2016 (8) TMI 512 - HC - Income Tax

Entitlement to deduction under Section 80IA - Held that - Taking into account the above referred decision of this court in the case of Commissioner of Income-Tax v. Atul Intermediates (2014 (4) TMI 676 - GUJARAT HIGH COURT ) and the decision of the Hon ble Supreme Court in the case of Assistant Commissioner of Income-Tax v. Micro Labs Ltd. (2015 (12) TMI 708 - SUPREME COURT ), we are of the view that the assessee is entitled to deduction under Section 80IA of the Income Tax Act. ITAT was right in law and on facts in confirming the order passed by the CIT (A) directing the Assessing Officer to allow the claim under Section 80IA without reducing deduction under Section 80HHC of the Income-tax Act - Decided in favour of assessee

Summary

Issues Involved:
1. Calculation of deduction under Section 80HHC without excluding the profit of new unit under Section 80IA of the Income Tax Act.
2. Exclusion of excise duty at the time of valuing closing stock at the end of the accounting period.
3. Allowance of claim under Section 80IA without reducing deduction under Section 80HHC of the Income-tax Act.

Detailed Analysis:

Issue 1: Calculation of Deduction under Section 80HHC without Excluding the Profit of New Unit under Section 80IA
The primary issue was whether the Income Tax Appellate Tribunal (ITAT) was correct in confirming the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which held that the deduction under Section 80HHC should be calculated without excluding the profit of the new unit under Section 80IA. The Court referenced the decision of the Supreme Court in Assistant Commissioner of Income-Tax v. Micro Labs Ltd., where it was discussed whether deductions under Sections 80IA, 80IB, and 80HHC could be claimed on the same profits. The matter was referred to a larger Bench due to differing opinions. The Court decided in favor of the assessee, subject to the larger Bench's decision.

Issue 2: Exclusion of Excise Duty at the Time of Valuing Closing Stock
In Tax Appeal No.170/2008, the Court also addressed whether the ITAT was correct in excluding excise duty while valuing closing stock at the end of the accounting period. The Court upheld the ITAT's decision, confirming that excise duty should not be included in the valuation of closing stock.

Issue 3: Allowance of Claim under Section 80IA without Reducing Deduction under Section 80HHC
In Tax Appeal No.594/2008, the Court examined whether the ITAT was right in confirming the CIT(A)'s order that directed the Assessing Officer to allow the claim under Section 80IA without reducing the deduction under Section 80HHC. The Court referred to the Supreme Court's decision in Micro Labs Ltd. and the Gujarat High Court's decisions in Commissioner of Income-Tax v. Amod Stamping and Commissioner of Income-Tax v. Atul Intermediates. The Court concluded that the assessee is entitled to the deduction under Section 80IA and upheld the ITAT's decision.

Conclusion:
The Court, after considering the decisions of higher judicial authorities and the arguments presented, ruled in favor of the assessee on all issues. The appeals were disposed of, affirming that deductions under Section 80HHC should be calculated without excluding profits under Section 80IA, excise duty should be excluded from the closing stock valuation, and claims under Section 80IA should be allowed without reducing deductions under Section 80HHC. The judgment was delivered in favor of the assessee, aligning with the precedent set by the Supreme Court and the Gujarat High Court.