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TMI Blog2024 (11) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Milin Mehta, A.R. For the Respondent : Shri Waghe Prasad Rao, Sr. DR ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These four appeals are filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short Ld. CIT(A) ), National Faceless Appeal Centre (in short NFAC ), for the Assessment Years 2000-2001, 2002-2003, 2003-2004 2004-2005. Since common issues are involved in all the year under consideration of appeals before us, the same are being disposed of by way of this common order. ITA No.521/Ahd/2023 for AY 2000- 2001 2. The Assessee has taken the following grounds of appeal:- All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. Invalid Proceedings: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ CIT(A) ] erred in fact and in law in passing an order beyond its jurisdiction. 2. The learned CIT(A) erred in fact and in law in invoking provisions of section 251(2) of the Act and enhancing the scope of set aside proceedings. 3. The learned CIT(A) erred in fact and in law in restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal, Alunedabad ( ITAT ). Non-applicability of section 251; 4. The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 5. The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of the Act in proper perspective. Without prejudice to the above: 6. The learned CIT(A) erred in fact and in law in restricting the deduction u/s 80HHC by invoking the provision of section 80IA(9) of the Act without appreciating the facts on record in proper perspective. 7. The learned CIT(A) erred in fact and in law in disallowing the deduction of lease rent income of Rs. 84,51,958 u/s 80HHC of the Act despite the fact that the issue of applicability of provisions of section 80IA(9) is already adjudicated by the higher authority. 8. The learned CIT(A) erred in fact and in law in invoking provisions of section 80IA(9) of the Act without appreciating the provisions of the law in proper perspective. Disallowance u/s 80HHC: 9. The learned CIT(A) erred in fact and in law in disallowing the deduction claimed u/s 80HHC of the Act on lease rent income. 10. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal in this appeal are mutually exclusive and without prejudice to each other. Invalid Proceedings: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ CIT(A) ] erred in fact and in law in passing an order beyond its jurisdiction. 2. The learned CIT(A) erred in fact and in law in enhancing the scope of set aside proceedings without granting proper opportunity of being heard to the Appellant. 3. The learned CIT(A) erred in fact and in law in invoking provisions of section 80IA(9) despite the fact that the Appellant has not claimed deduction u/s 80IA of the Act. 4. The learned CIT(A) erred in fact and in law in restricting the deduction u's 80HHC of the Act by invoking provisions of section 80IA(9) despite the fact that no such directions were given by Hon'ble Income Tax Appellate Tribunal, Ahmedabad ( ITAT ). Without prejudice to the above Non-applicability of section 251: 5. The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 6 The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease rent income from leasing out products manufactured by the assessee is eligible for 80IA deduction or not. It has been explained by the assessee that source of lease rent income is the product manufactured by the assessee. There appears to be direct connection between the product manufactured by the assessee and the income receipt. The nature of lease rent income, falls under the head income from business and profession. Letting out vacuum tanks was the regular business activity of the assessee. 2.9 As the lease rent income has direct nexus with the business of the assessee. I am of the opinion that the lease rent income received by the assessee by leasing the balance stock of vacuum tanks is directly connected with the business activity of the assessee and hence eligible for deduction under section 80IA.considering the same lease rent income for computation of deduction under section 80 HHC is not correct in view of the provisions under section 80IA (9). Hence no relief on the issue of computation of 80HHC deduction with respect to lease rent income is allowed. 3. The appeal is thus partly allowed. 7. Before us, the counsel for the assessee submitted that only two issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.1998 and the same reads as under:- PROFIT LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 1998 Schedule Rupees 1997-98 Rupees 1996-97 Rupees INCOME Sales 219,566,658 210,077,661 Income from Operations 4,103,603 1,197,045 Lease rent received 10,753,596 10,523,827 Other Income 13 2,862,550 3,003,193 Decrease/Increase in Stock 14 (27,422,489) 14,605,897 TOTAL 209,863,918 239,407,623 EXPENDITURE Consumption of Materials 15 82,917,295 112,537,162 Manufacturing Other Expenses 16 80.825,937 79,352,657 163,743,232 191,889,819 Less: Capitalised 4,331,715 TOTAL 163,743,232 Profit Before Interest Depre 46,120,686 187,556,104 Less: Interest 17 16,437,990 51,849,59 Profit before Depreciation 29,682,696 16,868,554 Less: Depreciation 5 12,474,934 34,980,965 Less: Capitalized - 11,512,571 12,474,934 97,338 17,207,762 11,415,233 Profit Before Tax 1,600,000 23,565,732 Less: Provision for taxation 15,607,762 3,200,000 20,365,732 Profit for the year 9549 Less: i) earlier year expenses 58,747 ii) Preliminary expenses written off 58,747 58,747 15,549,015 68,296 Add: Balance of profit brought forward 11,334,864 20,297,436 Amount available for appropriation 26,883,879 1,410,368 21,707,804 APPROPRIATIONS: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking. The Tribunal has failed to appreciate that it is not the case of the AO that the interest income is not assessable under the head 'Profits and gains of business'. It is only while computing relief under s. 80-1 of the Act that the Revenue changes its stand. When one reads the opening portion of s. 80-1 of the Act it is clear that words used are: gross total income of an assessee includes any profits and gains derived from an industrial undertaking . Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact, the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessment order. Both in relation to Vatva Unit and Mandali Unit the computation commences by taking profit as per statement of income filed along with return of income. Therefore, the same item of receipt cannot be treated differently: once while computing the gross total income, and secondly at the time of computing deduction under s. 80-1 of the Act. Therefore, on this limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by Ld. CIT(Appeals) in the appellate order. 11. We have heard the rival contentions and perused the material on record. Regarding the issue of availability of deduction under Section 80HHC of the Act with respect to lease rental , in view of the decision referred to by the Counsel for the assessee in assessee s own case in ITA No.756 of 2000 for assessment year 1997-98 to 1999-2000, in our view, the issue now stands decided in favour of the assessee and the assessee is eligible for deduction under Section 80HHC of the Act on lease rental income. 12. With regard to the second issue of simultaneous claim of deduction under Section 80HHC of the Act and Section 80IA of the Act, we are of the considered view that the decision cited by the assessee would not be of assistance on this issue since division bench of Supreme Court referred this matter to larger bench as there was difference of opinion as to whether assessee could claim simultaneous deductions under section 80-IA/ 80-IB and 80HHC on same profits in the case of Micro Labs Ltd. 64 taxmann.com 199 (SC). While dealing with similar issue, the ITAT Ahmedabad Bench in the case of Madhusudhan Industries ITA No.638/Ahd/2012 has o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Atul Intermediates (supra), the grounds raised by the assessee merits no consideration and are dismissed. 12.1 In the case of PCIT v. E.I.H. Ltd 103 taxmann.com 204 (SC), Supreme Court held that where in respect of issue as to double deduction under chapter VIA of Act, High Court disposed of Revenue's appeal by directing Assessing officer to pass order in accordance with judgment of Supreme Court as may be rendered on reference pursuant to judgment reported in Asstt. CIT v. MicroLabs Ltd. [2015] 64 taxmann.com 199/[2016] 237 Taxman 74 (SC), SLP filed against decision of High Court was to be allowed. 12.2 Further, in several decisions rendered by jurisdictional Gujarat High Court, the issue has been decided against the assessee. 12.3 In the case of Sun Pharmaceutical Industries Ltd. 75 taxmann.com 143 (Gujarat), the High Court held that provisions of section 80IA(9) have to be applied while considering assessee's claim for deduction under section 80HHC. While passing the order the Gujarat High Court held as under: 6. This leaves us with the sole surviving question of deduction under Section 80HHC to be worked out without giving effect to the provision of Section 80IA(9) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading C. - 'Deductions in respect of certain incomes', and in no case exceed the profits or gains of such eligible business of the undertaking or enterprise. It can thus be seen that subsection (9) is divided into two clear parts. First part pertains to non-allowability of deduction under any other provision contained in Part-C of Chapter VI to the extent of profits and gains of an enterprise or undertaking with respect to which deduction under section 80-IA is claimed and allowed. The second part provides that in any case, such deduction shall not exceed the profits and gains of eligible business of an undertaking or enterprise. If the interpretation of the assessee that only effect of sub-section (9) of section 80-IA would be to limit the maximum permissible deduction under section 80HHC to the profits and gains of the eligible business is accepted, it would amount to completely ignoring the first part of the sub-section. In other words, the earlier part of subsection would be rendered completely redundant, purposeless and otiose. It is well settled that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing deduction over and above the profit or gain of an enterprise or undertaking. Second aspect is that such provision does not have a non obstante clause. What would be the effect of these two forces emerging from sub-section (9) of section 80-IA needs to be appreciated. The combined effect of these two factors would be that sub-section (9) of section 80-IA would operate as long as there is nothing contrary contained in any other provisions of sub chapter C of Chapter VI. Thus, if there is any indication of legislative intent to allow the full deduction under section 80HHC irrespective of the provision contained in sub-section (9) of section 80-IA, such legislative intent must prevail. On the other hand, if one find that section 80HHC is not immune to outside influence, full play of the provision of sub-section (9) of section 80-IA must be allowed, even if it means restricting the claim of an assessee for deduction under section 80HHC. In other words, merely because sub-section (9) of section 80-IA does not contain non-obstante clause, it would not by itself mean that it can have no effect on the deduction under section 80HHC. As is well known, the Legislature uses the non obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sub-section (9) of section 80-IA was aimed to have restricted and limited scope of application. [Para 28] - The contention that no such matching provision was made in section 80HHC would clearly indicate the Legislative intent also, is not a valid argument. Sub-section (9) of section 80-IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI. It was neither possible nor expected of the Legislature to make individual matching provisions in large number of statutory provisions recognizing deductions under various situations. Such provisions are often times made for a limited period, new deductions are introduced from time to time and old deductions withdrawn. [Para 29] - Reference to the circular No. 772 of 23-12-1998 also would not resolve this controversy. In the said circular, it is merely amplified that it was noticed that certain assessee s claimed more than hundred per cent deduction of profits and gains of same undertaking, where they were entitled for deduction under more sections than one. It was, therefore, to prevent the taxpayers from taking undue advantage of the existing provisions of claiming repeated deductions in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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