Great Eastern Exports vs. CIT (Delhi High Court)

Pursuant to s. 80-IA(9), s. 80-IA deduction to be reduced for 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 AO held that the deduction allowed u/s 80-IA had to be reduced from the profits for computing deduction u/s 80HHC and this was upheld by the Tribunal. On appeal by the assessee, HELD dismissing the appeal:

(i) Applying the test of literal construction, s. 80-IA (9) provides for two things (a) once an assessee is allowed deduction u/s 80 IA, “to the extent of such profits and gains” he is not to be allowed further deductions under Chapter-C and (b) in no case the deduction shall exceed the profits and gains of such eligible business of Undertaking. The expression “deduction to the extent of such profits” signifies that if an assessee is claiming benefit of deduction of a particular amount of profits and gains u/s 80 IA, to that extent profits and gains are to be reduced while calculating the deduction under Chapter VI A (C). The word “and” is disjunctive and means that the other provision is independent. The provision aims at achieving two independent objectives and cannot be limited to second objective alone thereby annihilating the first altogether and making it otiose. Even under the purposive interpretation, the purpose behind introducing s. 80IA (9) is to ensure that an assessee does not get deduction on the amount of profits and gains accorded in one provision. Hindustan Mint & Agro Products 315 ITR 401 & Rogini Garments 294 ITR (AT) 15 (Che) approved;

(ii) The argument that s. 80AB is a non-obstante provision and should be given primacy and should prevail over s. 80 IA (9) is not acceptable because there is no conflict within the two provisions. The assessee’s interpretation does violence to the clear mandate of s. 80 IA (9) and renders it redundant;

(iii) The argument that where the Legislature intended to deduct the amount out of some other deduction a different phraseology was used is also not acceptable. Merely because s. 80-IB is not worded in a similar fashion does not mean that one has to do violence with the plain language of the provision, which is capable of only one meaning;

(iv) Accordingly, for computing deduction u/s 80 HHC, deduction allowed u/s 80-IA has to be reduced.