2017 (5) TMI 1641 - HC - Income Tax

Computation of deduction u/s 80IB - whether Section 80HHC and 80IB are independent of each other and therefore deductions under both the sections on the gross total income is to be computed independently and not on the reduced balance after taking into account the other deduction? - Held that - Appellant has relied upon the decision of Commissioner of Income Tax vs. Mandideep Eng. & PKG. India (P) Ltd. 2006 (4) TMI 75 - SUPREME COURT wherein held as - Section 80HH and 80-I are independent of each other and therefore a new industrial unit can claim deduction under both the sections on the gross total income independently. The respondent has pointed out that the same matter is referred to larger bench. In our considered opinion, the issue is answered in favour of the assessee as on today on the basis of decision of the Supreme Court which has upheld the decision of this court.

Summary

Issues:
1. Appellant challenging tribunal's judgment.
2. Claiming deduction under sections 80IB and 80HHC.
3. Disallowance of deduction by Assessing Officer.
4. Interpretation of Sections 80HHC and 80IB.
5. Reference to larger bench.

Analysis:

1. The appellant appealed against the tribunal's decision partially allowing the appeal of both the assessee and the department. The case involved the appellant, a company earning income from exporting readymade garments, filing for deductions under sections 80IB and 80HHC of the Income Tax Act. Reassessment proceedings were initiated, and the appellant's case was reopened under sections 147/148 of the Act.

2. The appellant simultaneously claimed deductions under sections 80HHC and 80IB on eligible business profits. The Assessing Officer disallowed this claim and calculated the deduction under section 80HHC after reducing the amount allowed under section 80IB. Additionally, the appellant had interest income from FDRs linked to business activities, which the Assessing Officer excluded from the computation of deduction under section 80IB due to the lack of a direct nexus with the industrial undertaking.

3. The court framed a substantial question of law regarding the independent computation of deductions under sections 80HHC and 80IB on gross total income, without reducing balances from other deductions.

4. The appellant cited a Supreme Court decision emphasizing the independence of sections 80HH and 80-I for claiming deductions on gross total income separately, supporting their argument.

5. The respondent mentioned a pending reference to a larger bench on the same matter.

6. The court, based on the Supreme Court's decision upholding a similar stance, ruled in favor of the appellant, considering the issue resolved in their favor unless referred to a larger bench.

7. Consequently, the court allowed the appeal in favor of the assessee, settling the matter based on existing legal precedents and interpretations of the Income Tax Act.