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2023 (2) TMI 640 - AT - Income TaxDeduction u/s 80HHC - reducing the amount eligible for deduction u/s.80IB from profits gains of business while computing deduction u/s.80HHC - HELD THAT - Deduction claimed u/s.80IA as well as the provisions of section 80HHC of the Act does not exceed the profits and gains of the undertaking i.e., profit declared under the head profits and gains of business or profession . In the present case before us, the assessee claim u/s.80IB of the Act was Rs.1,34,38,583/- and the claim of deduction u/s.80HHC of the Act was Rs.62,01,535/- as against total profit and gains declared from business or profession at Rs.2,48,98,022/-. According to us, the issue is squarely covered by the decision of SCM Creations 2008 (3) TMI 223 - MADRAS HIGH COURT and case of Associated Capsules (P) Ltd. 2011 (1) TMI 787 - BOMBAY HIGH COURT Respectfully following the same, we allow this issue of assessee s appeals and direct the AO to recompute the deduction accordingly. Deduction of DEPB u/s.80IB of the Act - We direct the AO to allow the claim of deduction as the amendment brought in by the legislature in the provisions of section 80HHC(3) of the Act by introducing 3rd 4th proviso is quashed and recompute the deduction accordingly. Hence, this appeal is remitted back to the file of the AO for recomputation of deduction. Therefore, both the appeals of the assessee are allowed in term of the above.
Issues Involved:
1. Deduction under Section 80IB and its impact on deduction under Section 80HHC. 2. Disallowance of the write-off of advance paid for the purchase of goods. 3. Computation of total turnover for the purpose of deduction under Section 80HHC. 4. Deduction of DEPB under Section 80IB. Detailed Analysis: 1. Deduction under Section 80IB and its impact on deduction under Section 80HHC: The primary issue in both appeals was the reduction of the amount eligible for deduction under Section 80IB from the "profits and gains of business" while computing the deduction under Section 80HHC. The assessee claimed deduction under Section 80IB amounting to Rs. 1,34,38,583 and under Section 80HHC amounting to Rs. 62,01,535. The Assessing Officer (AO) disallowed the deduction under Section 80HHC, recomputing it at Rs. 21,90,048. The CIT(A) upheld the AO's decision, following the Special Bench of ITAT in Rogini Garments. However, the Tribunal referred to the decisions of the Madras High Court in SCM Creations and the Bombay High Court in Associated Capsules (P) Ltd., which clarified that Section 80IA(9) restricts the allowance of combined deductions under Sections 80IA and 80HHC to not exceed the profits and gains of the undertaking. The Tribunal directed the AO to recompute the deduction accordingly, allowing the assessee's appeal. 2. Disallowance of the write-off of advance paid for the purchase of goods: This issue was raised but not specifically addressed in the detailed judgment provided. It implies that the Tribunal's focus was primarily on the deduction issues under Sections 80IB and 80HHC. 3. Computation of total turnover for the purpose of deduction under Section 80HHC: The assessee contended that the CIT(A) erred in not considering the grounds concerning the computation of total turnover for the deduction under Section 80HHC. The Tribunal's decision to allow the appeal and direct the AO to recompute the deduction implicitly addressed this issue, ensuring that the total turnover is computed correctly as per the relevant judicial precedents. 4. Deduction of DEPB under Section 80IB: For the assessment year 2004-05, the issue of DEPB deduction under Section 80IB arose. The Tribunal referred to the Supreme Court's judgment in CIT vs. M/s. Avani Exports, which quashed the amendment to Section 80HHC(3) that introduced distinctions based on turnover. The Tribunal directed the AO to recompute the deduction, removing the distinction between exporters with turnover below and above Rs. 10 crore, thus allowing the assessee's appeal on this ground. Conclusion: The Tribunal allowed both appeals, directing the AO to recompute the deductions under Sections 80IB and 80HHC in line with the judicial precedents cited, and to remove the turnover distinction for the DEPB deduction as per the Supreme Court's ruling. The judgment emphasized the correct interpretation of Section 80IA(9) and its impact on other deductions under Chapter VI-A, ensuring the total deductions do not exceed the profits and gains of the business.
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