2015 (6) TMI 245 - AT - Income Tax

Tribunal allows deduction under Section 40(a)(ia) reversing CIT(A) decision, directs deletion of disputed sum.

The Tribunal upheld the assessee's plea for deduction under Section 40(a)(ia) for the sum of Rs. 70,35,997/-, set aside the order of the CIT(A), and ... Disallowance u/s 40(a)(ia) - invoking section 80A(4) - Held that:- There is no claim under any of the provisions covered in section 80A(4) of the Act. Therefore, invoking section 80A(4) of the Act in the present case to deny assessee's claim is anyway not justified. So however, even if for a moment, we accept the invoking section 80A(4) of the Act by the Revenue yet it would cover a situation if multiple deductions are claimed for same profits in the same assessment year. Ostensibly, that is not the case in the present situation because there is no multiple deductions claimed by the assessee qua the impugned amount in the assessment year under consideration i.e. 2010-11. Therefore, we find that there is no relevance of section 80A(4) of the Act in order to test the efficacy of the claim for deduction of ₹ 70,35,997/- made by the assessee on the strength of the proviso to section 40(a)(ia) of the Act. Thus, this stand of the Revenue is liable to be rejected. Whether the assessee would derive double benefit if the claim was allowed because in the earlier year such income has not suffered tax on account of the deduction u/s 10B ? - Held that: - We are unable to find any statutory support to the plea of the Revenue. It is a well-settled rule of law that where language is clear and not capable of any other construction then the same has to be applied. In this context, the assessee had placed reliance on the parity of reasoning laid down in the case of Elphinstone Spinning And Weaving Mills Co. Ltd. vs. CIT (1955 (9) TMI 52 - BOMBAY HIGH COURT) held that the claim of the Revenue was unsustainable, as where the language is clear and not capable of any other construction, then however illogical the position, however absurd the result, however much the construction put may defeat the object of the Legislature, the statute must be construed according to the plain language used by the Legislature, and the more so, if that plain language supports the subject against the taxing department. Therefore, in conclusion, we uphold the plea of the assessee for deduction u/s 40(a)(ia) of the Act of a sum of ₹ 70,35,997/-. - Decided in favour of assessee. Issues Involved:1. Denial of deduction for freight charges under Section 40(a)(ia) of the Income-tax Act, 1961.2. Application of Section 80A(4) to deny multiple deductions.Issue-wise Detailed Analysis:1. Denial of Deduction for Freight Charges:The core issue in this appeal was the denial of deduction for a sum of Rs. 70,35,997/- by the income-tax authorities. The appellant, a company engaged in the manufacture and export of Hulled sesame seeds and dealing in spices, claimed this deduction for freight charges incurred in the preceding assessment year 2009-10. The tax deduction at source (TDS) corresponding to this amount was deducted in the previous year but was paid to the Government in the assessment year 2010-11. As per the proviso to Section 40(a)(ia) of the Income-tax Act, such expenditure should be allowed as a deduction in the year the tax is paid. The Assessing Officer, however, denied this deduction, arguing that the entire income of the assessee for the assessment year 2009-10, including the added back amount, was allowed as a deduction under Section 10B of the Act, which was not claimed in the current year. The CIT(A) upheld this decision.The appellant contended that the claim was within the purview of Section 40(a)(ia) and should be allowed since the requisite TDS was paid in the current year. The Revenue argued that allowing this deduction would reduce the tax burden unfairly since no additional taxes were paid on the disallowance in the preceding year due to the deduction under Section 10B.2. Application of Section 80A(4):The Revenue also relied on Section 80A(4) to deny the claim, which prevents multiple deductions for the same profits. The CIT(A) noted that the deduction under Section 10B had already been allowed in the preceding year, and thus, the same amount could not be considered for deduction again in the current year. Section 80A(4) stipulates that if any amount of profits and gains of an undertaking is claimed and allowed as a deduction under specified sections (including Section 10B) for any assessment year, then deduction in respect of such profits and gains shall not be allowed under any other provisions of the Act for that assessment year.Tribunal's Findings:The Tribunal found that the provisions of Section 40(a)(ia) explicitly allowed the deduction of the sum in the year the tax was paid. The Revenue's argument that the assessee would derive double benefit was not supported by any statutory provision. The Tribunal observed that Section 80A(4) aimed to prevent multiple deductions for the same profits in the same assessment year, which was not the case here since the claim was for different assessment years. The Tribunal also referred to the Hon'ble Bombay High Court's reasoning in the case of Elphinstone Spinning And Weaving Mills Co. Ltd. vs. CIT, which emphasized that clear statutory language must be applied even if it leads to an illogical result.Conclusion:The Tribunal upheld the assessee's plea for deduction under Section 40(a)(ia) for the sum of Rs. 70,35,997/-, set aside the order of the CIT(A), and directed the Assessing Officer to delete the impugned addition. The appeal of the assessee was allowed.