2014 (9) TMI 98 - HC - Income Tax

Computation of deduction u/s 80I(IA) Gross total income derived from business of Industrial undertaking Deduction u/s 80HHC not made Held that - The assessee is entitled for the deduction u/s 80HHC as well as 80IA relying upon IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income Tax 2004 (3) TMI 9 - SUPREME Court - section 80HHC has been incorporated in the Income Tax Act, 1961, with a view to providing incentive for earning foreign exchange - Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of the section - It the wording of the section is clear, then benefits which are not available cannot be conferred by ignoring or misinterpreting the words in the section - a plain reading of Section 80HHC makes it clear that in arriving at profits earned from export of both self-manufactured goods and trading goods, the profits and losses in both trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction u/s 80HHC(1) - If there is a loss the assessee would not be entitled to deduction - section 80AB has been given an overriding effect over all other sections, in Chapter VI-A. Section 80HHC does not provide that its provisions are to prevail over section 80AB or over any other provision of the Act - both the deductions under Section 80HHC and 80IA can be granted from the total income - the assessee herself has shown the computation, which was allowed by the AO - the assessee has claimed deduction u/s 80IA in the return of the income on the basis of the balance profit remaining after deduction of benefit u/s 80HHC of the Act there is no reason to interfere with the order Decided against Assessee.

Summary

Issues:
1. Computation of deduction under Section 80-I(IA) on gross total income without deducting Section 80HHC.
2. Authority of Assessing Officer to grant correct deduction amount even if not claimed in return.

Analysis:

Issue 1: Computation of deduction under Section 80-I(IA):
The case involved the computation of deduction under Section 80-I(IA) on the gross total income derived from an industrial undertaking without deducting the amount of deduction under Section 80HHC. The appellant claimed deductions under both sections, initially basing the Section 80IA deduction on the balance after claiming Section 80HHC deduction. However, the Assessing Officer later rectified the deduction under Section 80HHC, leading to a reduction in the Section 80IA deduction. The appellant argued that deductions under Chapter VIA are independent, citing relevant case laws like CIT Vs. Lucky Laboratories Ltd. The appellant contended that deductions under Section 80-IA should not be reduced by deductions under other provisions of the chapter. The Tribunal, however, upheld the reduction. The High Court analyzed the provisions of Section 80A, 80B(5), and 80HHC(3) along with relevant case laws to determine the correct computation method. The Court noted that deductions under Section 80IA should not be reduced by deductions under Section 80HHC, and the impugned order was set aside.

Issue 2: Authority of Assessing Officer to grant correct deduction amount:
The second issue revolved around the authority of the Assessing Officer to grant the correct amount of deduction to the assessee even if not claimed in the return. The appellant argued that the computation accepted by the Assessing Officer should be sustained as the deductions were claimed in the return based on the balance profit after Section 80HHC deduction. The Department justified the impugned order, citing the case of J.P. Tobacco products Pvt. Ltd. The High Court examined the case law of IPCA Laboratory Ltd. and relevant sections like 80AB to determine the correct approach. The Court upheld the impugned order, stating that the computation accepted by the Assessing Officer was sustained, and dismissed the appeal in favor of the Department.

In conclusion, the High Court dismissed the appeal, upholding the computation of deductions under Section 80-I(IA) without reducing the deductions under Section 80HHC and confirming the authority of the Assessing Officer to grant deductions based on the return filed by the assessee.