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TMI Blog2015 (1) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction/benefit under Section 80-I on the gross income without excluding/reducing deduction allowed under Section 80-HH? 2. The facts necessary for deciding this appeal under Section 260-A of the Income Tax Act, 1961 are that for the period 01-01-1988 to 31-03-1989, relevant for the assessment year 1989-90, the return of income was filed by the respondent-assessee declaring ₹ 53,93,390/- as income. The assessee manufactured and sold rubber patches for tyre, tubes, uniseals etc. By order dated 13-03-1992 the Assessing Officer inter alia held that deduction under Section 80-I could be allowed on the balance amount of income after it suffers a deduction under Section 80-HH. This view was affirmed by the Commissioner of Income Tax (Appeals) who was of the opinion that both Sections i.e., Sections 80-HH and 80-I were independent provisions and consequently, the assessee was entitled to deduction under Section 80-I on the total amount without it having suffered any deduction under Section 80- HH. The Revenue unsuccessfully appealed to the ITAT and consequently has approached this Court. 3. It is argued on behalf of the Revenue that the ITAT as well as the Commissioner (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I or] section 80J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section applies, effect shall first be given to the provisions of this section. [Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. 80-I. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel [or the business of repairs to ocean-going vessels or other powered craft], to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect [in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel] as if for the words twenty per cent , the words twenty-five per cent had been substituted. [(1A) Notwithstanding anything contained in sub-section (1), in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances and within the period specified in that section : Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words not being any article or thing specified in the list in the Eleventh Schedule had been omitted. Explanation 1. For the purposes of clause (ii) of this subsection, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely : (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machi-nery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2. Where in the case of an industrial undertaking, any machinery or plant or any part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by such company after the 31st day of March, 1983, but before the 1st day of April, 1988; and (iv) it is for the time being approved for the purposes of this subsection by the Central Government.] (5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning [or the company commences work by way of repairs to ocean-going vessels or other powered craft] (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year : Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words seven assessment years , the words nine assessment years had been substituted : [Provided further that in the case of an assessee carrying on the business of repairs to ocean-go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship [or the business of repairs to ocean-going vessels or other powered craft] are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel or the operation of the ship [or the business of repairs to ocean-going vessels or other powered craft] and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship [or the business of repairs to ocean-going vessels or other powered craft] does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-Section 9 of Section 80-HH was amended by Act No.30 of 1981, nevertheless, in relation to assessment year 1985-86, proceeded to hold that the benefits under Section 80-HH and Section 80-I were independent and consequently, there was no question of giving effect to Section 80-HH(9) and thereafter proceeding to bring the balance amount for the purposes of tax or benefit under Section 80-I. 7. The view in J.P. Tobacco (supra) was followed by several other High Courts i.e., Gujarat High Court, Allahabad High Court, Rajasthan High Court, the Punjab and Haryana High Court and even by a Division Bench of this Court [in CIT vs S.A. Engineering Pvt. Ltd. (2006) 285 ITR 423 (Del)]. Ultimately this view was affirmed by the Supreme Court in Joint Commissioner of Income Tax vs. Mandideep Engineering and Packaging Ind. Pvt. Ltd. (2007) 292 ITR (1) SC. The relevant part of the discussion by the Supreme Court is as follows:- 2. The Madhya Pradesh High Court in J.P.Tobacco Products P. Ltd. v. CIT reported in [1998] 229 ITR 123 took the view that both the sections are independent and, therefore, the deductions could be claimed both under sections 80HH and 80I on the gross total income. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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