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TMI Blog2012 (10) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Hon'ble ITAT was right in law in interpreting section 90IA(9) of the Income-tax Act by referring to Section 80AB and other provisions contained in Chapter VIA of the Act, when the provisions of section 80IA(9) are clear and unambiguous and ought to be given their natural meaning? 3. Whether the Hon'ble ITAT has correctly interpreted the provisions of Section 80IA(9) of the Income-tax Act, in holding that the said provisions only serve to restrict the aggregate deductions under Chapter VI-A of the Act to the profits of the business, without appreciating that the said provision has two limbs that are to be read together? 2. The basic issue involved in these cases is whether an assessee is entitled to full deduction under Sections 80IB and 80HHC of the Income-tax Act, 1961 or the deduction has to be proportionately reduced. 3. To give an example, supposing the assessee is entitled to claim exemption of 20% of income under Section 80IB and is also entitled to benefit under Section 80HHC or any other provisions contained in Chapter VIA, on what income can claim the second deduction. If the income is 1 Crore and 20% income is exempted that leave balance of 80 lacs. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim deduction under Section 80 HHC as well under Section 80-IA of the Act (or for that matter any other provision of this Chapter) on the gross total income independently and for granting deduction under Section 80-I of the Act, the said income was not to be reduced balance after taking 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 80 IA and sub-Section (13) of Section 80-IB of the Act has made any difference to this position. xxx... xxx.... xxx... 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay High Court in Associated Capsules P. Ltd. vs. Dy. Commissioner of Income-tax and another (2011) 332 ITR 42 considered both the judgements of the Delhi and Kerala High Courts and the entire law on the point and held as follows:- "22. We have carefully considered the rival submissions as also the decisions of two High Courts, wherein similar question has been answered in favour of the Revenue. However, we find it difficult to concur with the views expressed therein for the reasons enumerated herein below. 23. Chapter VIA of the Act provides for variety of deductions to be made in computing the total income. Chapter VIA is divided in to four parts viz. Part A, B, C & D. Part A (Sections 80A to 80B) deals with general provisions, Part B (Sections 80C to 80GGC) deals with deductions in respect of certain payments, Part C (Sections 80H to 80TT) provides for deductions in respect of certain incomes and Part D (Sections 80U to 80VV) deals with other deductions. 24. As per Section 80A(2) in part A of Chapter VIA, the aggregate amount of deduction allowed under Chapter VIA shall not exceed the gross total income. Thus, the overall deduction allowed under Chapter VIA cannot exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucing the profits of business by the amount of profits allowed under Section 80IA(1) of the Act. According to the assessee, Section 80IA(9) merely affects the allowability of the deduction computed under Section 80HHC so that the combined deduction under Section 80IA(1) and 80HHC does not exceed the profits and gains of the undertaking. xxx... xxx... xxx... 28. The question, therefore, to be considered is, whether Section 80IA(9) seeks to disturb the mechanism of computing the deduction provided under Section 80HHC (3) of the Act or Section 80IA(9) comes in to operation only at the stage of allowing the deduction computed under Section 80HHC, so that the combined deduction under Section 80IA and 80HHC does not exceed the total profits of the business of the undertaking. 29. Section 80IA(9) consists of three parts: First Part where any amount of profits and gains of an undertaking / enterprise is claimed and allowed under Section 80IA(1) for any assessment year, then Second Part deduction to the extent of profits and gains allowed under Section 80IA(1) shall not be allowed under any other provisions under heading 'C' of Chapter VIA of the Act; and Third Part in no case the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. Computation of deduction has to be made as provided in the respective sections and it is only at the stage of allowing deduction under section 80IA(1) and also under other provisions under heading 'C' of Chapter VIA, the provisions of Section 80IA(9) comes into operation. While accepting the arguments advanced by the Counsel for the Revenue, it appears that the Delhi High Court failed to consider the important argument of the Revenue noted in para 38 of its judgment. Moreover, without rejecting the argument of the Revenue that Section 80IA(9) applies at the stage of allowing the deduction and not at the stage of computing the deduction, the Delhi High Court could not have held that Section 80IA(9) seeks to disturb the method of computing the deduction provided under other provisions under heading 'C' of Chapter VIA of the Act. In these circumstances, we find it difficult to concur with the views expressed by the Delhi High Court in the case of Great Eastern Exports (supra). For the same reason, we find it difficult to subscribe to the views expressed by the Kerala High Court in the case of Olam Exports (supra). 41. In the result, we hold that Section 80IA(9) does not affe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section (9) of section 80IA makes it clear that such profits and gains which is allowed deductions under Section 80-IA cannot be again allowed deduction under any other provisions of the Chapter under the heading "C. - Deductions in respect of certain incomes". The stress on the profits and gains of such eligible business in the case of section 80HHC, is the profits and gains from export business. Under the provisions of Chapter VI-A of the Act, various deductions from the profits and gains are allowed to the assessee who have to fulfil certain requirements specified under the relevant section. The total deductions under Chapter VI-A of the Act are restricted to the gross total profits in respect of the assessee as a whole. In the Explanatory Note in Circular No.772(see(1999) 235 ITR (St.) 35) it is stated that the object of section 80-IA is not to curtail the deductions obtainable under various provisions under the heading "C.-Deductions in respect of certain incomes." Therefore, section 80-IA(9) affects the allowability of deductions and not computation and deductions. The deduction to which the assessee is entitled to under this provision is to be computed at the time of all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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