2021 (9) TMI 1514 - HC - Income Tax

Deduction u/s 80HHC - simultaneous deduction under Section 80HHC and 80IB on the same profits - whether deduction u/s 80IA should not be deducted from the profits and gains of business before computing ? - HELD THAT - It is not disputed before us that the above substantial questions of law were considered in the case of Micro Labs Ltd 2015 (12) TMI 708 - SUPREME COURT In the light of the difference of opinion between the Hon'ble Judges, the matter has been directed to be placed before the Hon'ble Chief Justice of India, so that the matter can be referred to a larger Bench. Tax Case Appeal is allowed and the order passed by the Tribunal, as well as the Commissioner of Income Tax (Appeals), Large Taxpayer Unit, Chennai, are set aside and the matter is restored to the file of the Assessing Officer, who shall await the decision of the larger Bench of the Hon'ble Supreme Court, in the reference made in the case of Micro Labs Ltd. (supra) .

Summary

Issues:
1. Interpretation of deduction under Section 80IA vis-a-vis Section 80HHC.
2. Inclusion of deduction under Section 80IB in business profits under Section 80HHC.
3. Entitlement to simultaneous deductions under Section 80HHC and 80IB on the same profits.

Analysis:
1. The appeal concerns the interpretation of the Income Tax Act, 1961, specifically regarding the deduction under Section 80IA and its computation before the deduction under Section 80HHC. The Revenue questions the Tribunal's decision on whether the deduction under Section 80IA should be deducted from the profits and gains of business before computing the deduction under Section 80HHC for the Assessment Year 2004-05.

2. Another substantial question raised is the inclusion of business profits as per Explanation (baa) of Section 80HHC, which involves determining whether the deduction already allowed under Section 80IB should be considered. The Tribunal's decision on this matter is under scrutiny, questioning the correctness of including the deduction under Section 80IB in the business profits under Section 80HHC.

3. The third issue revolves around the simultaneous entitlement to deductions under both Section 80HHC and 80IB on the same profits. The Tribunal's decision to allow such simultaneous deductions is being challenged, particularly in view of Section 80IA(9). The case references a similar matter before the Hon'ble Supreme Court and the Full Bench of the Court, indicating a pending decision on the matter.

4. The High Court acknowledged the unresolved nature of the issues at hand, noting a difference of opinion between judges and pending references to higher benches for clarification. Considering the pending status of the matter before the Supreme Court and the Full Bench of the Court, the High Court decided to allow the appeal. The order of the Tribunal and the Commissioner of Income Tax were set aside, and the case was restored to the Assessing Officer's file to await the decision of the larger Bench of the Supreme Court in the reference case. The substantial questions of law remain open for further consideration, with no costs imposed.