RELEVANT EXTRACTS:
1. This Special Bench was constituted on the recommendation of the regular Bench which was hearing above appeals. The controversy relates to the computation of deduction u/s 80HHC to an assessee (industrial undertaking) after it has been allowed deduction u/s 80-IB of the Income Tax Act. In other words, the effect of provision of Section 80-IA(9) introduced w.e.f. 1.4.1999 is to be seen.
2. Earlier Special Bench (ITAT ‘D’ Bench) at Chennai in the case of ACIT Vs Rogini Garments (2007) 108 ITD 49 was constituted to consider similar controversy when conflict of views between different benches of ITAT was found. The Special Bench after hearing both the parties had held that where deduction u/s 80HHC as also u/s 80-IA are claimed for AYs 1999-2000 and 2002-03, then relief allowed u/s 80-IA is to be deducted from profits and gains of assessee’s business on which relief u/s 80HHC of the Act is to be computed. After the above Special Bench, the Hon’ble Madras High Court in the case of SCM Creations decided the same question and took a view which some benches thought was different from the view taken by Special Bench in the case of Rogini Garments. It was thought by these benches that Rogini Garments is no more applicable after the decision of SCM Creations (supra). The referral Bench hearing these appeals noticed that Delhi ‘F’ Bench of the Tribunal, in case of Sarla Fashions & Modi Exports (ITA No. 1799 & 1085/D/06 for AY 2001-02 and 2002-03), decided a similar view in favor of the assessee in the light of above decision of Hon’ble Madras High Court. Similarly, Delhi Bench of the Tribunal in the case of Anil Kumar Rastogi Vs ACIT and Stanrose Mesowares (P) Ltd. Vs ACIT (ITA No. 2465/D/07 and ITA No. 1567/D/07) respectively took a similar view in favour of the taxpayer. Above case fell under the jurisdiction of Allahabad High Court. The Revenue had submitted before the referral Bench that Delhi Tribunal in above cases committed an error in not properly considering the decision of the Hon’ble Madras High Court in the case of SCM Creations. The revenue further relied upon the decision of the Delhi Bench in the case of Modi Exports Vs ACIT 24 SOT 526 where the case of SCM Creations (supra) was held to be not applicable. Several other Benches have held that applicability of Special Bench decision in the case of Rogini Garments was not affected by decision of Hon’ble Madras High Court in the case of SCM Creations. The referral Bench, in the light of conflict of views of different benches, thought it proper to refer the matter to the President for constitution of a larger special bench. Accordingly, a Special Bench of five Members was constituted to consider the following question:-
“Whether in view of the provisions of Section 80-IA(9) read with Section 80IB(13), the deduction of income under Chapter VI-A can be allowed on the entire profit and gains of an undertaking or an enterprise of an assessee or it is to be allowed on such profit and gains as are reduced by the deduction claimed and allowed under section 80IB/80IA.”
18. The legislature by Finance (No.2) Act 1998 w.e.f. April 1, 1999 introduced the following provision as sub-section (9) of section 80-IA:-
“Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
80-IA(9) Where any amount of profits and gains of an [undertaking] or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading “C.—Deductions in respect of certain incomes”, and shall in no case exceed the profits and gains of such eligible business of [undertaking] or enterprise, as the case may be.”
The provision has been made applicable to S.80IB by insertion of sub-section 13 noted above.
19. The above provision seems to have been introduced after taking note of observations of their lordships in the case of J.P. Tobacco (P) Ltd. Vs CIT and other similar decisions noted above. The Madhya Pradesh High Court had held that “no such provision was made in so far as Section 80-IA was concerned.” Courts have elaborately discussed that under sub-section (9) of Section 80HH and other provisions only priorities of deduction under different sections were fixed. In order to meet the lacuna pointed out by High Courts, the legislature added sub-section (9) in section 80-IA and a provision (sub-section 13) with a similar effect in Section 80-IB of the Act. It is therefore evident that there was change in the legislative policy. The mischief was sought to be removed. To the extent deduction allowed u/s 80-IA or for that matter in Section 80-IB was not to be allowed under any other provision of the Chapter under the heading “C – Deductions in respect of certain incomes” (hereinafter deduction under ‘C’ chapter VI-A). In other words, deficiency in the provision pointed out by the Hon’ble High Court in the case of J.P. Tobacco Products Pvt. Ltd. and in other cases noted above was covered and a specific provision to the above effect was made. It is not in dispute that in the case of J.P. Tobacco Products Pvt. and other decisions, no question of consideration of provision (80-IA)(9) arose as these cases pertained to Asstt. Years earlier than Asst. Year 1999-2000. In the case S.C.M. Creations (supra), as noted above, ld. Representative of the parties did not bring to the notice of their lordships the change in the statutory provision. The case was decided on concession by ld. Representative of parties. Applicability of section 80-IA(9) or similar provision u/s 80-IB was not considered by the Hon’ble Court. The case pertained to an assessment year after 1.4.99, yet the pre- amended law was applied. This fact is quite evident from the decision quoted above and is not in dispute.
19.1 Legal position of such a decision, as a binding precedent is quite clear. In the case of B.Bhama Rao vs Union Territory of Pondicherry AIR 1967 SC 1480, their Lordships of Supreme Court stated as under:-
“It is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles laid down therein. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law.”
