2011 (5) TMI 837 - AT - Income Tax

Whether deduction under section 801B and 80HHC were to be calculated independently on the eligible profits of the appellant and instead calculated deduction under section 80HHC on the residual profits after reducing therefrom amount of deduction under section 801B Held that - in the case of Associated Capsules Pvt. Ltd. (2011 - TMI - 207058 - BOMBAY HIGH COURT - Income Tax) held that S. 80-IA (9) cannot be interpreted to mean that s. 80-IA deduction has to be reduced for computing s. 80HHC deduction - The reasonable construction of s. 80IA (9) is that where deduction is allowed u/s 80IA (1) then the deduction computed under other provisions under heading C of Chapter VIA has to be restricted to the profits of the business that remains after excluding the profits allowed as deductions u/s 80IA so that the total deduction allowed under the heading C of Chapter VIA does not exceed the profits of business. - Assessing Officer is directed to compute the deduction in line with the judgment of Hon ble Jurisdictional High Court cited assessee s appeal is allowed

Summary

Issues:
Calculation of deductions under sections 80IB and 80HHC independently.

Analysis:
The appeal was against the Commissioner (Appeals) order dated 21st January 2010, for the assessment year 2000-01. The main issue was the calculation of deductions under sections 80IB and 80HHC independently. The Tribunal referred to its earlier orders and directed the Assessing Officer to compute these deductions separately to ensure that the total deduction does not exceed the profits of the undertaking. However, the Assessing Officer did not follow these directions, leading to the appeal.

The Commissioner (Appeals) observed that deductions under sections 80IB and 80HHC are to be calculated independently on the eligible profits of the undertaking. The deduction under section 80IB should be allowed first, and then the deduction under section 80HHC should be allowed on the remaining profits. The Commissioner noted that the Tribunal had clearly held that the deduction under section 80HHC should be allowed on the remaining profits after deducting the amount allowed under section 80IB. Therefore, the Commissioner confirmed that there was no mistake in the calculation of deductions by the Assessing Officer, dismissing the appellant's claim against the order of the Tribunal.

The Hon'ble Jurisdictional High Court in a related case held that section 80IA(9) does not mandate reducing the deduction under section 80IA for computing the deduction under section 80HHC. The Court clarified that the restriction in section 80IA(9) relates to the allowance of deduction and not the computation of deduction. It emphasized that the deduction computed under different provisions should be restricted to the profits of the business remaining after excluding the profits allowed as deductions under section 80IA. The Assessing Officer was directed to compute the deduction in line with this judgment.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the importance of calculating deductions under sections 80IB and 80HHC independently and ensuring compliance with the relevant legal provisions and judicial interpretations.

Order pronounced in the open Court on 27.5.2011.