TaxTMI 
TaxTMI 
2014 (9) TMI 19
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.... Brief facts giving rise to filing of the present appeal are as follows : The respondent is engaged in the business of export of processed iron ore and, therefore, its profits derived from such activities are eligible for deduction in accordance with section 80HHC. The respondent filed its return of income for the Assessment Year 1991-92 on 5/2/1992 and the respondent determined its income chargeable under the head "Profits and gains of business or profession" at Rs. 13,82,78,371/-, the income under the head "Income from house property" at Rs. 13,008/-, the income under the head "Capital gains" at Rs. 17,112/- and the income under the head "Income from other sources" at Rs. 6,82,696/-. From the aggregate of the aforesaid figure of Rs. 13,89,91,187/-, the respondent reduced the unabsorbed investment allowance pertaining to the earlier years amounting to Rs. 4,02,64,638/- and determined the gross total income at Rs. 9,87,26,549/-. The deductions under Chapter VI-A were worked out at Rs. 10,23,75,288/- which included the deduction under Section 80HHC of Rs. 10,16,92,592/-. But the same was restricted to the amount of gross total income of Rs. 9,87,26,549/- and accordingly, the retu....
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....me chargeable under the head "Profits and gains of business or profession" is concerned, the ITAT accepted the contention of the respondent in the light of its earlier two decisions in Z.F. Steering Gear (India) Limited vs. Deputy CIT, 77 ITD 279 and Allana Frozen Foods Private Limited Vs. Deputy, CIT 78 ITD 23. 3. During the course of hearing, the learned Counsel appearing for the respective parties agreed that the substantial questions of law as raised by the Revenue, mentioned hereinabove, are not correctly worded, however, the same convey the objections raised by the Revenue to the impugned order. In that view of the matter and in the light of the facts mentioned hereinabove, the issue that arises for determination by this Court is, whether the Assessing Officer was justified in setting off the unabsorbed investment allowance while computing the income chargeable under the head "Profits and gains of business or profession", or whether the unabsorbed investment allowance has to be adjusted against the business income or total income ? 4. Ms. A. Dessai, learned Counsel appearing for the Revenue, took us through the provisions of Section 28 to 43-C which fall under Chapter I....
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.... already on the statute book when Section 80HHC was introduced. Mr. Pardiwalla, distinguished the judgments cited by the Revenue, and submitted that the same are not applicable to the facts and circumstances of the present case. He lastly submitted that the appeal is without any substance and, therefore, no interference is called for. 6. Having considered the submissions of the rival parties, along with the compilation of the appeal, including the impugned order, and the ratio of the judgments cited supra, we find merit in the appeal. 7. The short question which falls for consideration of this Court is, while computing deduction under Section 80HHC(1) and (3) unabsorbed investment allowance is to be adjusted against the total income or income under the head "Profits and gains of business or profession" ? To answer this question, it would be advantageous to reproduce the provisions of Section 32A(1) and (3) and Section 80HHC(1) and (3), which read thus: "Section 32A (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in a....
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.... section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the [profits] derived by the assessee from the export of such goods or mechandise: Provided ... (3) For the purposes of sub- section (1), profits derived from the export of goods or merchandise out of India shall be the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession"), the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." 8. In section 32A(3) as well as Section 80HHC(3), reference is made to the profits computed under the business head. Perusal of Section 80HHC(3) makes it further clear that the deduction under Section 80HHC(1) is to be allowed on the profits and gains as computed under the head "Profits and gains of business or profession". Mr. Pardiwalla relied upon the wording of provisions of Section 32A(3) to contend that unabsorbed allowance can be set off from total income before allowing the deduction under Chapter VIA. This submission of Mr. Pardiwalla cannot b....
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.... from the gross total income. Sub-section (3) is a machinery provision to lay down the manner of calculating the profits which constitutes deduction under section 80HHC(1). Consequently, section 80HHC(3) aids in the working of the deduction under section 80HHC(1). Considering the fact that section 80HHC is a section which comes under Chapter VI-A providing for special deduction in gross total income, necessarily, the computation for deduction has to be in accordance with the total income computed in a manner provided for under section 80AB. It is relevant to note that section 80A deals with deduction to be made under Chapter VI-A in computing the total income. It may also be noted that section 80A(2) lays down that the aggregate amount of the income under Chapter VI-A shall not exceed the gross total income of the assessee. Read in the context of section 80A and section 80AB, the scheme of deduction under Section 80HHC has to be computed out of the income from profits and gains of business in accordance with the provisions of the Act, as stated so under section 80AB. A reading of this provision does not yield any other interpretation as suggested by the assessee." The decision o....