2015 (12) TMI 708 - SC - Income Tax

Split Decision by the Division bench of the Apex Court - Deduction under the provisions of Section 80-IA or/and 80-IB - whether the Assessee is also entitled to the deduction in respect of the profits and gains under the provisions of Section 80HHC of the Act or whether the Assessee is entitled to deductions under the aforestated all the three Sections in respect of the same profits Hon ble ANIL R. DAVE, J. held that - the High Court was in error while permitting the Assessee to get benefit in respect of Section 80HHC as it did not take into account the fact that the profits in respect of which deduction was allowed under Section 80HHC had also been previously allowed under Section 80-IB. In my opinion, this is not permissible under Section 80-IB(13) read with Section 80-IA(9) because by virtue of Section 80-IB(13) provisions of Section 80-IA(9) are also applicable to Section 80-IB. - Decided in favor of revenue. Hon ble Dipak Misra, J. held that - the interpretation placed by the High Court of Bombay is correct and, accordingly, I dismiss the appeals preferred by the revenue and allow the appeals preferred by the assessees.

Issues Involved:
1. Entitlement to deductions under Sections 80HHC, 80-IA, and 80-IB of the Income Tax Act, 1961.
2. Interpretation of Section 80-IA(9) in relation to deductions under other provisions of Chapter VIA.
3. Conflicting judgments from different High Courts on the issue.

Detailed Analysis:

1. Entitlement to Deductions Under Sections 80HHC, 80-IA, and 80-IB:
The primary issue in these appeals is whether the Assessee is entitled to claim deductions under Sections 80HHC and 80-IB of the Income Tax Act, 1961, for the same profits. The Tribunal had concluded that the Assessee was not entitled to these deductions simultaneously, while the High Court of Karnataka decided in favor of the Assessee, allowing deductions under both sections for the same profits.

2. Interpretation of Section 80-IA(9):
Section 80-IA(9) stipulates that if a deduction is claimed and allowed under Section 80-IA, then the Assessee cannot claim deductions under any other provisions of Chapter VIA to the extent of such profits and gains. The Revenue argued that the legislative intent behind Section 80-IA(9) is to prevent double deductions for the same profits, ensuring that the total deductions do not exceed the profits and gains of the business.

The High Court of Karnataka allowed the Assessee to claim deductions under both Sections 80HHC and 80-IB, which the Revenue contested, stating that this interpretation contradicts the clear provisions of Section 80-IA(9). The Supreme Court, upon examining the statutory language and the legislative intent, concluded that the Assessee cannot claim deductions under both sections for the same profits. The Court emphasized that Section 80-IA(9) is unambiguous and clearly prevents double deductions.

3. Conflicting Judgments from Different High Courts:
Different High Courts had taken varied stances on this issue. The High Court of Bombay had ruled in favor of the Assessee, while the High Court of Delhi had taken a contrary view. The Supreme Court noted these conflicting judgments and analyzed the relevant statutory provisions and judicial interpretations.

The High Court of Bombay in Associated Capsules Private Limited v. Deputy Commissioner of Income Tax held that Section 80-IA(9) does not affect the computation of deductions under other provisions but only restricts the allowance of deductions to ensure that the aggregate deductions do not exceed 100% of the profits. Conversely, the High Court of Delhi in Great Eastern Exports v. Commissioner of Income Tax interpreted Section 80-IA(9) to mean that deductions under other provisions must be reduced by the amount of deduction allowed under Section 80-IA.

The Supreme Court, aligning with the interpretation of the High Court of Delhi, concluded that Section 80-IA(9) clearly mandates that once a deduction is allowed under Section 80-IA, the same profits cannot be deducted again under Section 80HHC or any other provision under Chapter VIA.

Separate Judgment by Dipak Misra, J.:
Justice Dipak Misra, in a separate opinion, disagreed with the majority view. He emphasized a harmonious construction of the statutory provisions, arguing that Section 80-IA(9) should not affect the computation of deductions under other provisions but should only ensure that the total deductions do not exceed the profits of the business. He highlighted that the legislative intent was to prevent the aggregate deductions from exceeding the profits, not to alter the method of computing deductions under different sections.

Justice Misra cited the High Court of Bombay's judgment in Associated Capsules Private Limited, which distinguished between the computation and allowance of deductions, asserting that Section 80-IA(9) impacts the allowance, not the computation of deductions.

Conclusion:
The Supreme Court majority held that the Assessee cannot claim deductions under both Sections 80HHC and 80-IB for the same profits, aligning with the interpretation that Section 80-IA(9) prevents such double deductions. The appeals were decided in favor of the Revenue, overturning the High Court of Karnataka's decision. Justice Misra's dissenting opinion advocated for a more lenient interpretation, emphasizing the need to avoid rendering any part of the statute redundant. The appeals were disposed of with no order as to costs.

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