Brakes India Limited Vs ACIT (Madras High Court)
The appeal arose from the assessment for AY 2002-03, in which the assessee, engaged in the manufacture of automobile parts, claimed deductions under Sections 80-G, 80-HHC and 80-IA of the Income-tax Act. The Assessing Officer completed the assessment under Section 143(3) and, among other adjustments, restricted the deductions claimed under Sections 80-HHC and 80-IA. The appellate authority partly allowed the assessee’s appeal, confirming the disallowance of simultaneous deductions under Sections 80-HHC and 80-IB, while accepting the alternate contention relating to computation of deduction under Section 80-HHC. It also held that 90% of scrap sale should not be excluded from business profits or treated as part of total turnover for computing deduction under Section 80-HHC. However, the assessee’s claims relating to sub-contract income, lease rental, interest and duty drawback were rejected. Both the assessee and the Revenue appealed before the ITAT, which partly allowed both appeals, leading to the present appeal before the Madras High Court.
The High Court considered three substantial questions of law. The first concerned whether deduction allowed under Section 80-IA should be deducted from business profits before computing deduction under Section 80-HHC. Relying on the Supreme Court decision in Shital Fibres Ltd., the Court noted that Section 80-IA(9) restricts double deduction to the extent of profits already allowed under Section 80-IA but does not require reduction of the deduction from the gross total income while computing deductions under other provisions of Chapter VI-A.
