Commissioner of Income Tax Vs. Rochi Ram and Sons - Court Judgment

1. Heard learned counsel for the parties and perused the impugned orders.

2. This appeal has been admitted in terms of following questions :

(i) Whether the learned Tribunal was right in its wisdom to hold that deduction under Section 80IA is to be allowed on the gross total income of Rs. 1,25,98,790, even when deduction under Section 80HHC was already claimed and allowed at Rs. 81,57,935 on the said GTI?

(ii) Whether the learned Tribunal was right in its wisdom to allow total tax benefit/double tax deduction under two different provisions of IT Act, i.e., Sections 80HHC and 80-IA on the same gross total income of Rs. 1,25,98,790 ?

3. The assessee is a registered firm carrying its business of export. The assessee-firm filed return of its income for asst. yr. 1995-96 on 31st March, 1996. Total income declared by the assessee-firm was Rs. 12,91,160. During the course of assessment, it was found that the assessee-firm has claimed deduction under s, 80-IA and also deduction under Section 80HHC of the IT Act, 1961 (for short, 'the Act'). The ITO was of the view that once deduction under Section 80HHC was allowed at Rs. 81,57,935, deduction under Section 80-IA cannot be allowed on the same gross total income. Therefore, the ITO has allowed deduction under Section 80-IA only on the balance amount i.e., after deduction under Section 80HHC of the Act. In appeal before CIT(A), the CIT(A) has also affirmed the view taken by the AO. In appeal before the Tribunal, the Tribunal has allowed claim of the assessee holding that the assessee is entitled to deduction under Section 80HHC as well as Section 80IA of the Act on total gross income.

4. In appeal before us, Shri Singhi, learned counsel for the Revenue, submits that once deduction under Section 80HHC of the Act is allowed, thereafter deduction under Section 80-IA can be allowed only on the balance amount left. He further submits that even the amendment has been made to this effect in 1998 by insertion of Sub-section (9A) after Sub-section (9) of Section 80IA by Finance (No. 2) Act, 1998, w.e.f. 1st April, 1999, therefore, deduction under Section 80-IA should be allowed on the balance amount.

5. On the other hand, Shri Anant Kasliwal, learned counsel for the assessee (respondent), submits that similar issue has been considered by the Madhya Pradesh High Court. He placed reliance on the decision of Madhya Pradesh High Court in J.P. Tobacco Products (P) Ltd v. CIT : [1998]229ITR123(MP) .

6. While considering the issue, whether both the deductions under Sections 80HHC and 80-IA of the Act should be allowed on gross total income of the assessee, the Division Bench of Madhya Pradesh High Court in J.P. Tobacco Products (P) Ltd. v. CIT (supra) at p. 125 observed as under :

'Sub-section (9) of Section 80HH, as it stood prior to insertion of Section 80-I by the Finance (No. 2) Act, 1980, w.e.f. 1st April, 1981, originally included only Section 80J. Section 80J providing for deduction in respect of the profits and gains from newly established industrial undertakings or ships or hotel business in certain cases did not make any provision for reduction of the gross total income by the amount of deduction admissible to the assessee under Section 80HH. It was only by an amendment of the said Section 80J that the provision for reducing the gross total income by the amount of deduction under Section 80HH of the Act by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1st April, 1974, was inserted. Section 80I was inserted in its present form by the Finance (No. 2) Act, 1980, w.e.f. 1st April, 1981, and by the same Finance (No. 2) Act, Section 80HH(9) was amended and the words 'Section 80I or' were inserted to make the said provision applicable to Section 80I as well. However, no provision was made in Section 80I to provide for deduction of the gross total income by deduction allowed under Section 80HH for the purpose of allowing deduction under Section 80-I. It would, thus, be seen that when Section 80J already existed in Sub-section (9) of Section 80HH, an amendment was made in Section 80J in the year 1974 but no such provision was made insofar as Section 80J was concerned. This clearly contra-indicates that Sub-section (9) of Section 80HH by itself meant that deduction allowed under Section 80HH is to be reduced from the gross total income for granting the benefit of Section 80J and, for that matter, of Section 80I. It was provided in Section 80J itself by later amendment while no such provision was made in Section 80I even though inserted on a later date. The provision of law is, therefore, clear that insofar as the benefit of Section 80I is concerned, it has to be granted on the gross total income and not on the income reduced by the amount allowed under Section 80HH.'

Similar view has been taken by this Court in CIT v. Chokshi Contacts (P) Ltd. (2001) 251 ITR 587 .

7. Chapter VI-A of the Act deals with deductions, which are to be allowed while computing total income. Sub-section (1) of Section 80A of the Act provides that while computing the total income of an assessee, there shall be allowed deduction from gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in Sections 80C to 80U. 'Gross total income' has been defined in Sub-section (5) of Section 80B of the Act. Definition under Section 80B(5) provides that 'gross total income' means that total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter. The deduction under Section 80HHC is to be allowed on total income of the assessee subject to the provisions of this section. There is no dispute that deduction under Section 80HHC has already been allowed by the AO on gross total income.

8. The only dispute between the assessee and Department is as to whether the deduction under Section 80-IA should be allowed only on the balance amount i.e., amount remained after deduction under Section 80HHC or on gross total income. Even Section 80IA of the Act does not provide that if deduction under Section 80HHC has been allowed on gross total income, deduction under Section 80IA should be allowed only on balance income i.e., amount remained after deduction under Section 80HHC.

9. When there is no such provision or intention of the legislature to allow deduction under Section 80-IA on the balance amount, there is no justification to allow deduction under Section 80IA only on the balance amount i.e., amount remained after deduction under Section 80HHC of the Act, In the absence of such an intention, deduction under Section 80IA of the Act should also be allowed on gross total amount, as the words used in Sub-section (1) of Section 80A of the Act for deduction are 'gross total income' and not on balance amount after any deduction made under any section.

10. Considering provisions of Sub-section (9) of Section 80-IA of the Act and the language used in Section 80HHC, we are in agreement with the view taken by Madhya Pradesh High Court in CIT v. J.P. Tobacco Products (P) Ltd. and by this Court in CIT v. Chokshi Contacts (P) Ltd. (supra) that there is no restriction on allowing deductions under any other section of Chapter VI-A on gross total income after deduction, under Section 80HHC. There is no justification to reduce the amount of gross total income for allowing deduction under Section 80-IA of the Act.

11. Mr. Singhi, learned counsel for the appellant, further argued that the provisions of Section 80-IA has been amended by insertion of Sub-section (9A) which provides that if deduction under any of the sections has been allowed under Chapter VI-A and if any further deduction is to be allowed under any other section, that should be allowed only on the balance amount.

12. Whether what Mr. Singhi says has any force or not, but the facts remains that this amendment has been brought by the Act of 1998 and made effective from 1st April, 1999, and we are concerned with the asst. yr. 1995-96, therefore, this amendment has nothing to do with the asst. yr. 1995-96 and this amendment in no way helps the Department.

Consequently, we dismiss this appeal with no order as to costs.