Deduction u/s 80IA and 80HHC are to be calculated independently on the eligible profits

2. After hearing both the parties, we find that Mumbai Bench of the Tribunal in ITA no.1901 and 1902 /Mum./2003, vide order dated 18^th August 2009, at Para-9, followed the order of another Bench of the Tribunal in the case of Geetanjali Chemicals Pvt. Ltd. in ITA no.1385/Mum./2004 and directed the Assessing Officer to compute independently deduction under sections 80IA and 80HHC of the Income Tax Act, 1961 (for short “the Act”). After such computation, it was directed that the Assessing Officer should ensure that total deduction does not exceed the profit and gains of the undertaking. The Assessing Officer has not followed these directions.

3. At Para-3.3.1, the Commissioner (Appeals) observed as follows:-

3.3.1 Therefore, from the above, it is explicitly made clear that the deduction under section 80IB and 80HHC are to be computed independently on the eligible profit of the undertaking. The deduction under section 80IB is to be allowed first and deduction under section 80HHC is to be allowed on the remaining profit and gains of the industrial undertaking. The Honourable ITAT has nowhere held that the deduction under section 80HHC is to be allowed on the profit of the business including deduction under section 80IB. On the other hand, as noted above the Honourable ITAT has clearly held that deduction under section 80HHC is to be allowed on the remaining profit and gains of the undertaking i.e., on the profit of the business reduced by the deduction allowed under section 80IB. Therefore, on account of these specific directions of the Honourable ITAT, I find that there is no mistake or wrong calculation of deduction under section 80IB and 80HHC on the part of the A.O. The claim of the appellant as mentioned above is misplaced. On the other words, the claim made is against the order of the Honourable ITAT. Therefore, I find no inconsistency or incorrect computation of deduction under section 80IB and 80HHC of the Act on the part of A. 0. The same is accordingly confirmed. Therefore, ground of appeal for both the assessment years is dismissed.”

4. On plain reading of the above paragraph, it is clear that there is a contradiction in the order of the Commissioner (Appeals). In the first line, the Commissioner (Appeals) says that deductions under section 80IB and 80HHC are to be computed independently, whereas, in the next sentence, he says that the Assessing Officer is right.