2010 (11) TMI 91 - HC - Income Tax

Profits Deducted Under s.80-IA(9) Cannot Be Reclaimed for s.80HHC; No Double Benefit Allowed on Same Income

HC interpreted s.80-IA(9) to mandate that profits allowed as deduction under s.80-IA must be excluded while computing deduction under s.80HHC. It rejected ... Interpretation of Section 80IA(9) - Whether deduction to the extent of such profits claimed u/s 80IA would not be allowed for computing deduction u/s 80 HHC - Assessees contended that insertion of Section 80I by the Finance (No. 2) Act, 1980, has not made any change in so far as the manner of computation and deduction is to be made under various provisions of Part -C in Chapter VIA - the only thrust of this provision is that the total deduction to be allowed under various provisions in Part-C is not to exceed the profits and gains. Total accumulation should not exceed the profits and gains - Revenue on the other hand insists that introduction of sub Section 9 in Section 80 IA has made a clear departure and legislative intent is manifest in this provision namely once the deduction is claimed under Section 80-IA in respect of certain amount of profits and gains, 'to the extent of such profits and gains', deduction shall not be allowed and this has to be reduced while computing deduction under other provisions namely Section 80 HHC in the instant cases. HELD THAT:- Law on interpretation is clear. If the language of the statute is plain and capable of one and only one meaning, that obvious meaning is to be given to the said provision. Rules of interpretation are applied only if there are ambiguities when the purpose of interpretation is to ascertain the intention of the law i.e. mens legis, it is based on assertion by adopting plain meaning of the statute in the absence of any ambiguity. There is no conflict within the two provisions as was painstakingly tried to be demonstrated by Ms. Kapila. Section 80AB deals with computation of deduction on 'gross total income' which purpose is achieved even otherwise on reading these provisions and interpreting the same in the manner done by her herein before. On the contrary, if the interpretation suggested by Ms. Kapila is accepted, it will not only do violence to the clear mandate of Section 80 IA (9) but shall have the effect of rendering that provision redundant though specifically introduced by the Legislature with the purpose of achieving clear objective. We are not in a position to subscribe to the contention of the learned counsel for the assessees that where the Legislature intended to deduct the amount out of some other deduction a different phraseology was used as noticed above. This was sought to be demonstrated by referring to sub Section (5) of Section 80 HHB, sub Section (4) of Section 80 HHBA and sub Section (4) of Section 80- IE etc. which provisions start with the use of a non-obstante clause. Merely because section 80-IB is not worded in a similar fashion would not mean that we have to do the violence with the plain language used in that provision, which is capable of only one meaning. A particular section of an enactment, the intention of which is otherwise manifest, cannot be read by adopting such an insidious approach, by referring to other sections. It is well known that the legislature adopts different ways and means in order to achieve its goal and there is no justification for insistence of identical language. Likewise, as rightly point out by the Special Bench of the Tribunal, the notice and objects of accompanying reasons are only an aid to construction. Such aid to construction is needed when literal reading of the provision leads to an ambiguous result or absurdity. We thus do not find any force in any of the arguments advanced by the counsel appearing for the assessees and cannot persuade ourselves to given an interpretation to the aforesaid provisions contrary to what is indicated above, or what is sought to be suggested by them. Accordingly, we hold that for the purpose of computing deduction under Section 80 HHC of the Act, deduction already allowed under Section 80-IA has to be reduced. The question of law thus stands answered in favour of the Revenue and against the assessee. As a consequence, we allow the appeals filed by the Revenue and set aside the impugned decision of the Tribunal in those cases. On the other hand, the appeals preferred by the assessees stand dismissed. Issues Involved:1. Interpretation of Section 80IA(9) of the Income Tax Act.2. Interplay between deductions under Section 80IA and Section 80HHC.3. Application of non-obstante clause in Section 80AB.4. Relevance and binding nature of CBDT Circular No. 772.5. Harmonization of conflicting provisions within Chapter VIA of the Income Tax Act.Detailed Analysis:Issue 1: Interpretation of Section 80IA(9) of the Income Tax ActThe primary issue revolves around the interpretation of Section 80IA(9) which states: 'Where any amount of profits and gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction 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 shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be.'The court noted that a plain reading of this provision suggests that the profits and gains claimed and allowed under Section 80IA should not be allowed again under any other provisions of Chapter VIA, including Section 80HHC.Issue 2: Interplay between deductions under Section 80IA and Section 80HHCThe court examined the historical context and judicial interpretations of Chapter VIA, specifically the interplay between Section 80IA and Section 80HHC. Prior to the amendment effective from April 1, 1999, courts had held that deductions under these sections were independent and could be claimed without reducing one from the other. However, with the insertion of Section 80IA(9), the court concluded that the legislative intent was to prevent double deductions on the same profits and gains.The court affirmed the view taken by the Special Bench of the Income Tax Appellate Tribunal (ITAT) in Hindustan Mint & Agro Products Pvt. Ltd., which held that the relief under Section 80IA should be deducted from the profits and gains before computing the relief under Section 80HHC.Issue 3: Application of non-obstante clause in Section 80ABThe assessees argued that Section 80AB, which begins with a non-obstante clause, should prevail over Section 80IA(9). Section 80AB states that deductions under Chapter VIA should be computed on the 'gross total income.' The court, however, found no conflict between Section 80AB and Section 80IA(9). It held that Section 80AB deals with the computation of deductions on gross total income, while Section 80IA(9) ensures that deductions under different sections do not exceed the total profits and gains of the eligible business.Issue 4: Relevance and binding nature of CBDT Circular No. 772The court examined CBDT Circular No. 772, which clarified that the amendments to Section 80IA were intended to prevent taxpayers from claiming more than 100% deduction on the same profits and gains. The assessees argued that this circular should be binding on the Revenue. The court, however, noted that the circular only addressed one aspect of Section 80IA(9) and did not negate the restriction on double deductions.Issue 5: Harmonization of conflicting provisions within Chapter VIA of the Income Tax ActThe court emphasized the need for harmonious construction of statutory provisions to avoid rendering any provision redundant. It held that the purpose of Section 80IA(9) was to ensure that once a deduction is claimed under Section 80IA, the same profits and gains cannot be claimed again under other provisions of Chapter VIA. This interpretation harmonizes Section 80IA(9) with Section 80AB and other provisions of Chapter VIA.Conclusion:The court concluded that for the purpose of computing deductions under Section 80HHC, the deduction already allowed under Section 80IA must be reduced. This ensures that the total deductions do not exceed the profits and gains of the eligible business, in line with the legislative intent behind the insertion of Section 80IA(9). The appeals filed by the Revenue were allowed, and those filed by the assessees were dismissed.