CIT vs. M/s Atul Intermediates (Gujarat High Court)

DATE: (Date of pronouncement)
DATE: April 9, 2014 (Date of publication)

Click here to download the judgement (atul_80HHC_80_IA_9.pdf)

The effect of s. 80-IA(9) is that s. 80-IA deduction has to be reduced for s. 80HHC deduction in all cases and not only when the combined deduction exceeds the profits

The Gujarat High Court had to consider the controversy whether the assessee can claim deduction u/s 80HHC of the Act, ignoring the deduction already claimed and allowed u/s 80IA of the Act, unless and until the combined effect of the deductions flowing from both the sections is to exceed the profit and gain of the eligible business of the undertaking or enterprise. The Special Bench of the Tribunal in Rogini Garments 294 ITR (AT) 15 (Chennai) (SB) & Hindustan Mint and Agro Products 315 ITR 401 (Delhi) (SB) as well as the High Courts in Great Eastern Exports (Del) 332 ITR 14, Olam Exports 332 ITR 40 (Ker) & Broadway Overseas 41 75 (P&H) decided in favour of the department and held that if an assessee has claimed deduction of profit or gains u/s 80IB, deduction to that extent is not to be allowed u/s 80HHC. However, the High Courts in Associated Capsules 332 ITR 42 (Bom) & Millipore India 341 ITR 219 (Kar) decided in favour of the assessee and held that the effect of s. 80-IA(9) was only to ensure that the aggregate deduction did not exceed the profits of the eligible business. HELD by the High Court deciding in favour of the department:

Sub-section (9) of s. 80IA is aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act. This provision, therefore, necessarily impacts other deduction provisions including s. 80HHC of the Act. Nothing contained in s. 80HHC suggests that the deduction provided therein was immune from any outside influence or that the provision was impregnable by any other statute or enactment. Accepting any such theory would lead to incongruous results. Even the assessee concedes that sub-section (9) of s. 80IA would operate as to limiting the combined deductions to a maximum of the profits and gains from an eligible business of the undertaking or enterprise. If s. 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of s. 80IA could not be applied. This would completely render the provisions of sub-section (9) of s. 80IA redundant and meaningless.

Note: It is surprising that despite noting that “judicial opinion on the issue is split right down the middle”, the Court rejected the assessee’s request for grant of certificate of leave to appeal to the Supreme Court

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