TaxTMI 
TaxTMI 
2006 (9) TMI 343
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....respect of scrap sale of Rs. 15,130/- by considering the same as not derived from the manufacturing activities of the assessee-company and consequently reducing the allowable deduction under section 80-IA." 2. The Ground No. 1(b) has not been pressed before us and therefore, the only issue which remains for our consideration relates to the interpretation of section 80-IA(9) of Income-tax Act, 1961 ('Act'). Briefly stated the facts are these: The assessee was running an industrial undertaking, profits of which were eligible for deduction under sections 80-IA and 80HHC of the Act. As per the computation of income of the assessee, the gross total income derived from industrial undertaking was declared at Rs. 97,56,015/- which included export incentives of Rs. 44,82,994/-. The assessee claimed deduction of Rs. 29,26,804/- under section 80-IA being 30 per cent of the gross total income and Rs. 38,07,772/- under section 80HHC in accordance with the formula given in that section. The assessee also claimed deduction under section 80G at Rs. 10,000/- and thus total income was declared at Rs. 30,11,440/-. The Assessing Officer while computing deduction under section 80-IA excluded the scr....
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....effect has to be given to both the limbs. Proceeding further, she submitted that the decisions relied upon by the learned Counsel for the assessee are distinguishable on facts and further the first limb mentioned above had not been taken into consideration in those decisions. 4. Faced with this situation, the learned Counsel for the assessee submitted, in reply, that provisions of section 80-IA(9) do not override the provisions of section 80HHC inasmuch as the Legislature has not used the expression "Notwithstanding any other provisions contained in other provisions of Chapter VI-A". In this connection he drew our attention to the provisions of section 80AB, wherein such expression has been employed by the Legislature and therefore, it is only the provisions of section 80AB which controls or governs the provisions contained under the heading "C - Deductions in respect of certain incomes" in Chapter VI-A. It was further submitted that there is no provision in section 80HHC under which any deduction could be made from the profits of the business on account of deduction allowed in section 80-IA(9). According to him, section 80HHC is an independent provision and therefore, computati....
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....e in clear terms that if any amount of profits and gains of an undertaking or of an enterprise is claimed and allowed under section 80-IA, then (i) 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 (ii) shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise as the case may be. Thus, in our opinion, the Legislature has clearly provided two limbs with reference to the profits and gains of an undertaking or an enterprise which has been claimed and allowed as deduction under section 80-IA. The word "and" has also been used between these two limbs by the Legislature and therefore, both the limbs are cumulative and mandatory in nature and consequently, the effect of either of the limbs cannot be ignored. Thus, the effect of both the limbs has to be taken into consideration while computing the deductions under the heading "C - Deductions in respect of certain incomes" in Chapter VI-A. 8. It is the cardinal rule of interpretation that where the language used by the Legislature is clear and unambiguous then t....
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....of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of consequences. It is said that the words themselves best declare the intention of the Law give. The Courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the Legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surplus if they can have a proper application in circumstances conceivable within the contemplation of the statute." Though there are various judgments upholding the above principle but we may mention that Constitution Bench of the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1^1 , has endorsed the above view by observing as under: "This exercise of purposive interpretation by looking into the object and scheme of the Act and the legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to....
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.... and provided disallowance of any expenditure/depreciation in respect of a guest house maintained by the assessee. In the case of CIT v. Chase Bright Steel Ltd. (No. 2) [1989] 177 ITR 128 and in the case of Century Spg. & Mfg. Co. Ltd. v. CIT [1991] 189 ITR 660 the Hon'ble Bombay High Court held that section 37(4) had overriding effect only over the provisions of section 37(1) and (3) and not overs the intendment sections 30 to 36. Meaning thereby that sections 30 to 36 could not be controlled by section 37(4) and consequently rent paid and depreciation allowed in respect of guest house under sections 30 and 32 could not be disallowed under section 37(4). Similar view was taken by the Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad Mfg. & Calico Printing Co. Ltd. [1992] 197 ITR 538 and in the case of CIT v. Maharana Mills Ltd. [1994] 208 ITR 972 . However, contrary view was taken by Kerala High Court in the case of United Catalysts (India) Ltd. v. CIT [1998] 229 ITR 233 and M.P. High Court in the case of Hindustan Electro Graphite Ltd. v. CIT [1998] 96 Taxman 163 by holding that in view of specific provisions of section 37(4) the assessee could not put forwar....
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....ons to be fulfilled or to be given effect to then, none of such conditions/limitations can be ignored and it is the duty of the tax authorities to give effect to the same. It is also pertinent to note, even at the cost of repetition, that in section 80-IA(9), the Legislature has used the word 'and' between the two limbs which clearly shows that Legislature intended that both the limbs are to be given effect and therefore, none of the two can be ignored. We hold accordingly. 13. At this stage, it would also be useful to refer to the judgment of the Apex Court in the case of IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521. In that case the court was concerned with the interpretation of section 80HHC(3). The contention of assessee's counsel was that provisions being incentive provisions should be construed liberally. This contention was met by observing as under :- "Undoubtedly section 80HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of this section. If the wordings of the section are clear then benefits, which are not ....
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.... deduction under section 80-IB is allowed and (ii) the object of section 80-IA(9) is to prevent double deduction of more than 100% of profits and gains of the undertaking by claiming multiple deductions under different sections in Chapter VI-A. In view of the same, it was further contended that both the deductions were permissible subject to the condition that total deductions would not exceed the profits or gains of the undertaking. It is in this context that the Tribunal held as under:- "12. Therefore, the object of insertion of section 80-IA(9A), which later became section 80-IA(9) in the present section, was to prevent deduction of more than 100 per cent of profits and gains of the undertaking by claiming multiple deduction. The object of insertion of section 80-IA(9A) was not to prevent claim of deduction under more than one section, under Chapter VI-A, where the assessee satisfies conditions of these sections, but only to ensure that the sum total of the deductions so claimed by the assessee does not exceed the profits and gains of the undertaking in respect of which deductions are allowable. 13. When one peruses the second limb of section 80-IA(9) which rea....
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....ding the deduction under sections 80-I and 80G. Since there was no provision either under section 80HHC or under section 80-I to the effect that deduction under section 80-I is to be reduced for the profits, the Tribunal held that both the deductions were to be allowed independently without any restriction. However, we are concerned with the first limb of the provisions of section 80-IA(9) which restricts the claim of the assessee under other provisions in Chapter VI-A. Hence, that decision is inapplicable to the present case. 17. The next decision relied upon by assessee's Counsel is in the case of Toshica Creations v. ITO [2005] 96 TTJ (Jp.) (SMC) 651. In that case, the Assessing Officer first allowed deduction under section 80-IB on the gross total income and then allowed deduction under section 80HHC on the reduced figure of gross total income. The Tribunal held that deduction under section 80HHC could not be allowed on reduced figure of gross total income. In coming to this conclusion, it referred to the provisions of section 80AB and concluded that only section 80AB has overriding effect over other provisions contained in Chapter VI-A. Meaning thereby, section 80HHC could ....