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2006 (9) TMI 343 - AT - Income TaxInterpretation of statutes - Deduction u/s 80-IA and 80HHC - income derived from industrial undertaking - export incentives - Manufacturing activities Or Not - non-eligibility in respect of scrap sale - HELD THAT - In our opinion, the Legislature has clearly provided two limbs with reference to the profits and gains of an undertaking or an enterprise which has been claimed and allowed as deduction u/s 80-IA. The word and has also been used between these two limbs by the Legislature and therefore, both the limbs are cumulative and mandatory in nature and consequently, the effect of either of the limbs cannot be ignored. Thus, the effect of both the limbs has to be taken into consideration while computing the deductions under the heading C - Deductions in respect of certain incomes in Chapter VI-A. Though we have held that in view of the clear language employed by the Legislature, the courts are not required to look into the intention of the Legislature yet on going through the circular mentioned in the decision of Tribunal in the case of Mittal Clothing Co. 2005 (6) TMI 480 - ITAT BANGALORE , we do not find anything to suggest that first limb in section 80-IA(9) is to be ignored. Circular simply refers to the intention of the Legislature in respect of the second limb. Therefore, the circular does not support the case of assessee. The Apex Court in the case of IPCA Laboratory Ltd. 2004 (3) TMI 9 - SUPREME COURT has clearly held that relief cannot be allowed by ignoring or misreading the provisions of the Act. Therefore, reference to the circular, in this case, is misplaced. We have already referred to the relevant provisions of sub-section (9) of section 80-IA. It clearly provides that where any amount of profit of an undertaking or of an enterprise of an assessee is claimed and allowed under this section then deduction to the extent of such profit shall not be allowed under any other provisions of Chapter VI-A under the heading C-Deductions in respect of certain incomes . Section 80HHC falls under the above heading in Chapter VI-A. Therefore, while computing the relief u/s 80HHC, the tax authorities duty bound to give effect to both the limbs provided in section 80-IA(9). Therefore, in our opinion, the lower authorities were justified in reducing the profits of business of the undertaking by the amount of profits allowed as deduction u/s 80-IA while computing the deduction u/s 80HHC. Thus, the order of the Learned CIT (Appeals) is upheld - In the result, assessee s appeal stands dismissed.
Issues Involved:
1. Sustaining deduction under section 80HHC. 2. Interpretation of section 80-IA(9) of the Income-tax Act, 1961. Detailed Analysis: 1. Sustaining Deduction under Section 80HHC: The assessee appealed against the Commissioner of Income-tax (A)'s decision to sustain the deduction under section 80HHC at Rs. 26,67,213/- instead of Rs. 38,07,772/-. The assessee argued that the provisions of section 80HHC and section 80-IA are independent and that the total deduction claimed did not exceed the gross total income. The Assessing Officer had excluded scrap sales of Rs. 15,130/- from the gross total income and allowed a deduction of Rs. 29,22,265/- under section 80-IA. For section 80HHC, the Assessing Officer reduced the profits by the amount allowed under section 80-IA, resulting in a lower deduction. The CIT(A) confirmed this computation. 2. Interpretation of Section 80-IA(9) of Income-tax Act, 1961: The primary issue was the interpretation of section 80-IA(9), which restricts the allowance of deductions under other provisions of Chapter VI-A to the extent of profits already claimed and allowed under section 80-IA. The assessee cited various Tribunal decisions supporting their interpretation that section 80HHC should be computed independently without reducing the profits by the deduction allowed under section 80-IA. The Departmental Representative argued that section 80-IA(9) clearly prohibits such double deductions. Tribunal's Analysis: Interpretation of Section 80-IA(9): The Tribunal emphasized the clear and unambiguous language of section 80-IA(9), which mandates that deductions under other provisions of Chapter VI-A should not exceed the profits and gains of the eligible business. The Tribunal referred to the principle that where the language of the statute is clear, the plain and natural meaning should be applied without resorting to interpretative aids. The Tribunal cited several Supreme Court judgments affirming this principle, including Smt. Tarulata Shyam v. CIT and Keshavji Ravji & Co. v. CIT. Rejection of Assessee's Arguments: The Tribunal rejected the assessee's argument that section 80HHC is an independent provision and not subject to other sections unless expressly stated. The Tribunal noted that the Legislature can impose conditions or limitations in other provisions without using specific expressions like "notwithstanding." The Tribunal also referred to the Supreme Court's decision in Britannia Industries Ltd. v. CIT, which upheld the specific disallowance provisions even if not stated in the main section. Distinguishing Other Tribunal Decisions: The Tribunal distinguished the decisions cited by the assessee, noting that those cases dealt with different issues or did not consider the first limb of section 80-IA(9). The Tribunal emphasized that both limbs of section 80-IA(9) must be given effect, meaning that deductions under other provisions must be reduced by the amount already allowed under section 80-IA. Conclusion: The Tribunal upheld the CIT(A)'s order, affirming that the lower authorities were justified in reducing the profits of the business by the amount allowed under section 80-IA while computing the deduction under section 80HHC. The assessee's appeal was dismissed. Final Judgment: The appeal was dismissed, and the order of the Learned CIT (Appeals) was upheld.
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