2005 (10) TMI 440 - AT - Income Tax

Summary

Issues:
1. Whether turnover of units claiming exemption under section 10A should be included while computing deduction under section 80HHC.

Analysis:
The appeal involved a dispute regarding the computation of deduction under section 80HHC in relation to the turnover of a unit eligible for exemption under section 10A of the Income Tax Act. The Assessing Officer contended that the turnover of the unit claiming exemption under section 10A should not be included in the export turnover for the purpose of computing deduction under section 80HHC. The appellant argued that the turnover of the unit should be included for the purpose of computing deduction under section 80HHC, citing relevant case law to support their position.

Upon careful consideration of the arguments presented, the Tribunal analyzed the provisions of section 80AB, which governs deductions under section 80HHC. It was noted that deduction under section 80HHC is granted only in respect of income included in the gross total income of the assessee. Since the income from the unit eligible for exemption under section 10A is entirely exempt and not included in the gross total income, the Tribunal held that the turnover of such unit should not be included in the turnover for the purpose of computing deduction under section 80HHC.

The Tribunal referred to the decision of the Hon'ble Supreme Court in Escorts Ltd. case, emphasizing the principle that no double deduction should be allowed unless specifically provided for by the statute. Additionally, the Tribunal considered the decision of the Gauhati High Court in another case, highlighting that deductions can only be claimed when the income is included in the total income chargeable to tax. Based on these principles, the Tribunal concluded that the turnover of the unit exempt under section 10A cannot be included in the export turnover for computing deduction under section 80HHC.

Furthermore, the Tribunal referenced the decision in IPCA Laboratory Ltd. case, which established that section 80AB governs section 80HHC as well. Finally, the Tribunal agreed with the decision in Jindal Exports case, stating that if an assessee is eligible for deductions under both section 10A and section 80HHC, it should be granted. However, in this specific case, since the profit of the unit eligible for exemption under section 10A was not included in the gross total income, the Tribunal dismissed the appeal, affirming that the turnover of the exempt unit should not be considered for the purpose of computing deduction under section 80HHC.