TaxTMI 
TaxTMI 
2026 (7) TMI 1243
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....rs 2002-03, 2003-04 and 2004-05, the appellant filed its returns of income claiming deductions under Sections 80HHC and 80IB of the Income Tax Act, 1961 (for short 'the Act'). Upon scrutiny, the Assessing Officer completed the assessments under Section 143(3) by disallowing the claim relating to deferred sales tax liability under Section 43B for the respective assessment years and consequently restricting the deductions admissible under Sections 80HHC and 80IB of the Act. 3. Aggrieved by the aforesaid disallowance, the appellant/assessee preferred appeals before the Commissioner of Income Tax (Appeals) (for short, 'CIT(A)'). The CIT(A), however, dismissed the appeals and affirmed the orders passed by the Assessing Officer. The appellant thereafter carried the matter in further appeal before the learned Income Tax Appellate Tribunal (hereinafter referred to as 'ITAT'), which also upheld the findings of the Assessing Authority. Aggrieved by the orders passed by the learned ITAT in the respective ITAs, the appellant has preferred the present appeals before this Court. 4. The learned Assessing Officer, the CIT(A) and the learned ITAT have concurrently held that the appellant/asse....
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....he learned ITAT and the lower authorities erred in holding that the deferred sales tax liability had not been converted into a loan solely on the ground that the assessee failed to produce the agreement to that effect. He further submits that the appellant had admittedly produced the Eligibility Certificate and as such, the conversion of the sales tax liability into a loan need not necessarily be evidenced by a formal agreement, and when once the competent authority passed adjustment orders giving effect to the deferment scheme by treating the sales tax dues as a loan liability, such adjustment itself constituted valid conversion. He further contends that the lower authorities, including the learned ITAT, failed to appreciate this aspect in its proper perspective. In this context, the learned counsel has drawn the attention of this Court to paragraph 9 of the order of the learned ITAT, which reads as follows: "Apart from eligibility certificate, the assessee has to show that the liability was in fact converted into loan by way of an agreement or by way of entry in the Government Account or by way of set-off or adjustment in the sales tax assessment order." 9. The learne....
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.... the expression "Government Loan extended to the dealer due to treating deferred tax as deemed to have been paid" was incorporated, to contend that the amendment recognizes the statutory position that, upon conversion under the Government scheme, the deferred sales tax liability assumes the character of a Government loan. Reliance is also placed on CBDT Circular No.496, dt.25.09.1987, which clarifies that where sales tax liability is converted into a loan in accordance with a Government Scheme, such conversion is to be treated as payment for the purposes of Section 43B of the Act. 12. Learned counsel for the appellant therefore, submitted that the findings recorded by the learned ITAT and the lower authorities cannot be sustained in view of the adjustment orders issued by the Commercial Tax Officer, which now satisfies the very deficiency noted by them, namely, the absence of material establishing conversion of the deferred sales tax liability into a loan, thereby entitling the appellant to the benefit under Section 43B of the Act. 13. The learned counsel also relies upon the decision of the Hon'ble Punjab and Haryana High Court in CIT v. Gopal Cotton Industries 2017 392 ....
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....s tax liability had been converted into a Government loan during the relevant assessment years, and that mere production of the Eligibility Certificate was not sufficient to claim the benefit under Section 43B of the Act, and that the Tribunal rightly held that the assessee was required to establish such conversion by cogent evidence, which it failed to do. 17. The learned Senior Standing Counsel further submits that the adjustment orders now relied upon by the appellant were not produced before any of the authorities below and cannot be relied upon at this stage to overcome the deficiencies in the appellant's case. She further contends that the concurrent findings recorded by the authorities are based on the material available before them and do not call for interference. Further, neither Section 16C of the Andhra Pradesh General Sales Tax Act nor CBDT Circular No.496 assists the appellant in the absence of proof of actual conversion of the deferred tax liability into a Government loan, and therefore the learned Senior Standing Counsel vehemently opposes the request for remand for giving the benefit under Section 43B of the Act. 18. With regard to the deduction under Sec....
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....ment deferment schemes and the applicable assessment years. If this is intended to be part of a High Court judgment, it would be preferable to quote the exact statutory text applicable to AYs 2002-03 to 2004-05 from the Bare Act rather than paraphrase it. ...." 21. It is not in dispute that the assessment order was passed on 09.03.2006 and that the appellant/assessee had already been granted the benefit of sales tax deferment for the assessment years 2002-03 to 2004-05. It is equally undisputed that the Commercial Tax Officer subsequently issued Form VAT 205 adjustment orders in the years 2016, 2017 and 2022, for the respective assessment years, which were admittedly not available when the Assessing Officer completed the assessments. They were also not in existence when the appeals were heard by the learned ITAT or even when the present appeals were instituted before this Court. 22. Be that as it may, the adjustment orders have now been passed by the competent statutory authority, namely, the Commercial Tax Officer, in exercise of the powers vested in him under the relevant enactment. Though the appellant has filed applications under Order XLI Rule 27 of the Code of ....
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....he present appeals. 26. For better understanding, the relevant observations contained in paragraphs 20 to 24 of the judgment in Shital Fibers Ltd.'s case(supra), are extracted hereunder: "20. Therefore, on plain reading of Sub-section (9) of Section 80-IA, if a deduction of profits and gains under Section 80-IA is claimed and allowed, the deduction to the extent of such profits and gains in any other provision under the heading 'C' is not allowed. The deduction to the extent allowed under Section 80-IA cannot be allowed under any other provision under heading 'C'. Therefore, if deduction to the extent of 'X' is claimed and allowed out of gross total income of 'Y' under Section 80-IA and the assessee wants to claim deduction under any other provision under the heading 'C', though he may be entitled to deduction 'Y' under the said provision, he will get deduction under the other provisions to the extent of (Y-X) and in no case total deductions under heading 'C' can exceed the profits and gains of such eligible business of undertaking or enterprise. 21. Sub-section (9) of Section 80-IA, on its plain reading, does not provide that when a deduction is allowed under ....
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....method of computing the deduction provided under other provisions under heading C of Chapter VI-A of the Act. In these circumstances, we find it difficult to concur with the views expressed by the Delhi High Court in the case of Great Eastern Exports [2011] 332 ITR 14. For the same reason, we find it difficult to subscribe to the views expressed by the Kerala High Court in the case of Olam Exports [2011] 332ITR 40. 41. In the result, we hold that section 80-IA(9) does not affect the computability of deduction under various provisions under heading C of Chapter VI-A, but it affects the allowability of deductions computed under various provisions under heading C of Chapter VI-A, so that the aggregate deduction under section 80-IA and other provisions under heading C of Chapter VI-A do not exceed 100 per cent. of the profits of the business of the assessee. Our above view is also supported by the dated December 23, 1998 ((1999) 235 TR (St.)35), wherein it is stated that section 80-IA(9) has been introduced with a view to prevent the taxpayers from claiming repeated deductions in respect of the same amount of eligible income and that too in excess of the eligible profits. Thus....
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....d be Rs. 700, and not Rs.1000. 48. On the other hand, the case of the assessee is that the gross total income would not undergo a change or reduction for the purpose of Section 80-HHC. The two deductions will be computed separately, without the deduction allowed under Section 80-IA being reduced from the gross total income for computing the deduction under Section 80-HHC. The reason being that sub-section (9) of Section 80-IA does not affect computation of deduction under Section 80-HHC, but postulates that the deduction computed under Section 80-HHC so aggregated with the deduction under Section 80-IA does not exceed the profits of the business." In paragraphs 53 and 54 of the same decision, it is held thus:- "53. The first part of sub-section (9) of Section 80-IA refers to the computation of profits and gains of an undertaking or enterprise allowed under Section 80-IA in any assessment year and the amount so calculated shall not be allowed as a deduction under any other provisions of this Chapter. It is in this context that the Bombay High Court has rightly pointed out that there is a difference between allowing a deduction and computation of deduction.....
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....hich includes export turnover of Rs 5000 and the deduction allowable under Section 80-IA was 30% and the deduction allowable under Section 80-HHC was 80% of the eligible profits as computed under Section 80-HHC(3). The stand of the Revenue is that without alteration or modification of the figures of total turnover and the export turnover, the gross total income would undergo a reduction from Rs 1000 to Rs 700 as Rs 300 has been allowed as a deduction under Section 80-IA. This would result in anomaly for the said figure would not be the actual and true figure or the true gross total income or profit earned on the total turnover including export turnover and, therefore, would give a somewhat unusual and unacceptable result. There is no logic or rationale for making the calculation in the said impracticable and unintelligible manner. 24. In view of what we have held above, we find that the interpretation made by the Bombay High Court in the case of Associated Capsules (P) Ltd. v. Deputy Commissioner of Income Tax and Anr. (Civil Appeal No.1914 OF 2012, dt.08.02.2012) appears to be logical and correct." 27. In view of the law laid down by the Hon'ble Supreme Court in Shital....