2023 (6) TMI 726 - AT - Income Tax

Deduction u/s 80HHC - whether to be computed on the residual profits remaining after allowing deduction u/s 80IA of the Act in terms of section 80IA(9) ? - HELD THAT - Since assessee has fairly conceded that the reference to the Larger Bench of the Supreme Court on this issue in the case of Micro Lab 2015 (12) TMI 708 - SUPREME COURT has been dismissed and Hon ble jurisdictional High Court has decided the issue against the assessee in the case of Atul Intermediates 2014 (4) TMI 676 - GUJARAT HIGH COURT the grounds raised by the assessee merits no consideration and are dismissed. Appeal of the assessee, is therefore, dismissed. Allowance of claim of deduction u/s 80HHC - Misc. income such as sale of scrap, stores etc; and Income in the nature of contract compensation - HELD THAT - With regard to allowance of deduction u/s 80HHC on the sale of scrap and parts, Revenue cannot be in any grievance since as per the AO itself, it is allowable to the assessee. Contract compensation received, considering the uncontroverted facts relating to the nature of the receipt, we agree with theCIT(A) that it has arisen from the business of the assessee, and therefore, the CIT(A) has rightly held that the assessee is entitled to claim deduction u/s 80HHC. Grounds raised by the Revenue are accordingly dismissed.

Summary

Issues:
The judgment involves cross-appeals by the Revenue and the assessee against a common order of the ld.CIT(A)-VIII, Ahmedabad dated 29-12-2011 under section 250(6) of the Income Tax Act, 1961, pertaining to the Asst. Year 1999-2000.

Assessee's Appeal - Deduction under section 80HHC:
The main issue in the assessee's appeal was whether the deduction under section 80HHC of the Act should be allowed on the net profits remaining after the claim of deduction under section 80IA of the Act. The senior counsel for the assessee conceded that the issue had been decided against the assessee by the jurisdictional High Court and the reference to the Larger Bench of the Supreme Court had been dismissed. Consequently, the appeal of the assessee was dismissed.

Revenue's Appeal - Allowance of Deduction under section 80HHC:
The Revenue's appeal focused on the allowance of claim of deduction under section 80HHC on miscellaneous incomes such as sale of scrap, stores, and contract compensation. The ld.CIT(A) allowed the claim of deduction under section 80HHC on these incomes, as they were found to be arising from the business activity of the appellant company. The AO also treated the income from sale of scrap as includible for the purpose of computing deduction under section 80HHC. Therefore, the grounds raised by the Revenue were dismissed, and the appeals of both the Revenue and the assessee were ultimately dismissed.

Conclusion:
The judgment addressed the issues of deduction under sections 80HHC and 80IA of the Income Tax Act, 1961, in the context of cross-appeals by the Revenue and the assessee. The decision highlighted the importance of considering income arising from business activities for the purpose of claiming deductions under the relevant sections. Ultimately, the appeals were dismissed by the ITAT Ahmedabad on 14th June 2023.