2016 (9) TMI 1191 - HC - Income Tax

Deduction under Section 80HHC to be worked out without giving effect to the provision of Section 80IA(9) - Held that - Admitted facts are that on identical issue, this Court has in case of Commissioner of Income Tax vs. Atul Intermediates 2014 (4) TMI 676 - GUJARAT HIGH COURT held that nothing contained in Section 80HHC suggests that the deduction provided therein was immune from any outside influence that the provision was impregnable by any other statute or enactment. Accepting any such theory would lead to incongruous results. It was held that the provision of sub section (9) of Section 80IA would have to be applied while considering the assessee s claim for deduction under Section 80HHC of the Act. Thus, the issue was decided against the assessee. Ordinarily, therefore, we would reject such a question without any further discussion. Assessee, however, pointed out that different High Courts have taken different views on the topic. The Supreme Court has granted SLP and is in seizing of the controversy. Learned Judges of the Bench, who heard the appeals, were divided in their opinion each passing reasoned order. In view of this disagreement, the issue is now referred to the larger bench. These orders are reported in case of Assistant Commissioner of Income Tax vs. Micro Labs Ltd. reported in 2015 (12) TMI 708 - SUPREME COURT . Learned counsel for the assessee, therefore, submitted that these questions may also be kept pending or, at any rate, be allowed to be re-agitated. If by the time this appeal is taken up for hearing, the decision of the Supreme Court is available. In view of the binding judgement of this Court which squarely covers the issue, we are unable to accept either of the two suggestions. Today, insofar as this Court is concerned, the question is governed by the decision in case of Atul Intermediates. In absence of any extraordinary reasons, we are duty bound to follow the judgement. Such question is, therefore, rejected. The last surviving suggestion of counsel for the assessee, however, needs to be accepted. He submitted that the certificate in terms of Section 261 of the Income Tax Act may be granted with respect to this question. Section 261 of the Act which pertains to appeal to Supreme Court provides inter alia that an appeal to High Court shall lie from any judgement of the High Court, in any case which the High Court certifies to be fit one for appeal to the Supreme Court. In the present case, when we notice that different High Courts have taken different views, the Supreme Court has granted SLP, the appeal is pending hearing at the hands of larger bench on account of difference of opinion between the two learned Judges of the Bench, such a fitness certificate is required to be and is hereby granted.

Summary

Issues:
1. Reallocation of R&D expenditure for determining profits of a new industrial undertaking under section 80IB of the Income Tax Act.
2. Reduction of brought forward depreciation while computing profits for the purpose of deduction under section 80HHC of the Act.
3. Allowance of deduction under section 115JB for brought forward business loss or unabsorbed depreciation.
4. Calculation of deduction under section 80HHC without giving effect to provisions of section 80IA(9) of the Act.
5. Addition of provision for deferred tax to book profits for calculation under section 115JB of the Act.

Analysis:
1. The primary issue in this case was whether the Income Tax Appellate Tribunal was correct in directing the Assessing Officer to reallocate R&D expenditure for determining profits of a new industrial undertaking under section 80IB of the Income Tax Act. The High Court admitted the tax appeal for consideration of this question. The case was to be heard with connected appeals.
2. Another issue raised was regarding the reduction of brought forward depreciation of a company while computing profits for the purpose of deduction under section 80HHC of the Act. The counsel for the assessee pointed out that similar issues had been decided against the assessee in a previous judgment by the Court, and hence, this question was not entertained further.
3. The question of allowing deduction under section 115JB for brought forward business loss or unabsorbed depreciation was also raised. The Court referred to a previous judgment where it was held that the assessee had made a wrong claim, and the appeal was dismissed in favor of the department.
4. The issue of calculating deduction under section 80HHC without giving effect to the provisions of section 80IA(9) of the Act was the only surviving question. The Court noted a previous judgment where it was held that the provisions of section 80HHC were not immune from outside influence and had to be considered along with section 80IA(9). The Court rejected the question based on the binding judgment.
5. Lastly, the addition of the provision for deferred tax to book profits for calculation under section 115JB of the Act was discussed. The counsel for the assessee requested a fitness certificate for an appeal to the Supreme Court due to differing views among different High Courts and a pending decision by the Supreme Court on the matter. The Court granted the fitness certificate for appeal to the Supreme Court.