Eng. and Pkg. Ind. P. Ltd. reported in [2007] 292 ITR 1 (SC) wherein it is held as under (page 2) : "The point involved in the present case is whether sections 80HH and 80-I of the Income-tax Act, 1961, are independent of each other and, therefore, a new industrial unit can claim deductions under both the sections on the gross total income independently or that deduc- tion under section 80-I can be taken on the reduced balance after tak- ing into account the benefit taken under section 80HH. The Madhya Pradesh High Court in J. P. Tobacco Products P. Ltd. v. CIT reported in [1998] 229 ITR 123 took the view that both the sec- tions are independent and, therefore, the deductions could be claimed both under sections 80HH and 80-I on the gross total income. Against this judgment a special leave petition was filed in this court which was dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 80-I. It was provided in section 80J itself by later amendment while no such provision was made in section 80-I even though inserted on a later date. The pro- vision of law is, therefore, clear that in so far as the benefit of section 80-I is concerned, it has to be granted on the gross total income and not on the income reduced by the amount allowed under section 80HH. In the result, we find that the Tribunal was not right in holding that deduction under section 80-I is to be allowed only on the balance of the income after deducting the relief under section 80HH from the gross total income and accordingly we answer the said question in favour of the assessee and against the Revenue." 15. The said judgment has been affirmed by the apex court. Similar view was taken by the Bombay High Court in the case of CIT v. Nima Specific Family Trust reported in [2001] 248 ITR 29 (Bom) which also is affirmed by the apex court. 16. In calculating the "profits and gains of export business", "profits of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Under the provisions of Chapter VI-A of the Income-tax Act, various deductions from the profits and gains are allowed to the assessees who have to fulfil certain requirements specified in the relevant sections. The total deductions under Chapter VI-A of the Income-tax Act are restricted to the total profits and gains in respect of such eligible business. 20. In fact the intention of Parliament could also be gathered from the way they have expressed themselves. In sub-section (7) of section 80HHD which reads as hereunder : "(7) Where a deduction under sub-section (1) is claimed and allowed in respect of profits derived from the business of a hotel, such part of profits shall not qualify to that extent for deduction for any assessment year under any other provisions of this Chapter under the heading 'C.-Deductions in respect of certain incomes' and shall in no case exceed the profits and gains of such hotel." 21. In the aforesaid provision they have categorically stated that such portion of the profit shall not qualify to that extent for deduction for any assessment year under any other provisions in this Chapter under the heading "C.- Deductions in respect of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the afore- said statutory provisions as well as clause (baa) to Explanation to section 80HHC. When once it is held that sections under the heading "C.- Deductions in respect of certain incomes" are independent of each other and the assessee is entitled to claim deduction under more than one section, the deduction has to be necessarily in the profits and gains arrived at after making the claims in terms of the aforesaid section. However, the overall claim under both sections has to be restricted to the total profits and gains of such eligible business from the gross total income. 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. 24. For the aforesaid reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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