2017 (2) TMI 1216 - HC - Income Tax

Deductions u/s 80I & 80HH - assessee has not maintained separate books of accounts for claiming deduction - Held that - As decided in Transpek Silox Industry Ltd. vs. Deputy Commissioner of Income Tax 2016 (7) TMI 1303 - GUJARAT HIGH COURT Sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI - different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources - at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply - clause (baa) to explanation to section 80HHC defines a term profits of the business - While working out the business profits as specified therein, in terms of sub-section (9) of section 80IA the profit or gain which had already been allowed deduction to the extent mentioned therein would have to be ignored. In IPCA Laboratory Ltd. v. Deputy Commissioner of Income-Tax reported in 2004 (3) TMI 9 - SUPREME Court it has been held that Section 80AB is also in Chapter VI-A - It starts with the words where any deduction is required to be made or allowed under any Section of this Chapter - This would include Section 80HHC - Section 80AB further provides that notwithstanding anything contained in that Section - Thus Section 80AB has been given an overriding effect over all other Sections in Chapter VIA -Section 80HHC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB - Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act - If the income has to be computed in accordance with the provisions of the Act, and then not only profits but also losses have to be taken into consideration. Assessing Officer may give effect to this order only after the decision of the Larger Bench of the Supreme Court in the case referred to it by the decision reported in 2015 (12) TMI 708 - SUPREME COURT . Decided in favour of Revenue

Summary

Issues:
1. Interpretation of provisions related to deductions under sections 80I, 80HH, and 80IA of the Income Tax Act.
2. Application of previous court decisions and the principle of following precedents.
3. Requirement to maintain separate books of accounts for claiming deductions.

Analysis:

Interpretation of Deduction Provisions:
The appellant challenged the Tribunal's decision to dismiss the appeal regarding deductions under sections 80I, 80HH, and 80IA of the Income Tax Act. The High Court framed questions of law regarding the justification of allowing deductions under these sections without the assessee maintaining separate books of accounts. The appellant relied on a decision of the Gujarat High Court to argue that the legislative intent behind section 80IA(9) was to have universal application to all deductions under the relevant sub-chapter. The High Court, considering this argument, disposed of the appeals in favor of the revenue, pending the decision of the Larger Bench of the Supreme Court.

Application of Precedents:
The High Court referred to a previous decision in Tax Appeal No. 185/2004 and emphasized the need to follow the earlier view confirmed by the Supreme Court. It noted conflicting views in other cases but held that the Division Bench's decision, confirmed by the Supreme Court, should be followed. The court highlighted the importance of consistency in following precedents set by higher courts to maintain legal certainty and uniformity in decisions.

Requirement for Separate Books of Accounts:
The issue of maintaining separate books of accounts for claiming deductions was raised during the proceedings. The appellant contended that deductions were wrongly allowed without the assessee maintaining separate books of accounts. However, the High Court's decision was based on the interpretation of relevant provisions and the application of previous court decisions rather than the issue of separate books of accounts.

In conclusion, the High Court's judgment upheld the revenue's position regarding deductions under sections 80I, 80HH, and 80IA, pending the Supreme Court's decision. The court emphasized the importance of following established precedents to ensure consistency in legal interpretation and decision-making. The issue of maintaining separate books of accounts, although raised, did not form the basis of the court's decision, which was primarily focused on statutory interpretation and adherence to previous court rulings.