2004 (7) TMI 75 - HC - Income Tax

(i) Whether Tribunal was right to hold that deduction under section 80-IA is to be allowed on the gross total income of Rs. 1, 25, 98, 790 even when deduction under section 80HHC was already claimed and allowed at Rs. 81, 57, 935 on the said GTI? (ii) Whether Tribunal was right in its wisdom to allow total tax benefit/double tax deduction under two different provisions of the Income-tax Act i.e. sections 80HHC and 80-IA on the same gross total income of Rs. 1, 25, 98, 790? Held that there is no restriction on allowing deductions under any other section of Chapter VI-A on the gross total income after deduction under section 80HHC. There is no justification to reduce the amount of gross total income for allowing deduction under section 80-IA revenue s appeal dismissed

Summary

Issues:
1. Whether deduction under section 80-IA should be allowed on the gross total income even after deduction under section 80HHC was claimed and allowed?
2. Whether double tax deduction under sections 80HHC and 80-IA can be allowed on the same gross total income?

Analysis:
1. The assessee, a registered firm engaged in export business, filed its income return for the assessment year 1995-96, claiming deductions under both section 80-IA and section 80HHC of the Income-tax Act, 1961. The Income-tax Officer allowed deduction under section 80-IA only on the balance amount after deduction under section 80HHC. The Commissioner of Income-tax (Appeals) upheld this decision, but the Income-tax Appellate Tribunal ruled in favor of the assessee, allowing deductions under both sections on the total gross income.

2. The main contention was whether deduction under section 80-IA should be allowed on the gross total income or only on the balance amount left after deduction under section 80HHC. The Revenue argued that a 1998 amendment inserted sub-section (9A) after sub-section (9) of section 80-IA, stating that further deductions should be allowed only on the balance amount. However, the court noted that this amendment was not applicable to the assessment year 1995-96 and, therefore, did not support the Revenue's argument.

3. The court referred to a decision by the Madhya Pradesh High Court and its own previous ruling to support its decision. It emphasized that the provisions of section 80-IA and the language used in section 80HHC did not restrict allowing deductions under any other section of Chapter VI-A on the gross total income after deduction under section 80HHC. Therefore, there was no justification to reduce the gross total income for allowing deduction under section 80-IA.

4. The court highlighted that the amendment to section 80-IA, which the Revenue relied upon, was not applicable to the relevant assessment year. As a result, the court dismissed the appeal, ruling in favor of the assessee and emphasizing that deduction under section 80-IA should be allowed on the gross total income, as per the provisions of the Income-tax Act.

5. In conclusion, the court dismissed the appeal with no order as to costs, affirming the decision to allow deduction under section 80-IA on the gross total income, even after deduction under section 80HHC was claimed and allowed.