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2010 (11) TMI 91 - HC - Income TaxSection 80HHC and Section 80IA of the Income Tax Act, 1961 - Whether deduction to the extent of such profits claimed under Section 80IA would not be allowed for computing deduction under Section 80 HHC Appellant submitted that, She emphatically argued that in view of a non-obstante provision contained in Section 80 AB of the Act, which is to be given primacy and should prevail over Section 80 IA (9). On this basis, her submission was that Section 80 AB of the Act was coming in conflict with Section 80IA AB of the Act with Section 80 IA (9) and 80 IB (13) if the Rule of Literal Interpretation is applied and, therefore, the two provisions needed to be harmonized. According to her, otherwise, Section 80 AB would be rendered otiose. - Held that - there is no conflict within the two provisions as was painstakingly tried to be demonstrated by Ms. Kapila. Section 80AB deals with computation of deduction on gross total income which purpose is achieved even otherwise on reading these provisions and interpreting the same in the manner done by her herein before. On the contrary, if the interpretation suggested by Ms. Kapila is accepted, it will not only do violence to the clear mandate of Section 80 IA (9) but shall have the effect of rendering that provision redundant though specifically introduced by the Legislature with the purpose of achieving clear objective. For the purpose of computing deduction under Section 80 HHC of the Act, deduction already allowed under Section 80-IA has to be reduced. The question of law thus stands answered in favour of the Revenue and against the assessee.
Issues Involved:
1. Interpretation of Section 80IA(9) of the Income Tax Act. 2. Interplay between deductions under Section 80IA and Section 80HHC. 3. Application of non-obstante clause in Section 80AB. 4. Relevance and binding nature of CBDT Circular No. 772. 5. Harmonization of conflicting provisions within Chapter VIA of the Income Tax Act. Detailed Analysis: Issue 1: Interpretation of Section 80IA(9) of the Income Tax Act The primary issue revolves around the interpretation of Section 80IA(9) which states: "Where any amount of profits and gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, 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 shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be." The court noted that a plain reading of this provision suggests that the profits and gains claimed and allowed under Section 80IA should not be allowed again under any other provisions of Chapter VIA, including Section 80HHC. Issue 2: Interplay between deductions under Section 80IA and Section 80HHC The court examined the historical context and judicial interpretations of Chapter VIA, specifically the interplay between Section 80IA and Section 80HHC. Prior to the amendment effective from April 1, 1999, courts had held that deductions under these sections were independent and could be claimed without reducing one from the other. However, with the insertion of Section 80IA(9), the court concluded that the legislative intent was to prevent double deductions on the same profits and gains. The court affirmed the view taken by the Special Bench of the Income Tax Appellate Tribunal (ITAT) in Hindustan Mint & Agro Products Pvt. Ltd., which held that the relief under Section 80IA should be deducted from the profits and gains before computing the relief under Section 80HHC. Issue 3: Application of non-obstante clause in Section 80AB The assessees argued that Section 80AB, which begins with a non-obstante clause, should prevail over Section 80IA(9). Section 80AB states that deductions under Chapter VIA should be computed on the "gross total income." The court, however, found no conflict between Section 80AB and Section 80IA(9). It held that Section 80AB deals with the computation of deductions on gross total income, while Section 80IA(9) ensures that deductions under different sections do not exceed the total profits and gains of the eligible business. Issue 4: Relevance and binding nature of CBDT Circular No. 772 The court examined CBDT Circular No. 772, which clarified that the amendments to Section 80IA were intended to prevent taxpayers from claiming more than 100% deduction on the same profits and gains. The assessees argued that this circular should be binding on the Revenue. The court, however, noted that the circular only addressed one aspect of Section 80IA(9) and did not negate the restriction on double deductions. Issue 5: Harmonization of conflicting provisions within Chapter VIA of the Income Tax Act The court emphasized the need for harmonious construction of statutory provisions to avoid rendering any provision redundant. It held that the purpose of Section 80IA(9) was to ensure that once a deduction is claimed under Section 80IA, the same profits and gains cannot be claimed again under other provisions of Chapter VIA. This interpretation harmonizes Section 80IA(9) with Section 80AB and other provisions of Chapter VIA. Conclusion: The court concluded that for the purpose of computing deductions under Section 80HHC, the deduction already allowed under Section 80IA must be reduced. This ensures that the total deductions do not exceed the profits and gains of the eligible business, in line with the legislative intent behind the insertion of Section 80IA(9). The appeals filed by the Revenue were allowed, and those filed by the assessees were dismissed.
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