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TMI Blog2024 (11) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... thout prejudice to each other. Invalid Proceedings: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] erred in fact and in law in passing an order beyond its jurisdiction. 2. The learned CIT(A) erred in fact and in law in invoking provisions of section 251(2) of the Act and enhancing the scope of set aside proceedings. 3. The learned CIT(A) erred in fact and in law in restricting the deduction u/s 80HHC and 80IA of the Act by invoking provisions of section 80IA(9) despite the fact that no such directions were given by Hon'ble Income Tax Appellate Tribunal, Ahmedabad ("ITAT"). Non-applicability of section 251; 4 The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 5. The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of the Act in proper perspective. Without prejudice to the above: 6. The learned CIT(A) erred in fact and in law in restricting the deduction u/s 80HHC by invoking the provision of section 80IA(9) of the Act without appreciating the facts on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80HHC of the Act despite the fact that the issue of applicability of provisions of section 80IA(9) is already adjudicated by the higher authority. 8. The learned CIT(A) erred in fact and in law in invoking provisions of section 80IA(9) of the Act without appreciating the provisions of the law in proper perspective. Disallowance u/s 80HHC: 9. The learned CIT(A) erred in fact and in law in disallowing the deduction claimed u/s 80HHC of the Act on lease rent income. 10. The learned CIT(A) erred in fact and in law in disallowing deduction u/s 80HHC without granting proper opportunity of being heard. 11. Your appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeals. ITA No.523/Ahd/2023 for AY 2003- 2004 4. The Assessee has taken the following grounds of appeal:- All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. Invalid Proceedings: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] erred in fact and in law in passing an order beyond its jurisdiction. 2 The learned CIT(A) erred in fact and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estricting the deduction u's 80HHC of the Act by invoking provisions of section 80IA(9) despite the fact that no such directions were given by Hon'ble Income Tax Appellate Tribunal, Ahmedabad ("ITAT"). Without prejudice to the above Non-applicability of section 251: 5. The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 6 The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of the Act in proper perspective. 7 The learned CIT(A) erred in fact and in law in disallowing the deduction u/s 80HHC on lease rent income of Rs. 52,30,180 by invoking the provision of section 80IA(9) of the Act without appreciating the facts on record in proper perspective. Disallowance u/s 80HHC: 8 The learned CIT(A) erred in fact and in law in disallowing the deduction claimed u/s 80HHC of the Act on lease rent income. 9. The learned CIT(A) erred in fact and in law in disallowing deduction u/s 80HHC without granting proper opportunity of being heard. 10. Your appellant craves the right to add to or alter, amend, substitute, delete or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome received by the assessee by leasing the balance stock of vacuum tanks is directly connected with the business activity of the assessee and hence eligible for deduction under section 80IA.considering the same lease rent income for computation of deduction under section 80 HHC is not correct in view of the provisions under section 80IA (9). Hence no relief on the issue of computation of 80HHC deduction with respect to lease rent income is allowed. 3. The appeal is thus partly allowed. 7. Before us, the counsel for the assessee submitted that only two issues are involved in all the appeals before us. 8. The first-issue-is-whether income from "lease rental" is eligible for deduction under section 80HHC of the Act. The counsel for the assessee submitted that this issue has been conclusively decided by the Tribunal in assessee's own case in ITA number 756 of 2001 and others for assessment years 1997-98 to 1999- 2000 which has allowed deduction under section 80 HHC to the assessee on "lease rental" income on the ground that lease rental income is emanating out of goods manufactured by the assessee and therefore should be considered as derived from "business activity". It wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112,537,162 Manufacturing & Other Expenses 16 80.825,937 79,352,657 163,743,232 191,889,819 Less: Capitalised 4,331,715 TOTAL 163,743,232 Profit Before Interest & Depre 46,120,686 187,556,104 Less: Interest 17 16,437,990 51,849,59 Profit before Depreciation 29,682,696 16,868,554 Less: Depreciation 5 12,474,934 34,980,965 Less: Capitalized - 11,512,571 12,474,934 97,338 17,207,762 11,415,233 Profit Before Tax 1,600,000 23,565,732 Less: Provision for taxation 15,607,762 3,200,000 20,365,732 Profit for the year 9549 Less: i) earlier year expenses 58,747 ii) Preliminary expenses written off 58,747 58,747 15,549,015 68,296 Add: Balance of profit brought forward 11,334,864 20,297,436 Amount available for appropriation 26,883,879 1,410,368 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . And, the Hon'ble High Court has held as under:- "27. Insofar as question No. 2 is concerned, according to the Tribunal s. 80-1 of the Act uses the phrase 'derived from' and hence the interest received by the assessee from its trade debtors cannot be taken into consideration for the purpose of computing profits derived from an industrial undertaking. The Tribunal has failed to appreciate that it is not the case of the AO that the interest income is not assessable under the head 'Profits and gains of business'. It is only while computing relief under s. 80-1 of the Act that the Revenue changes its stand. When one reads the opening portion of s. 80-1 of the Act it is clear that words used are: "gross total income of an assessee includes any profits and gains derived from an industrial undertaking". Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact, the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ACIT v. IPCA Laboratories 112 Taxman.com 332 (SC) in support of the proposition that deduction under section 80HHC of the Act is available to the assessee without excluding deduction under section 80IA of the Act. The counsel for the assessee also relied on several other decisions on the this issue, as well. 10. In response, Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. 11. We have heard the rival contentions and perused the material on record. Regarding the issue of availability of deduction under Section 80HHC of the Act with respect to "lease rental", in view of the decision referred to by the Counsel for the assessee in assessee's own case in ITA No.756 of 2000 for assessment year 1997-98 to 1999-2000, in our view, the issue now stands decided in favour of the assessee and the assessee is eligible for deduction under Section 80HHC of the Act on "lease rental" income. 12. With regard to the second issue of simultaneous claim of deduction under Section 80HHC of the Act and Section 80IA of the Act, we are of the considered view that the decision cited by the assessee would not be of assistance on this issue since division bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing deduction under section 80IA of the Act in terms of section 80IA(9) of the Act. Since the ld.counsel for the assessee has fairly conceded that the reference to the Larger Bench of the Supreme Court on this issue in the case of Micro Lab (supra) has been dismissed on 17.9.2018 in CA No.007427/2012 and Hon'ble jurisdictional High Court has decided the issue against the assessee in the case of Atul Intermediates (supra), the grounds raised by the assessee merits no consideration and are dismissed. 12.1 In the case of PCIT v. E.I.H. Ltd 103 taxmann.com 204 (SC), Supreme Court held that where in respect of issue as to double deduction under chapter VIA of Act, High Court disposed of Revenue's appeal by directing Assessing officer to pass order in accordance with judgment of Supreme Court as may be rendered on reference pursuant to judgment reported in Asstt. CIT v. MicroLabs Ltd. [2015] 64 taxmann.com 199/[2016] 237 Taxman 74 (SC), SLP filed against decision of High Court was to be allowed. 12.2 Further, in several decisions rendered by jurisdictional Gujarat High Court, the issue has been decided against the assessee. 12.3 In the case of Sun Pharmaceutical Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has claimed deduction of profit or gains under section 80-IB, deduction to that extent is not to be allowed under section 80HHC of the Act. While passing the order, High Court made the following observations: - In plain terms, section 80-IA(9) provides that where any amount of profits and gains of an undertaking or enterprise in case of an assessee is claimed and allowed under section 80-IA, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading C. - 'Deductions in respect of certain incomes', and in no case exceed the profits or gains of such eligible business of the undertaking or enterprise. It can thus be seen that subsection (9) is divided into two clear parts. First part pertains to non-allowability of deduction under any other provision contained in Part-C of Chapter VI to the extent of profits and gains of an enterprise or undertaking with respect to which deduction under section 80-IA is claimed and allowed. The second part provides that in any case, such deduction shall not exceed the profits and gains of eligible business of an undertaking or enterprise. If the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done in sub-section (2) of section 80A. Therefore, the theory that the Legislature has in far more complex and detailed expression desired to bring about the same result, though in plain terms, when the sub-section read as a whole, conveys entirely different connotation could not be accepted. [Para 24] - In plain terms when read as a whole sub-section (9) of section 80-IA does not limit its effect only to disallowing deduction over and above the profit or gain of an enterprise or undertaking. Second aspect is that such provision does not have a non obstante clause. What would be the effect of these two forces emerging from sub-section (9) of section 80-IA needs to be appreciated. The combined effect of these two factors would be that sub-section (9) of section 80-IA would operate as long as there is nothing contrary contained in any other provisions of sub chapter C of Chapter VI. Thus, if there is any indication of legislative intent to allow the full deduction under section 80HHC irrespective of the provision contained in sub-section (9) of section 80-IA, such legislative intent must prevail. On the other hand, if one find that section 80HHC is not immune to outside influence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] - It is true that in different provisions the Legislature has used different language for restricting or limiting the claim of deductions. The use of language in statutory provisions in such complex situations must be peculiar to every situation the Legislature may seek to meet with. Merely because in some of the provisions certain disallowances are expressed in different language, it would not by itself mean that sub-section (9) of section 80-IA was aimed to have restricted and limited scope of application. [Para 28] - The contention that no such matching provision was made in section 80HHC would clearly indicate the Legislative intent also, is not a valid argument. Sub-section (9) of section 80-IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI. It was neither possible nor expected of the Legislature to make individual matching provisions in large number of statutory provisions recognizing deductions under various situations. Such provisions are often times made for a limited period, new deductions are introduced from time to time and old deductions withdrawn. [Para 29] - Reference to the circular No. 772 of 23-12-1998 also wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd 48 taxmann.com 51 (Gujarat), where the jurisdictional Gujarat High Court held that when a certain profit or gain has already been granted deduction undersection 80-IA to extent specified in first part of sub-section (9) of section 80-IA assessee's claim of deduction under other provisions, including section 80HHC, would be restricted. 12.6 Accordingly, in view of the above discussion, we are of the view that when a certain profit or gain has already been granted deduction under section 80-IA, to extent specified in first part of sub-section (9) of section 80-IA, claim of deduction under other provisions, including section 80HHC of the Act, would not be available for "lease rental" income in view of Section 80IA(9) of the Act. This also finds support from a concurrent reading of the orders of Ahmedabad Tribunal in the case of Madhusudhan Industries supra, the decision of Supreme Court in the case of E.I.H. Ltd. supra and various Gujarat High Court decisions referred to above, on this issue. Accordingly, on this issue, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. 13. In the result, the appeal of the assessee is partly allowed for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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