2017 (6) TMI 21 - HC - Income Tax

Computation of deduction u/s 80HHC - whether relief u/s 80IB of the Act is to be deducted from profits and gains of business before computing relief u/s 80HHC ? - Held that - The parties will be governed by the said decision subject to decision of Supreme Court in the case of ASST. COMMR. OF I.T BANGALORE Versus M/s MICRO LABS LTD. 2015 (12) TMI 708 - SUPREME COURT stating that the the two provisions are required to be read harmoniously, for Section 80-IA(9) should not be treated as a redundant provision as it was introduced for the purpose of achieving a clear objective. Consequently, it has held that the deduction under Section 80HHC cannot be computed without reference to the bar under Section 80IA(9). It is well established in law that the language of the statute must be read as it is, and the statute must not be read by adding or substituting the words unless it is absolutely necessary to do so. Section 80-IA(9) does not affect the computability of deduction under various provisions under heading C of Chapter VI-A, but it affects the allowability of deductions computed under various provisions under heading C of Chapter VI-A, so that the aggregate deduction under section 80-IA and other provisions under heading C of Chapter VI-A do not exceed 100 per cent - Central Board of Direct Taxes Circular No. 772 dated December 23, 1998 wherein it is stated that section 80-IA(9) has been introduced with a view to prevent the taxpayers from claiming repeated deductions in respect of the same amount of eligible income and that too in excess of the eligible profits - Decided in favor of the assessee. See Associated Capsules Private Limited v. Deputy Commissioner of Income Tax and another 2011 (1) TMI 787 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenging Tribunal's judgment on relief u/s 80IB and 80HHC deduction calculation.

Analysis:
The High Court admitted multiple appeals challenging the Tribunal's decision on the deduction calculation under sections 80IB and 80HHC of the Income Tax Act. The substantial question of law framed in each appeal questioned the correctness of deducting relief u/s 80IB from profits before computing relief u/s 80HHC. The appellant relied on a previous court decision to support their argument.

The Court referred to a decision of the Gujarat High Court regarding the interpretation of statutory provisions related to deductions. The Court emphasized that the legislative intent behind sub-section (9) of section 80IA was to have universal application to all deductions under the relevant chapter. It clarified that the disentitlement provision should be applied at the stage of considering the deduction under section 80HHC, affecting the computation of eligible profits. The Court disagreed with the interpretation that the provision operates only at the stage of allowing the deduction.

Based on the observations and legal principles discussed, the Court disposed of the appeals in favor of the revenue and against the assessee. However, the Assessing Officer was directed to implement the order after the decision of the Larger Bench of the Supreme Court in a specific case. The Court also mentioned a previous case where a similar view was taken in favor of the department.

The respondent contended that previous conflicting views existed, but the Court upheld the consistency of following earlier decisions confirmed by the Supreme Court. Consequently, the Court ruled in favor of the assessee, subject to the decision of the Supreme Court in the mentioned case. The parties were instructed to abide by the Supreme Court's decision, pending the applicability of the provision for the relevant assessment year.

In conclusion, the Court allowed the appeals, directing the parties to follow the decision of the Supreme Court in the specified case. The judgment was to be included in each relevant file for reference and compliance.