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TMI Blog2011 (1) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished 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 - Held that: 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 X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80HHC has to be computed on the profits of the business as reduced by the profits allowed as deduction under section 80-IA of the Act. 6. On appeal filed by the assessee, the Commissioner of Income-tax (Appeals) by his order dated May 10, 2005 allowed the appeal, by holding that section 80-IA(9) does not authorize the Assessing Officer to reduce the amount of profits of business allowed as deduction under section 80-IA from the total profits of business while computing deduction under section 80HHC. According to the Commissioner of Income-tax (Appeals), where the assessee is entitled to deduction under section 80-IA and section 80HHC, then the deduction under both sections have to be computed independently and thereafter, the deduction computed under section80-IA has to be allowed in full and the deduction computed under section 80HHC has to be restricted to the profits of the business reduced by the profits allowed under section 80-IA, so that the deductions under both sections (80-IA and 80HHC in the present case) do not exceed the profits of the business of the undertaking. 7. Challenging the order of the Commissioner of Income-tax (Appeals), the Revenue filed an appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference can be drawn that section 80-IA(9) contemplates that the amount of profits claimed and allowed under section 80-IA has to be deducted from the profits of business while computing deduction under section 80HHC. 9. It is further contended on behalf of the assessees that the expression "profits of the business" for the purpose of deduction under section 80HHC is defined in clause (baa) of section 80HHC. If the Legislature intended that the deduction allowed under section 80-IA has to be excluded from the profits of business while computing the deduction under section 80HHC, then the Legislature would have used the non obstante provision as found in sections 80HHB(5) and 80HHBA(4). It is submitted that unless the restriction is placed by way of non obstante provision, it would not be possible for the Revenue to tinker with the method/manner of computation of deduction allowable under section 80HHC of the Act. 10. Counsel for the assessees further submitted that the Special Bench of the Tribunal in the case of Hindustan Mint and Agro Products P. Ltd. [2009] 315 ITR (AT) 401 (Delhi) as also in the case of Asst. CIT v. Rogini Garments [2007] 294 ITR (AT) 15 (Chennai) ; 108 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above method of computation of deduction provided under section 80HHC, but it merely seeks to restrict the deduction computed under section 80HHC to the extent of profits of business reduced by the amount of profits allowed under section 80-IA so that the aggregate deduction under heading C of Chapter VI-A does not exceed the profits of the business. 14. It is further contended that the two restrictions contained in section 80-IA(9) viz., the deduction allowed under section 80-IA shall not be allowed under any other provisions under the heading C of Chapter VI-A and that in no case the deduction shall exceed the profits and gains of such eligible business of undertaking or enterprise have to be read together and on reading so, it becomes clear that the restrictions in section 80-IA(9) are with reference to allowability and not computability of deduction under other provisions in heading C of Chapter VI-A of the Act. 15. Referring to the Memorandum explaining the reasons for inserting section 80-IA(9) by the Finance (No. 2) Bill, 1998 and the Board's Circular No.772 dated December 23, 1998 [1999] 235 ITR (St.) 35, it is contended that the object of inserting section 80-IA(9) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reducing the amount of profits allowed as deduction under section 80-IA while computing the deduction under section 80HHC of the Act. 18. Counsel for the Revenue further submitted that section 80-IA(9) was introduced to avoid repeated deductions in respect of the same profits claimed and allowed under section 80-IA, which may be eligible for deduction under any other section covered under Part C of Chapter VI-A. Section 80-IA(9) is intended to check the misuse of double deduction on the same profits eligible for deduction under Part C of Chapter VI-A. Therefore, to give effect to section 80-IA(9) of the Act, it is necessary to exclude the deduction to the extent of profits claimed and allowed under section 80-IA from the profits available for deduction under section 80HHC of the Act. 19. Relying on the decision of the apex court in the case of CIT v. K. Ravindranathan Nair reported in [2007] 295 ITR 228, it is submitted by the counsel for the Revenue that section 80HHC is not a self-contained code and hence open to the restrictions and accordingly by inserting section 80-IA(9), the Legislature has imposed restrictions on the computation of deduction allowable under section 80HHC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 80C to 80GGC) deals with deductions in respect of certain payments, Part C (sections 80H to 80TT) provides for deductions in respect of certain incomes and Part D (sections 80U to 80VV) deals with other deductions. 24. As per section 80A(2) in Part A of Chapter VI-A, the aggregate amount of deduction allowed under Chapter VI-A shall not exceed the gross total income. Thus, the overall deduction allowed under Chapter VI-A cannot exceed the gross total income. However, on noticing that several undertakings were availing of deductions under Chapter VI-A within the overall limit of gross total income but exceeding the profits of the undertaking, the Legislature introduced sub-section (9A) in section 80-IA by the Finance (No. 2) Act, 1998, with effect from April 1, 1999. By the Finance Act, 1999, section 80-IA(9A) has been renumbered as section 80-IA(9). 25. The object of amending section 80-IA by the Finance (No. 2) Act, 1998, as is evident from the memorandum explaining the provisions in the Finance (No. 2) Bill, 1998 ([1998] 231 ITR (St.) 252) is that it was noticed that certain assessees were claiming more than 100 per cent. deduction on the profits and gains of the same unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (30 per cent. of Rs. 100) and in view of section 80-IA(9), the deduction under section 80HHC has to be computed not on the profits of the business of Rs. 100 but on Rs. 70 being the profits of the business reduced by the amount of profits allowed under section 80-IA(1). According to the assessee, deduction under section 80HHC has to be computed on the profits of the business of Rs. 100 and not on Rs. 70 as contended by the Revenue, because, according to the assessee, section 80-IA(9) does not affect the computation of deduction under section 80HHC but affects the allowance of deduction computed under section 80HHC, so that the aggregate deduction does not exceed the profits of the business. 28. The question, therefore, to be considered is, whether section 80-IA(9) seeks to disturb the mechanism of computing the deduction provided under section 80HHC(3) of the Act or section 80-IA(9) comes in to operation only at the stage of allowing the deduction computed under section 80HHC, so that the combined deduction under sections 80-IA and 80HHC does not exceed the total profits of the business of the undertaking. 29. Section 80-IA(9) consists of three parts : First part where any amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly or impliedly provide that the amount of profits allowed as deduction under section 80-IA(1) should be reduced from the profits of the business for the purpose of computing deduction under section 80HHC or computing deduction under any other provisions in heading C of Chapter VI-A and, therefore, the contention of the Revenue to that effect cannot be accepted. 33. In the case of a trader-exporter, section 80HHC(3)(b) provides that the deduction under section 80HHC(1) has to be computed on the export turnover reduced by the direct costs and indirect costs attributable to the goods or merchandise exported by the assessee. The argument of the Revenue that under section 80-IA(9) the amount of profits allowed under section 80-IA has to be deducted from the profits of business while computing deduction under section 80HHC is accepted, then the section becomes unworkable, because in the case of a trader-exporter, the deduction under section 80HHC is computed on the exporter turnover and not on the profits of the business. The words "export turnover" and "profits of business" are separately defined under section 80HHC. Therefore, in the case of a trader-exporter, section 80-IA(9) can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under any other provisions under heading C of Chapter VI-A. 36. 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. Since section 80-IA(9) uses the words "shall not be allowed", it is not permissible to read section 80-IA(9) by substituting the above words with the words "shall not qualify" or by adding the words "shall not be allowed in computing" the deduction under any other provisions under heading C of Chapter VI-A of the Act. When the plain and simple meaning of section 80-IA(9) can be ascertained from the words used in the section, it would not be proper to construe the section by substituting or adding the words as suggested by the Revenue. 37. In these circumstances, in our opinion, the reasonable construction of section 80-IA(9) would be that where deduction is allowed under section 80-IA(1), then the deduction computed under other provisions under heading C of Chapter VI-A has to be restricted to the profits of the business that remains after excluding the profits allowed as deductions under section 80-IA, so that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment. Moreover, without rejecting the argument of the Revenue that section 80-IA(9) applies at the stage of allowing the deduction and not at the stage of computing the deduction, the Delhi High Court could not have held that section 80-IA(9) seeks to disturb the method of computing the deduction provided under other provisions under heading C of Chapter VI-A of the Act. In these circumstances, we find it difficult to concur with the views expressed by the Delhi High Court in the case of Great Eastern Exports [2011] 332 ITR 14. For the same reason, we find it difficult to subscribe to the views expressed by the Kerala High Court in the case of Olam Exports [2011] 332 ITR 40. 41. In the result, we hold that 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. of the profits of the business of the assessee. Our above view is also supported by the Central Board of Direct T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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