S. 80-IA(9) cannot be interpreted to mean that s. 80-IA deduction has to be reduced for computing s. 80HHC deduction
S. 80-IA (9) inserted w.e.f. 1.4.1989 provides that where any amount of profits and gains of an undertaking is claimed and allowed under s. 80-IA for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VI-A (C) and shall in no case exceed the profits and gains of such eligible business. The Court had to consider whether the deduction allowed u/s 80-IA had to be reduced from the profits for computing deduction u/s 80HHC. HELD dissenting from Rogini Garments 108 ITD 49 (Che)(SB), Hindustan Mint & Agro Products 119 ITD 107 (Del) (SB), Great Eastern Exports (Del) & Olam Exports (India) Ltd 184 TM 373 (Ker) & deciding in favour of the assessee:
(i) The argument of the Revenue that s. 80IA(9) mandates that the deduction u/s 80HHC has to be computed by reducing the amount of profits and gains allowed as deduction u/s 80IA(1) is not acceptable. S. 80IA(9) uses the words ‘shall not be allowed’ and not the words ‘shall not qualify’ or ‘shall not be allowed in computing deduction’. Accordingly, the restriction in s. 80IA(9) relates to the allowance of deduction and not computation of deduction. The manner of computation of deduction u/s 80HHC(1) is set out in s. 80HHC(3). S. 80IA(9) does not disturb the mechanism of computing the deduction provided u/s 80HHC (3). S. 80IA(9) comes into operation only at the stage of allowing the deduction computed u/s 80HHC so that the combined deduction u/s 80IA and 80HHC does not exceed the total profits of the business of the undertaking. S. 80IA(9) seeks to curtail allowance of deduction and not computability of deduction under any other provisions under heading ‘C’ of Chapter VIA;
(ii) The reasonable construction of s. 80IA(9) is that where deduction is allowed u/s 80IA(1), then the deduction computed under other provisions under heading ‘C’ of Chapter VIA has to be restricted to the profits of the business that remains after excluding the profits allowed as deductions u/s 80IA, so that the total deduction allowed under the heading ‘C’ of Chapter VIA does not exceed the profits of the business.