TaxTMI 
TaxTMI 
2024 (11) TMI 764
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....f appeal in this appeal are mutually exclusive and without prejudice to each other. Invalid Proceedings: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] erred in fact and in law in passing an order beyond its jurisdiction. 2. The learned CIT(A) erred in fact and in law in invoking provisions of section 251(2) of the Act and enhancing the scope of set aside proceedings. 3. The learned CIT(A) erred in fact and in law in restricting the deduction u/s 80HHC and 80IA of the Act by invoking provisions of section 80IA(9) despite the fact that no such directions were given by Hon'ble Income Tax Appellate Tribunal, Ahmedabad ("ITAT"). Non-applicability of section 251; 4 The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 5. The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of the Act in proper perspective. Without prejudice to the above: 6. The learned CIT(A) erred in fact and in law in restricting the ....
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....nvoking the provision of section 80IA(9) of the Act without appreciating the facts on record in proper perspective. 7. The learned CIT(A) erred in fact and in law in disallowing the deduction of lease rent income of Rs. 84,51,958 u/s 80HHC of the Act despite the fact that the issue of applicability of provisions of section 80IA(9) is already adjudicated by the higher authority. 8. The learned CIT(A) erred in fact and in law in invoking provisions of section 80IA(9) of the Act without appreciating the provisions of the law in proper perspective. Disallowance u/s 80HHC: 9. The learned CIT(A) erred in fact and in law in disallowing the deduction claimed u/s 80HHC of the Act on lease rent income. 10. The learned CIT(A) erred in fact and in law in disallowing deduction u/s 80HHC without granting proper opportunity of being heard. 11. Your appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeals. ITA No.523/Ahd/2023 for AY 2003- 2004 4. The Assessee has taken the following grounds of appeal:- All the grounds of appeal in this appeal are mutually exclus....
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.... jurisdiction. 2. The learned CIT(A) erred in fact and in law in enhancing the scope of set aside proceedings without granting proper opportunity of being heard to the Appellant. 3. The learned CIT(A) erred in fact and in law in invoking provisions of section 80IA(9) despite the fact that the Appellant has not claimed deduction u/s 80IA of the Act. 4. The learned CIT(A) erred in fact and in law in restricting the deduction u's 80HHC of the Act by invoking provisions of section 80IA(9) despite the fact that no such directions were given by Hon'ble Income Tax Appellate Tribunal, Ahmedabad ("ITAT"). Without prejudice to the above Non-applicability of section 251: 5. The learned CIT(A) erred in fact and in law in invoking section 251 of the Act without satisfying the conditions provided under the Act. 6 The learned CIT(A) erred in fact and in law in enhancing the scope of proceedings without appreciating the provisions of the Act in proper perspective. 7 The learned CIT(A) erred in fact and in law in disallowing the deduction u/s 80HHC on lease rent income of Rs. 52,30,180 by invoking the provision of secti....
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....n explained by the assessee that source of lease rent income is the product manufactured by the assessee. There appears to be direct connection between the product manufactured by the assessee and the income receipt. The nature of lease rent income, falls under the head income from business and profession. Letting out vacuum tanks was the regular business activity of the assessee. 2.9 As the lease rent income has direct nexus with the business of the assessee. I am of the opinion that the lease rent income received by the assessee by leasing the balance stock of vacuum tanks is directly connected with the business activity of the assessee and hence eligible for deduction under section 80IA.considering the same lease rent income for computation of deduction under section 80 HHC is not correct in view of the provisions under section 80IA (9). Hence no relief on the issue of computation of 80HHC deduction with respect to lease rent income is allowed. 3. The appeal is thus partly allowed. 7. Before us, the counsel for the assessee submitted that only two issues are involved in all the appeals before us. 8. The first-issue-is-whether income from "lease rental" is....
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....ENDED 31ST MARCH, 1998 Schedule Rupees 1997-98 Rupees 1996-97 Rupees INCOME Sales 219,566,658 210,077,661 Income from Operations 4,103,603 1,197,045 Lease rent received 10,753,596 10,523,827 Other Income 13 2,862,550 3,003,193 Decrease/Increase in Stock 14 (27,422,489) 14,605,897 TOTAL 209,863,918 239,407,623 EXPENDITURE Consumption of Materials 15 82,917,295 112,537,162 Manufacturing & Other Expenses 16 80.825,937 79,352,657 163,743,232 191,889,819 Less: Capitalised 4,331,715 TOTAL 163,743,232 Profit Before Interest & Depre 46,120,686 187,556,104 Less: Interest 17 16,437,990 51,849,59 Profit before Depreciation 29,682,696 16,868,554 Less: Depreciation 5 12,474,934 ....
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....income of the assessee included lease rent. The Assessing Officer has also taken the same under the head "Profits & Gains of Business". In our understanding of the facts, the same item of receipt cannot be treated differently, i.e., once while computing the gross total income and secondly, at the time of computing deduction u/s 80-1 of the Act. An identical issue was considered by the Hon'ble High Court of Gujarat in the case of Nirma Industries Ltd vs. DCIT, reported in (2995) 283 ITR 402 (Guj.), wherein inter alia the Hon'ble High Court was seized with the following question:- "2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that while computing deduction under s. 80-1 of the IT Act, 1961, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial undertaking?" 8. And, the Hon'ble High Court has held as under:- "27. Insofar as question No. 2 is concerned, according to the Tribunal s. 80-1 of the Act uses the ph....
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....rial undertaking within the meaning of section 80-1." 10. Considering the business activities of the assessee qua the lease rental income in the light of the aforementioned findings of the Hon'ble High Courts, we decline to interfere with the findings of the CIT(A) for AY 1997- 98, 1998-99 and 1999-2000. All these appeals by the Revenue are accordingly dismissed and for similar reasons, findings of the CIT(A) for AY 1999-2000 are set aside. The appeal filed by the assessee is allowed. 11. In the result, all the appeals filed by the Revenue are dismissed and the appeal filed by the assessee is allowed. 9. The second issue brought to our notice by the Counsel for the assessee before us was that Ld. CIT(Appeals) had disallowed the deduction under section 80HHC on the ground that on the same lease rental income, deduction under section 80IA has been allowed to the assessee and therefore in view of the section 80IA(9), deduction under section 80HHC of the Act is not allowable to the assessee The counsel for the assessee relied on the case of ACIT v. IPCA Laboratories 112 Taxman.com 332 (SC) in support of the proposition that deduction under section 80HHC of the ....
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.... the Act. 3. He pointed out that this issue had been referred to a Larger Bench of the Supreme Court in view of divergent views of the Hon'ble Judges in the case of ACIT Vs. M/s.Micro Labs Ltd. reported in 380 ITR 1 (SC).That pending disposal of this reference the present appeals were being adjourned time and again; that now this reference to the Larger Bench had been disposed of as dismissed. The ld.counsel for the assessee stated, therefore, that the issue had to be adjudicated in the light of the prevailing judgments of Hon'ble High Courts. He pointed out that the jurisdictional High Court had decided the issue against the case in the case of CIT Vs. Atul Intermediates, 45 taxmann.com 275 (Guj), and therefore, he ITA No.638 & 697/Ahd/2012 conceded that the assessee's appeal was without any merits, and needed to be dismissed. .............. 6. As is evident from the above, the solitary issue raised in the present appeal relates to the claim of deduction under section 80HHC of the Act; whether to be computed on the residual profits remaining after allowing deduction under section 80IA of the Act in terms of section 80IA(9) of the Act. Since t....
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....e Supreme Court has granted SLP and is in seizin of the controversy. Learned Judges of the Bench, who heard the appeals, were divided in their opinion each passing reasoned order. In view of this disagreement, the issue is now referred to the larger bench. These orders are reported in case of Asstt. CIT v. Micro Labs Ltd. [2016] 380 ITR 1/237 Taxman 74/[2015] 64 taxmann.com 199 (SC). Learned counsel for the assessee, therefore, submitted that these questions may also be kept pending or, at any rate, be allowed to be re-agitated. If by the time this appeal is taken up for hearing, the decision of the Supreme Court is available. 7. In view of the binding judgement of this Court which squarely covers the issue, we are unable to accept either of the two suggestions. Today, insofar as this Court is concerned, the question is governed by the decision in case of Atul Intermediates (supra).In absence of any extraordinary reasons, we are duty bound to follow the judgement. Such question is, therefore, rejected. 12.4 In the case of Atul Intermediates 45 taxmann.com275 (Gujarat), the High Court held that if an assessee has claimed deduction of profit or gains under section 80-IB, ....
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....een granted deduction under section 80-IA. Under such situation, to the extent specified in first part of sub-section (9), the assessee's claim of deduction under other provisions, including section 80HHC, would be restricted. Second implication of sub-section (9) of section 80-IA is that under no circumstances, once deduction has been granted under section 80-IA, deduction under any other provision combined together would exceed the total amount of profits and gains of eligible business of an undertaking or enterprise. This much is plain, and requires neither any imagination nor any interpretative process. Any other view would amount to obliterating the first part of sub-section (9) of section 80-IA, and would, thus, be wholly impermissible to do. If the sole intention of the Legislature was to limit various deductions to the maximum limit of the profit of the eligible business, why was such long and somewhat complex expression was used in sub-section (9) of section 80-IA? The same purpose could have been easily achieved by far briefer and more simple expression of providing maximum limit of deduction, for example, as was done in sub-section (2) of section 80A. Therefore, the ....
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....stricting the ambit of a benefit must yield in absence of such non obstante expression. [Para 25] - Sub-section (9) of section 80-IA was aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act. This provision, therefore, necessarily impacts other deduction provisions including section 80HHC. Nothing contained in section 80HHC suggests that the deduction provided therein was immune from any outside influence or that the provision was impregnable by any other statute or enactment. Accepting any such theory would lead to incongruous results. Even the assessee concedes that sub-section (9) of section 80-IA would operate as to limiting the combined deductions to a maximum of the profits and gains from an eligible business of the undertaking or enterprise. If section 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of section 80-IA could not be applied. This would completely render the provisions of sub-section (9) of section 80-IA redundant and meaningless. [Para 27] - It is true that in different p....
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.... deduction under any other provisions contained in sub-chapter C of Chapter VI in respect of any income specified in such section, notwithstanding anything contained in that section, for the purpose of computing deduction, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature, which is derived or received by the assessee, and which is included in his gross total income. The non obstante expression used in this section is notwithstanding contained in 'that section' namely, the section under which the claim of deduction is to be examined. By no means this provision of expression' notwithstanding anything contained in that section' can be used to interpret that section 80HHC can have no effect of sub-section (9) of section 80-IA. As noted earlier, if this were so, the second part of sub-section (9) limiting the total deductions to the profit and gain from the eligible business also could not be applied. [Para 32] - The question is answered in favour of the Revenue. 12.5 Further, there is also another direct decision rendered in the case of Shah Alloys Ltd ....