TaxTMI 
TaxTMI 
2026 (6) TMI 1456
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....e respondents in Tax Appeal Nos. 558 of 1999, 559 of 1999 and 469 of 2000. 2. These appeals are pending in view of the order dated 21.8.2025 passed by the Honourable Supreme Court in Civil Appeal No. 13477 of 2024 with Civil Appeal Nos.13478 - 13480 of 2024 and Civil Appeal No. 13481 of 2024 whereby the Honourable Supreme Court set aside the order dated 27.8.2007 passed by the Court in Tax appeal No. 378 of 1999 with Tax Appeal Nos.558 of 1999 and 559 of 1999 and the order dated 20.11.2007 passed in Tax Appeal No.469 of 2000 and remanded the matters for fresh consideration in accordance with law keeping in mind the judgment of the Honourable Supreme Court in the case of Vijay Industries Vs Commissioner of Income Tax, reported in (2019) 412 ITR 1 (SC). 3. The common question which is arising in these appeals which are admitted for consideration is as under. "Whether in law and in facts and circumstances of the appellant's case, the Tribunal was justified in rejecting the appellant's contention that deduction under Section 80-I of the I.T. Act should allowed on profit of Industrial Undertaking without reducing the claim of Investment Deposit under Section 32AB of I.T. ....
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....d decided the same against the assessee on merits. The Tribunal in I.T.A.No.5665 of 1991 in paragraphs 13, 20 and 21, it is observed as under. "13. For the purposes of computing the deduction u/s 80 the provisions of sec 80AB and 80B(5) of the Act are relevant. Sec 80AB refers to deduction to be made with reference to the income included in the gross total income. The expression Gross total income has been defined u/s 80B(5) to mean the total income computed in accordance with the provisions of this Act before making any deductions under chapter VI-A. On a fair reading of the entire scheme for computation of deductions as enumerated in chapter - VI C it is clear that deduction is to be calculated with reference to the income arrived at as per the provisions of the Act i.e. after making deduction u/s 32AB. The additional ground of appeal raised by the assessee is therefore without merit and is dismissed. Since the issue is covered by the supreme Court decisions as cited above, we do not consider it necessary to discuss the decisions of the Ahmedabad Tribunal as well as other cases cited by the ld. Counsel. The additional ground is therefore dismissed. With regard to the qua....
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....d "Profits and gains of business or profession", has, out of such income,- (a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a), in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a 2[deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of]- (i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised; or (ii) a sum equal to twenty per cent. of the p....
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....of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (iv) the amounts carried to any reserves, by whatever name called; (v) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; (vi) the amount by way of provision for losses of subsidiary companies; and (vii) the amount or amounts of dividends paid or proposed, if any debited to the profit and loss account; and as reduced by any amount or amounts withdrawn from reserves or provisions, if such amounts are credited to the profit and loss account [***.] [***] (4) No deduction under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of- (a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house; (b) any office appliances (not being computers); (c) any road transport vehicles; (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the inc....
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....-section (5A), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.] (5B) Where any amount standing to the credit of the assessee in the deposit account is utilised by the assessee for the purposes of any expenditure in connection with the [***] business or profession in accordance with the scheme, such expenditure shall not be allowed in computing the income chargeable under the head "Profits and gains of business or profession".] (6) Where any amount, standing to the credit of the assessee in the deposit account, released during any previous year by the Development Bank for being utilised by the assessee for the purposes specified in the scheme or at the closure of the account [in circumstances other than the circumstances specified in clauses (b), (c) and (e) of sub-section (5A)], [is not utilised in accordance with and within the time specified in, the scheme], either wholly or in part, [***] the whole of such amount or, a....
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....t the provisions of this section shall not apply to any class of assessees, with effect from such date as it may specify in the notification. [(10) Where a deduction has been allowed to an assessee under this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year.] Explanation.-In this section,- (a) "computers" does not include calculating machines and calculating devices; (b) "Development Bank" means- (i) in the case of an assessee carrying on business of growing and manufacturing tea in India, the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (ii) in the case of other assessees, the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank or institution as ma....
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....is section, be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty-five per cent.", the words "thirty per cent." had been substituted.] (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of [ten years] next fo....
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....th. Explanation 3.-For the purposes of this sub-section, "small-scale industrial undertaking" shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. (3) This section applies to any ship, where all the following conditions are fulfilled, namely:- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time within the period of 1[ten years] next following the 1st day of April, 1981. (4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely:- (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (ii) the business of the hotel is owned and carried....
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....undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; or (ii) a ship which is first brought into use; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 3[but before the 1st day of April, 1991], provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been substituted: Provided also that in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso shall have effect as if for the words "nine assessment years", the words "eleven assessment years" had been substituted.] (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel [or the business of repairs to ocean-going vessels or other powered craft] to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-sec....
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....hat where, in the opinion of the [Assessing Officer], the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship [or the business of repairs to ocean-going vessels or other powered craft] in the manner hereinbefore specified presents exceptional difficulties, the [Assessing Officer] may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, "market value", in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. (9) Where it appears to the [Assessing Officer] that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship [or the business of repairs to ocean-going vessels or other powered craft] to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the ....
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....ment dated 17th May, 2004 construed Section 80-HH of the Income Tax Act, 1961 following a judgment of this Court in Motilal Pesticides(I) Pvt. Ltd. Vs. Commissioner of Income Tax, Delhi-II (2000) 9 SCC 63. The High Court noticed an argument made before it to the following effect: "It is most humbly submitted that the concept 'profits and gains' is a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred 2 from the figure of sales by the assessee. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee. However, the term 'income' does take into consideration the deductions on account of depreciation and investment allowance. Therefore, the term profits and gains are not synonymous with the term 'income'. However, the High Court correctly felt that it was bound by the judgment of this Court. 2. Motilal Pesticides(I) Pvt. Limited (Supra) is a Judgment of this Court which affirmed the Judgment of the Delhi High Court concerning the interpretation of the very same Section 80-HH of the Income Tax Act. The assessm....
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....other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India. But does not apply to any Indian Company referred to in Clause (1), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in Section 108 of its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees". 6. It will be noticed that in marked contrast to the Section under consideration in this appeal i.e. 80-HH, Section 80-E uses the expression "total income [as 5 computed in accordance with the provisions of this Act]" and goes on to speak of any profits and gains, so computed, for the purpose of deduction under Section 80-E. It will be seen in the present case the said words are conspicuous by their absence in Section 80-HH even though the expression "profits and gains" is the same expression used in section 80-E. 7. The finding in paragraph 4 in Motilal Pesticides (supra) that the language of Section 80-HH and Section 80-M is the same is, with respect, prima facie, incorrect. Conceptually, "any....
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....with the provisions contained in Sections 30-43D of the Act. Sections 30-43D contain deductions of various kinds which are in the nature of expenditure or the like nature. After providing the deductions admissible in these provisions, one arrives at the figure of net profits which would become the net income under the head 'profits and gains of business or profession'. In contrast, as mentioned above, under Chapter VI-A of the Act certain deductions are given by way of incentives. Assessees may earn these deductions on fulfilling the eligibility conditions contained therein, even when they are not in the nature of any expenditure incurred by the assessee. Here, Section 80A of the Act provides that in computing the total income of assessee, there shall be allowed from his gross total income, in accordance with the subject of the provisions of this Chapter, the deductions specified in Sections 80C to 80U. As mentioned above, Sections 80C to 80U contain different subject matters and also specify particular percentage of deductions for a particular period. Significantly, Section 80A itself uses the expression 'from his gross total income' as it states that deduction is to be a....