Lease rental income with section 80-IA deduction cannot claim additional section 80HHC deduction

The ITAT Ahmedabad ruled that lease rental income already granted deduction under section 80-IA cannot claim additional deduction under section 80HHC. The tribunal held that when profit or gain receives deduction under section 80-IA to the extent specified in sub-section (9), claims for deduction under other provisions including section 80HHC are barred. The decision was supported by precedents from Ahmedabad Tribunal and SC. The tribunal upheld the CIT(A)'s order finding no grounds for interference.

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Issues Involved:

1. Eligibility of "lease rental" income for deduction under Section 80HHC of the Income Tax Act.
2. Simultaneous claim of deductions under Sections 80HHC and 80IA of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Eligibility of "Lease Rental" Income for Deduction under Section 80HHC:

The primary issue addressed was whether the income derived from "lease rental" qualifies for deductions under Section 80HHC of the Income Tax Act. The assessee argued that the "lease rental" income should be considered as derived from business activity since it emanates from goods manufactured by the assessee. This argument was supported by a previous ruling in the assessee's own case for earlier assessment years, where the Tribunal allowed the deduction under Section 80HHC for "lease rental" income. The Tribunal concluded that the lease rental income is directly linked to the business activity of the assessee, as the leased goods were manufactured by the assessee itself. Thus, the lease rental income is considered as "derived from" the business activity, making it eligible for deduction under Section 80HHC.

2. Simultaneous Claim of Deductions under Sections 80HHC and 80IA:

The second issue was whether deductions under both Sections 80HHC and 80IA can be claimed simultaneously on the same "lease rental" income. The CIT(A) had disallowed the deduction under Section 80HHC on the grounds that the same lease rental income had already been allowed for deduction under Section 80IA, invoking the provisions of Section 80IA(9), which restricts the claim of deduction under any other provisions if it has already been claimed under Section 80IA. The assessee relied on the case of ACIT v. IPCA Laboratories, arguing that deductions under Section 80HHC should be available without excluding deductions under Section 80IA. However, the Tribunal noted that the Supreme Court had referred a similar matter to a larger bench due to differing opinions, indicating that simultaneous deductions are not straightforwardly permissible. The Tribunal referenced various judgments, including those from the Gujarat High Court, which consistently held that Section 80IA(9) restricts the simultaneous claim of deductions. Consequently, the Tribunal upheld the CIT(A)'s decision that deductions under Section 80HHC are not available for "lease rental" income when deductions under Section 80IA have been claimed.

Conclusion:

The appeals were partly allowed. The Tribunal confirmed that "lease rental" income qualifies for deduction under Section 80HHC. However, it upheld the restriction on simultaneous deductions under Sections 80HHC and 80IA, in line with Section 80IA(9). The decision was based on consistent judicial precedents that emphasize the non-availability of dual deductions on the same income under these sections.

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