TMI Blog2015 (12) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeals preferred by the revenue and allow the appeals preferred by the assessees. - Civil Appeal No(s). 7427/2012 With C.A. No. 14295/2015, C.A. No. 14297/2015 to C.A. No. 14320/2015, C.A. No. 14322/2015 to C.A. No. 14347/2015, C.A. No. 7847/2012, C.A. No. 4544/2013, C.A. No. 5341/2013 And C.A. No. 1890/2015 - - - Dated:- 10-12-2015 - Anil R. Dave And Dipak Misra, JJ For the Petitioner : Mr. Arijit Prasad,Adv., Ms. Sadhna Sandhu,Adv., Ms. Gargi Khanna,Adv., Mrs. Anil Katiyar,Adv., Dr. Rakesh Gupta,Adv., Ms. Poonam Ahuja,Adv., Mr. Ambhoj Kumar Sinha,Adv., Mr. Rohit Kumar Gupta,Adv., Mr. Pramod Dayal,Adv., Mr. Nikunj Dayal,Adv., Ms. Payal Dayal,Adv., Mr. B.V. Desai,Adv., Ms. Saumya Mehrotra,Adv., Mr. Vikas Mehta,Adv., Mr. Balraj Dewan,Adv., Mr. Rajinder Mathur,Adv., Mr. Avinash Kumar,Adv., Mr. B.V. Balaram Das,Adv., Ms. Namita Choudhary,Adv. And Mr. S.K. Sabharwal,Adv. For the Respondent : Mr. K.V. Mohan,Adv., Mr. Nikhil Nayyar,Adv., Mr. Ravindra Keshavrao Adsure,Adv., Mr. Rustom B. Hathikhanawala,Adv., Mr. Kamal Mohan Gupta,Adv., Mr. Jay Savla,Adv., Ms. Renuka Sahu,Adv., Mr. Prabhat K.C.,Adv., M/s. Temple Law Firm,Advs. And Mr. Pramod B. Agarwala,Adv. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is that looking at the provisions of the aforestated Sections, the Assessee is not entitled to the deductions under all the aforestated Sections of the Act. 7. On the aforestated subject, different views have been taken by different High Courts and therefore, this appeal had been admitted. The High Court of Bombay has decided cases in favour of the Assessee whereas a different view has been taken by the High Court of Delhi. 8. For the purpose of better understanding of the issue, relevant extracts of the said Sections of the Act have been reproduced hereinbelow: 80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. (1) Where the gross total income of an Assessee includes any profits and gains derived from any business referred to in sub-Sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of the Section, be allowed, in computing the total income of the Assessee, a deduction from such profits and gains of an amount equal to such percentage and for such numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be an amount equal to (i) eighty per cent thereof for an assessment year beginning on the 1st day of April, 2001; (ii) seventy per cent thereof for an assessment year beginning on the 1st day of April, 2002; (iii) fifty per cent thereof for an assessment year beginning on the 1st day of April, 2003; (iv) thirty per cent thereof for an assessment year beginning on the 1st day of April, 2004; and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year. 9. So far as Civil Appeal No.7427 of 2012 is concerned, which is against the judgment delivered by the High Court of Karnataka at Bangalore, as stated hereinabove, the same has been decided in favour of the Assessee and in the circumstances, the Revenue has preferred the present appeal as it has been aggrieved by the way in which the deductions were permitted by the High Court from the same profits and gains of the business to the Assessee under Sections 80HHC and 80-IB of the Act. According to the case of the Revenue, the Tribunal was right in deciding the case of the Assessee and the High Court committed an error ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development. He had further submitted that Section 80-IB(13) also provides that certain provisions of Section 80-IA would also apply to Section 80-IB, like the provisions of Sub-Section (5) and Sub-Sections (7) to (12) of Section 80-IA. 14. The learned counsel had, thus, submitted that by virtue of the provisions of Section 80-IB(13), the provisions applicable to industrial undertakings to whom deductions under Section 80-IA are granted, would also apply to certain extent. By virtue of the aforestated provisions of Section 80-IB(13), provisions of Section 80-IA(9) would also apply to the industrial units who claim benefit of deduction under Section 80-IB of the Act. 15. According to the learned counsel, Section 80-IA(9) is clear to the effect that once a deduction is claimed under Section 80-IA, no deduction can be claimed under heading C of Chapter VIA. Section 80HHC is included in heading C of Chapter VIA and therefore, if an assessee claims and is allowed deduction under Section 80-IA or Section 80-IB, he cannot be allowed any deduction under Section 80HHC or any other Section that falls under heading C of Chapter VIA of the Act. 16. Now, let us look at the case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given by the High Court and had submitted that the appeals filed by the Revenue deserve dismissal. 20. I have heard the learned counsel and considered the judgments referred to by them and the provisions of the Act concerning the subject of the appeals. 21. Upon perusal of the Sections referred to hereinabove and the judgments discussed during the course of the hearing, I am of the view that the High Court of Karnataka is not right when it decided to allow deductions in respect of same profits under Section 80HHC as well as under Section 80-IA or Section 80-IB. 22. One can very well see from the provisions of Section 80-IA(9) that if an Assessee is engaged in infrastructure development as well as in the export business, he cannot claim deduction of his entire profits and gains under the provisions of Section 80HHC as well as under Section 80-IA or/and Section 80-IB of the Act. 23. Section 80-IA(9) is quite unambiguous, which clearly provides that if an assessee claims any deduction under the provisions of Section 80-IA, then the assessee cannot claim deduction to the extent of such profits and gains under heading C of Chapter VIA of the Act, which, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed under Section 80-IB. In my opinion, this is not permissible under Section 80-IB(13) read with Section 80-IA(9) because by virtue of Section 80-IB(13) provisions of Section 80-IA(9) are also applicable to Section 80-IB. 29. For the aforestated reasons, I am not in agreement with the view expressed by the High Court and therefore, I decide the appeals in favour of the Revenue by holding that the Assessee who had claimed and had been allowed deductions in respect of profits under Section 80-IB, could not have been allowed deductions in respect of the same profits under Section 80HHC of the Act. 30. Other issues, though referred to in the memo of appeals, had not been pressed seriously and therefore, I am not deciding the same by keeping the said issues open. 31. The appeals, thus, stand disposed of as allowed in favour of the Revenue with no order as to costs. ORDER Dipak Misra, J. Leave granted in the special leave petitions. 2. Having perused the judgment of my esteemed brother, for whom I have the deepest respect, I am unable to concur with the view expressed by him. Hence, I pen a separate opinion. 3. In this batch of appeals, the issue that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court in the case of Great Eastern Exports [2011] 332 ITR 14. 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 [2011] 332 ITR 40. In the result, we hold that section 80-1A(9) does not affect the computability of deduction under various provisions under heading C of Chapter VI-A, but it affects the allowability of deductions computed under various provisions under heading C of Chapter VI-A, so that the aggregate deduction under section 80-1A and other provisions under heading C of Chapter VI-A do not exceed 100 per cent of the profits of the business of the assessee. Our above view is also supported by the Central Board of Direct Taxes Circular No. 772 dated December 23, 1998 ([1999] 235 TR (St.) 35), wherein it is stated that section 80-1A(9) has been introduced with the view to prevent the taxpayers from claiming repeated deductions in respect of the same amount of eligible income and that too in excess of the eligible profits. Thus, the object of section 80-1A(9) being not to curtail the deductions computable under various provisions under heading C of Chapter VI-A, it is reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ours of the charge for levy of income tax and ambit and scope of total income and certain other matters. Chapter III relates to incomes, which do not form part of the total income at all. Chapter IV relates to computation of total income under different sources, i.e., six sub heads, which have been divided into parts (A) to (F), Chapter V deals with income of other persons, which are to be included in the assessee s total income. Chapter VI postulates aggregation of income from different sources or set off or carry forward of loss computed under different sources and to the next assessment year. Chapter VIA, with which we are concerned, deals with deductions to be made in computing total income. The said Chapter is divided into four parts namely, A to D. The said Chapter becomes operative on reaching the last stage of computation of income from different sources as per the provisions of Chapter I to VI. It is to be borne in mind that each chapter deals with independent subject matters at different stages. In other words, before reaching the stage of invoking provisions of Chapter VIA, the assessee is required to work out the gross total income by applying the provisions upto the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gross total income. This provision is significant and accepts that an assessee may be entitled to multiple deductions under Section 80C to 80U, when conditions precedent stipulated in the section are satisfied. 9. The expression gross total income has been defined in sub-section(5) to Section 80B and it reads as under:- 80B. In this Chapter- (5) gross total income means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter; On a conjoint and harmonious reading of Sections 80AB and 80B(5), it is apparent that once gross total income is computed in accordance with the provisions of the Act but before making any deduction under the provisions of Sections 80C to 80U. Gross total income is computed by applying provisions upto Chapter VI, without or before making any deduction under Sections 80C to 80U, but the quantum of income which qualifies for deduction under Sections 80C to 80U would be amount of income of that nature, derived or received by the assessee. 10. As I perceive, there is no difficulty to this extent. The difficulties arise when there are overriding provisions, which tend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a number of cases against which no special leave petitions were filed meaning thereby that the Department has accepted the view taken in these judgments. See CIT v. Nima Specific Family Trust reported in [2001] 248 ITR 29 Bom ; CIT v. Chokshi Contacts P. Ltd. [2001] 251 ITR 587 (Raj); CIT v. Amod Stamping [2005] 274 ITR 176 (Guj); CIT v. Mittal Appliances P. Ltd [2004] 270 ITR 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). 3. 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 by the Madhya Pradesh High Court, we do not find any merit in this appeal. The Department having accepted the view taken in those judgments cannot be permitted to take a contrary view in the present case involving the same point. Accordingly, the civil appeal is dismissed. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible business under this Section. 13. In the present set of appeals, I am dealing with the provisions after 1st April, 1999, i.e., post amendment provisions and the question raised is whether deduction allowed under Section 80IA is to be reduced from the gross profits while computing deduction under Section 80HHC. The controversy arises because the assessees herein are entitled to deduction both under Section 80IA, which is restricted to the stipulated percentage of profits and gains derived from specified business, and under Section 80HHC again stipulated percentage of profits derived from exports of goods and merchandise are entitled for deduction. Section 80HHC specifically prescribes a formula or method for computing the said deduction in sub-section (3), which at present reads as follows:- 80HHC. (3) For the purposes of sub-section(1), - (a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that, - (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme: Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that, - (a) he had an option to choose either the duty drawback or the Duty Free Replenishment Certificate, being the Duty Remission Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to Section 80HHC in case of a trader exporter and under clause (c) in respect of an assessee, who is both a manufacturer/processor and a trader exporter. The Section is a detailed one and provides complete method and mechanism to compute deduction under Section 80HHC. 15. It is in the context of Section 80HHC that sub-section (9) to Section 80I has come up for interpretation. There is no dispute that sub-section (9) to Section 80I would be applicable as the assessee would be entitled to deduction under Section 80IA as well as under Section 80HHC. The contention of the Revenue is that the said sub-section mandates that deduction under Section 80HHC has to be computed not only on the profits of business as reduced by the amounts specified in clause (baa) and sub-section (4)(B) of Section 80HHC but by also reducing the amount of profit and gains allowed as a deduction under Section 80IA(1) of the Act. In other words, the gross total income eligible for deduction under Section 80HHC would be less or reduced by the deduction already allowed under Section 80IA. Thus, the gross total income eligible for deduction would not be the gross total income as defined in sub-section (5) to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA(1). The second part of section 80-IA(9) does not even remotely refer to the method of computing deduction under other provisions under heading C of Chapter VI-A. Thus, section 80-IA(9) seeks to curtail allowance of deduction and not computability of deduction under any other provisions under heading C of Chatper VI-A of the Act. 31. How to compute deduction allowable under section 80HHC(1) is set out in section 80HHC(3). In the case of a manufacturer-exporter, section 80HHC(3)(a) provides that the deduction under section 80HHC(1) has to be computed as per the formula: 32. Clause (baa) in section 80HHC defines the term profits of the business for the purposes of section 80HHC to mean the profits of the business as computed under the head Profits and gains of business or profession as reduced by the amounts specified therein. Therefore, in the case of a manufacturer-exporter, deduction under section 80HHC(1) is statutorily required to be computed on the profits of the business as reduced by the amounts specified in clause (baa) of section 80HHC. Unless, it is specifically provided by the statute, the profits of the business for the purpose of section 80HHC canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 35. Wherever the Legislature intended that the deduction allowed under one section should affect the computation of deduction under other provisions of the Act, the Legislature has expressly used words to that effect. It may be noted that sections 80HHD(7) and 80-IA(9) (presently 80-IA(9)) were introduced by Finance (No.2) Act, 1988, with effect from April 1, 1999. Section 80HHD (7) provides that the deduction allowed under section 80HHD (1) shall not qualify to that extent for deduction under any other provisions of Chapter VI-A under the heading C, whereas, section 80-IA(9A) provides that the deduction allowed under section 80-IA(1) shall not be allowed under any other provisions of Chapter VI-A under heading C. Similarly, in section 80-IC(5), the words used are that notwithstanding anything contained in any other provision of the Act, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VI-A or section 10A or section 10B in relation to the profits and gains of the undertaking. Thus, the Legislature has used specific words whenever it intended to affect the computation of deduction. As the words used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is to be given to the said provision. Rules of interpretation are applied only if there are ambiguities when the purpose of interpretation is to ascertain the intention of the law i.e., mens legis, it is based on assertion by adopting plain meaning of the statute in the absence of any ambiguity. 19. The aforesaid judgment gives the stamp of approval to the opinion expressed by the Special Bench of the Tribunal in Assistant Commissioner of Income-tax v. Ragini Garments [2007] 294 ITR (AT) 15 (Chennai) wherein it has been observed that several sections like 80HHA, 80HHA(5) and 80HHA(6) provide for modification or change of manner and mode of computation or preferential treatment of one deduction over the other. These sections have to be read harmoniously. Though Section 80AB starts with the non-obstante clause, the provisions of Section (9A) to Section 80IA would override. The Delhi High Court has accepted the said interpretation and observed that the two provisions are required to be read harmoniously, for Section 80-IA(9) should not be treated as a redundant provision as it was introduced for the purpose of achieving a clear objective. Consequently, it has held that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Bill, 1998([1998] 231 ITR (St.) 252) is that it was noticed that certain assessees were claiming more than 100 percent deduction on the profits and gains of the same undertaking, when they were entitled to deductions under more than one section under heading C of Chapter VI-A. With a view to prevent the taxpayer taking undue advantage of the existing provisions of the Act, section 80-IA was amended by the Finance (No.2) Act, 1998, so that the deductions allowed under section 80-IA and various sections under heading C of Chapter VI-A are restricted to the profits of the business of the undertakings/enterprise. 21. The first part of sub-section (9) to Section 80IA refers to the computation of profits and gains of an undertaking or enterprise allowed under Section 80IA in any assessment year and the amount so calculated shall not be allowed as a deduction under any other provisions of this Chapter. It is in this context that the Bombay High Court has rightly pointed out that there is a difference between allowing a deduction and computation of deduction. The two have separate and distinct meanings. Computation of deduction is a stage prior and helps in quantifying the amount, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80HHC(3). The stand of the Revenue is that without alteration or modification of the figures of total turnover and the export turnover, the gross total income would undergo a reduction from ₹ 1,000/- to ₹ 700/- as ₹ 300/- has been allowed as a deduction under Section 80-IA. This would result in anomaly for the said figure would not be the actual and true figure or the true gross total income or profit earned on the total turnover including export turnover and, therefore, would give a somewhat unusual and unacceptable result. There is no logic or rationale for making the calculation in the said impracticable and unintelligible manner. 23. Recently, this Court in Jeyar Consultant and Investment Private Limited v. Commissioner of Income Tax, Madras (2015) 7 SCC 705, dealing with the Assessment Year 1989-90, had examined sub-section (3)(b) to Section 80 HHC as it then existed on the question of computation of deduction, which has reference to figures of profit from business, export turnover and total turnover. The said clause applied to assessee who had turnover and income from business in India as well as from export business. The eligible profits from expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (No.2) Act, 1991 and further amendments has been quoted in paragraph 15 above. 26. It may be noted that the second, third and fourth provisos to Section 80HHC(3) were inserted by Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1st April, 1998. The fifth proviso was inserted by Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1st April, 1992. Explanation to sub-section (3) would indicate that it defines different terms including direct and indirect cost , trading goods , adjusted export turnover and adjusted profits of the business . 27. Finance (No.2) Act, 1991 with retrospective effect from 1st April, 1987 in the Explanation to the Section 80HHC defines the term total turnover and profits of business in clauses (ba) and (baa). They read as under:- (ba) total turnover , shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 2 (52 of 1962): Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression total turnover shall have effect as if it also excluded any sum referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have to be included. Similarly, in computation of such profits of business, different expenses which are allowable under Sections 30 to 44-D have to be allowed as expenses. After including such receipts of income and after deducting such expenses, the total of the net receipts are profits of the business of the assessee computed under the head Profits and Gains of Business or Profession from which deductions are to be made under clauses (1) and (2) of Explanation (baa). 29. Reliance was placed for the said interpretation on a decision of the Constitution Bench in Distributors (Baroda) (P) Limited v. Union of India (1986) 1 SCC 43, to observe:- 16. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head Profits and Gains of Business or Profession referred to in the first part of the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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