Thursday, 17 April 2014

Whether assessee can claim deduction u/s 80HHC, ignoring the deduction already claimed and allowed u/s 80IA - NO: High Court

On Appeal before the HC the Revenue Counsel submitted that once a deduction has been claimed, and allowed u/s 80IA, no deduction under Chapter VI under the heading `C. Deductions in respect of certain incomes' is to be allowed to that extent. The Counsel further submitted that Effect of sub-section (9) cannot be restricted to limiting the deduction to hundred per cent of the profit of the eligible business. It also submitted that Board's circular No. 772 dated 23rd December 1998 does not restrict the scope of sub-section (9) of section 80IA. The Assessee Counsel submitted that sole intention of the Legislature in introducing subsection (9) of section

80IA was to restrict the benefit of deduction under Chapter VI under the heading `C. Deductions in respect of certain incomes' to a maximum of hundred per cent of the eligible business. No further meaning can be ascribed to the said provision. Secondly, sub-section (9) of section 80IA is not given overriding effect over the other provisions. The said provision, therefore, cannot be applied for computing the deduction under section 80HHC by substituting the term `business profit' as explained in clause (baa) of explanation to section 80HHC. The Counsel also submitted that deduction u/s 80HHC is to be computed independently of any other claim of deduction of the assessee.

Having heard the parties, the HC held that,

++ it is well settled that the Legislature cannot be expected to have used words and expressions, which have no meaning or effect. Limiting the scope of application of sub-section (9) of section 80IA only to restricting the claim of deduction u/s 80HHC or for that matter under the provisions of sub-chapter C to Chapter VI would amount to giving no effect to the earlier portion of the subsection, which specifically provides for making a disallowance of deduction claimed by the assessee under various provisions contained in sub-chapter C profit or gain of an undertaking or enterprise which has already been claimed and allowed under section 80IA;

++ subsection (9) of section 80IA has two implications. First part would operate as to denying an assessee's claim of deduction under other provisions of sub-chapter C of Chapter VI when a certain profit or gain has already been granted deduction u/s 80IA. 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 subsection (9) of section 80IA is that under no circumstances, once deduction has been granted under section 80IA, 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 80IA, 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 80IA? 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;

++ merely because sub-section (9) of section 80IA does not contain non-obstante clause would not by itself mean that it can have no effect on the deduction u/s 80HHC. In absence of a non-obstante clause, even if there is no conflict between the two statutory provisions, the provision restricting the ambit of a benefit must yield in absence of such non-obstante expression;

++ sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI. It was neither possible nor expected of the Legislature to make individual matching provisions in large number of .In plain terms subsection (9) of section 80IA disentitles an assessee from claiming deduction under any other provision of sub-chapter C to the extent deduction is already claimed and allowed for certain profit or gain of an undertaking or enterprise under section 80IA. Such provision, therefore, would have to be applied at the very stage to assessee's claim for deduction u/s 80HHC is considered. While computing such deduction the effect of sub-section (9) of section 80IA would have to be given. 

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