2007 (4) TMI 122 - AT - Income Tax

Deduction - Revenue contented that relief u/s 80-IA should be deducted from profits and gains of business before computing relief u/s 80HHC - Held that revenue contention was correct and allowed

Summary

Issues Involved:
1. Interpretation of Section 80-IA(9) of the Income-tax Act, 1961.
2. Whether relief under Section 80-IA should be deducted from profits and gains of business before computing relief under Section 80HHC.

Detailed Analysis:

Issue 1: Interpretation of Section 80-IA(9)
- Statutory Language and Legislative Intent: The core issue revolves around the interpretation of Section 80-IA(9) of the Income-tax Act, 1961. The section states that profits and gains claimed under Section 80-IA should not be allowed under any other provisions of Chapter VI-A, and should not exceed the profits and gains of the eligible business. This restriction aims to prevent taxpayers from claiming more than 100% deduction on the same profits and gains from multiple sections of Chapter VI-A.

- Arguments by Assessee: The assessee argued that Section 80HHC is export-based and independent, thus should not be affected by Section 80-IA(9). They cited the CBDT Circular No. 772, which aims to prevent repeated deductions exceeding eligible profits, and contended that Section 80HHC should be computed independently as it is a complete code by itself. They also argued for harmonization between Sections 80-IA and 80HHC, suggesting that both sections should be given effect without curtailing each other.

- Arguments by Revenue: The Revenue argued that the language of Section 80-IA(9) is clear and unambiguous, and its restrictions must be applied to prevent double deduction. They cited the Supreme Court decision in IPCA Laboratory Ltd. v. Deputy CIT, emphasizing that benefits not available under the clear wording of a section cannot be conferred by misinterpreting it. The Revenue also referenced the decision in Escorts Ltd. v. Union of India, which held that no legislature intends a double deduction for the same business outgoing.

Issue 2: Deduction from Profits and Gains Before Computing Relief under Section 80HHC
- Tribunal's Decision: The Tribunal examined various precedents and legal theories, concluding that the restriction in Section 80-IA(9) applies to all deductions under Chapter VI-A, including Section 80HHC. They emphasized that the statute's language is plain and unambiguous, and the legislative intent is to prevent double deductions. The Tribunal cited the Supreme Court's principle that when the language of a statute is clear, it should be interpreted literally without adding or ignoring words.

- Precedents and Legal Principles: The Tribunal referred to several decisions, including the Supreme Court's ruling in Britannia Industries Ltd. v. CIT, which upheld restrictive clauses in different sections. They also noted the principle of harmonious construction, which requires avoiding conflicts between statutory provisions and giving effect to all sections if possible. However, they concluded that the specific restriction in Section 80-IA(9) must prevail over the general provisions of Section 80HHC.

- Final Judgment: The Tribunal held that relief under Section 80-IA should be deducted from the profits and gains of the business before computing relief under Section 80HHC. They found no ambiguity in the statutory language and emphasized that the restriction aims to prevent unintended benefits and double deductions. The appeals of the Revenue were allowed, and it was decided that the restrictive clause in Section 80-IA(9) must be applied when computing deductions under Section 80HHC.

Conclusion:
The Tribunal concluded that the relief under Section 80-IA must be deducted from the profits and gains of the business before computing relief under Section 80HHC, upholding the statutory restriction to prevent double deductions. The appeals of the Revenue were allowed, and the principles laid down in this case should be considered in future similar cases.