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TMI Blog2018 (7) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Section 80IA(9A) for assessment years 1997-98 and 1998-99?" 3. This Appeal relates to the Assessment Year 1997-1998. 4. The Appellant Assessee is engaged in the manufacture of industrial gums. It has factories situated at Mumbai, Jodhpur and Ahmedabad. In Ahmedabad, it has four factories, out of which two factories are new factories. The issue is this appeal is restricted to only the claim for deduction in respect of its two new factories at Ahmadabad. It is the two new factories whose claim for deduction under Section 80IA of the Act along with the claim for deduction under Section 80HHC of the Act is the subject of this dispute. 5. For the previous year relevant to the subject Assessment year, the Appellant in its return of income claimed 100% deduction in respect of profits earned by the two new factories derived from its exports under Section 80HHC of the Act. Besides, the Appellant also claimed the benefits of deduction under the Section 80IA of the Act to the extent of 30% of the profits and gains derived from its two new factories at Ahmedabad. The aggregate of deductions claimed was less than its Gross Total Income as defined under Section 80B(5) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the CIT(A). In fact, the impugned order dismisses the appeal by holding as under : "We have thoroughly scrutinised the appellate order of the CIT(A) and we concur with his findings and therefore, there being no merit in this common ground of the assessee, we reject the same". 8. Before considering the rival submission in the context of the two substantial questions of law, it would necessary to reproduce the relevant provisions of law in force during the relevant Assessment Years as under: " Section 80B. In this Chapter - (1) to (4) ........ (5) "gross total income" means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter. Section 80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise 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 of the [profits] derived by the assessee from the export of such goods or merchandise: Provided ........ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 30% exemption available under Section 80IA of the Act and only thereafter the balance i.e. after excluding the quantum of deduction which is allowed to be deducted that deduction under Section 80HHC of the Act can be availed in respect of its profits and gains derived from exports. (b) In the above view, it is submitted on behalf of the appellant assessee that for the period prior to Assessment Year 1999-00, there was no restrictions either in terms of quantum of deduction or even the priority in taking deductions under the various sections specified in Chapter VI A Part 'C' of the Act. Thus, while construing a fiscal legislation it is submitted nothing can be read into it. It is also pointed out that it is an undisputed position that the total exemption claimed under both the sections i.e. 80IA and 80HHC of the Act are less than the appellant's gross total income as defined under Section 80B(5) of the Act. Reliance is also placed upon the decision of the Rajasthan High Court in Commissioner of Income Tax Vs. Rochiram & Sons, 271 ITR 444 and of the Madras High Court in General Optics (Asia) Ltd. Vs. DCIT 315 ITR 400 where on identical fact situation for the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the Legislature to allow double deduction i.e. 200% on the same asset in the context of Section 32 and 35 of the Act. Moreover, the committee further records that "If.......a contrary view is possible on construction of Section 35 of the Act, then the law should be clarified to the extent that no depreciation under Section 32 of the Act shall be allowable in respect of capital expenditure for scientific research qualifying for deduction under Section 35". The decision of the Apex Court was rendered in the context of the 1980 amendment being retrospective or not. It is to be noted that the amendment itself made by the Finance No.2 Act 1980 provided that it shall be retrospective w.e.f. 1st April,1961. The retrospective amendment was held to be valid by the Apex Court as it was in the facts before it merely clarificatory in nature. In our view, the decision of the Apex Court in Escorts Ltd. (supra) would not apply to the facts of the present case, as that case dealt with a double deduction being claimed on the same expenditure i.e. 200% deduction on expenditure. (e) In the present case, we are not dealing with the claim of deduction on expenditure being allowed but d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80B(5) of the Act. Admittedly, in this case, the total deduction claimed is less than the gross total income. In the present facts, Section 80IA was amended w.e.f. 1st April, 1999 by introduction of Sub-Section 9A therein which is in accord with the observations made by the Apex Court in Escorts Ltd. (supra). However, it is to be noted that when the Finance (No.2) Bill of 1998 (Bill No.51 of 1998) introduced, it provided that the amendment should have retrospective effect from the year 1990. However, when the Parliament passed the bill and made it into an Act, it made the amendment prospective w.e.f. 1st April, 1999. Thus, this would indicate that the Parliament was of the view that the deductions taken under Section 80IA and 80HHC of the Act even if it does amount to double benefit it would be allowed prior to 1st April, 1999 i.e. Assessment Year 1999-2000. It was in its wisdom that the Parliament made the amendment prospective even though the bill as introduced by the Finance Minister sought to make the amendment retrospective. This would indicate that the Parliament did not seek to disturb and / or affect cases where deduction is taken twice over i.e. under Section 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... David & Co. Pvt. Ltd. Vs. Commissioner of Income Tax, 118 ITR 261 had occasion deal with a similar fact situation. In that case, the Court was concerned with the Income Tax Bill 1961, which was introduced in the Parliament and after the due consideration by the Parliament, it was passed as Income Tax Act, 1961. In the Income Tax Bill of 1961 as introduced in the Parliament, the deduction allowable under Section 37(1) of the Bill as introduced was as under : " any expenditure ......... laid out or expended wholly necessarily and exclusively for the purposes of business or profession shall be allowed.....". (emphasis supplied) However, when the bill become an Act of Parliament being Income Tax Act, 1961, the word "necessarily" was absent in the Section 37 of the Act. It read as under : " any expenditure ......... laid out or expended wholly and exclusively for the purposes of business or profession shall be allowed.....". Thus, for the purposes of deduction under Section 37 of the Act all that was required was that the expenditure must be laid out wholly and exclusively for the purposes of business or profession. The requirement of "necessarily" for the purposes of business was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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