Section 80-IA(9) cannot be interpreted to mean that s. 80-IA deduction has to be reduced for computing deduction U/s. 80HHC – Bombay HC

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO. 3036 OF 2010

Versus

1. Dy. Commissioner of Income Tax

2. Commissioner of Income ­tax

CORAM : J.P. Devadhar &R.M. Savant, JJ.

Reserved on : 21st December, 2010.

Pronounced on : 10th January, 2011.

JUDGMENT: (Per J.P. Devadhar, J.)

1. This appeal was admitted on 23rd August 2010 on two questions of law. However, at the hearing of the appeal, the said two questions were re­framed into one question of law, which reads thus :

“Whether the Tribunal was justified in holding that Section 80IA(9) of the Income Tax Act, 1961 mandates that the amount of profits allowed as deduction under Section 80IA(1) of the Act has to be reduced from the profits of the business of the undertaking while computing deduction under any other provisions under heading ‘C’ in Chapter VI­A of the Income Tax Act, 1961 ?”

2. The assessment year involved herein is A.Y. 2003­-2004.

3. The appellant (herein after referred to as ‘the assessee’) is engaged in the business of manufacture of Empty Hard Gelatin Capsules and PVDC Capsules. For the above business, the assessee has set up four industrial undertakings at Kandivali, Mumbai and two industrial units at Pune. Out of the above industrial undertakings / units, one undertaking at Kandivali, Mumbai and one unit at Pune are eligible for deduction under Section 80IA and Section 80HHC of the Income Tax Act, 1961 (‘the said Act’ for short).

4. In the assessment year in question i.e. A.Y. 2003­2004, the assessee claimed deduction under Section 80IA at 30 per cent of the profits and gains derived from the business and deduction under Section 80HHC at 50 per cent of the profits derived from the export of goods or merchandise determined on the basis of the formula set out in Section 80HHC of the Act.

5. The assessing officer in his assessment order passed under Section 143(3) of the Act disagreed with the quantum of deduction computed by the assessee under Section 80HHC of the Act. According to the assessing officer, where deduction under Section 80IA is claimed and allowed, then Section 80IA(9) of the Act requires that the quantum of deduction allowable under any section under heading ‘C’ of Chapter VI­A has to be computed not on the total profits of the business but on the profits of the business as reduced by the profits of business allowed as deduction under Section 80IA(1) of the Act. In other words, according to the assessing officer, if the assessee is entitled to deduction under Sections 80IA and 80HHC, then, deduction under Section 80IA(1) has to be computed and allowed on the profits of the business and the deduction allowable under Section 80HHC has to be computed on the profits of the business as reduced by the profits allowed as deduction under Section 80IA of the Act.

6. On appeal filed by the assessee, the Commissioner of Income Tax (Appeals) by his order dated 10th May 2005 allowed the appeal, by holding that Section 80IA (9) does not authorize the A.O. to reduce the amount of profits of business allowed as deduction under Section 80IA from the total profits of business while computing deduction under Section 80HHC. According to the Commissioner of Income Tax (Appeals), where the assessee is entitled to deduction under Section 80IA and Section 80HHC, then the deduction under both the Sections have to be computed independently and thereafter, the deduction computed under Section 80IA has to be allowed in full and the deduction computed under Section 80HHC has to be restricted to the profits of the business reduced by the profits allowed under Section 80IA, so that the deductions under both the Sections (80IA and 80HHC in the present case) do not exceed the profits of the business of the undertaking.

7. Challenging the order of the Commissioner of Income Tax (Appeals), the Revenue filed an appeal before the Income Tax Appellate Tribunal (‘Tribunal’ for short). By the impugned order dated 15th December 2009, the Tribunal reversed the decision of the Commissioner of Income Tax (Appeals) by following the Special Bench decision of the Tribunal in the case of Assistant Commissioner of Income Tax V/s. Hindustan Mint & Agro

Products (P) Limited reported in 2009 (119) ITD 107 (Del.). The Tribunal held that Section 80IA(9) affects the computation of deduction under Section 80HHC of the Act and not allowance of deduction computed under Section 80HHC of the Act. Being aggrieved by the aforesaid order of the Tribunal dated 15th December 2009, the assessee has filed the present appeal.

8. Mr. Mistri, learned Senior Advocate appearing on behalf of the assessee and Dr.K. Shivram, Mr.V. Sridharan, Mr.Jitendra Jain as well as Mr. F.B. Andhyarujina, Senior Advocate appearing as Counsel for the intervenors submitted that in the present case, the restriction imposed by Section 80IA(9) is not applicable at the stage of computation of deduction under Section 80HHC (3) but is applicable at the stage of allowing deduction under Section 80HHC (1). It is submitted that plain reading of Section 80IA(9) does not in any way suggest that the deduction allowable under Section 80HHC has to be computed by reducing the amount of profits allowed as deduction under Section 80IA. Referring to Section 80HHB (5), 80HHBA (4), 80HHD (7) and Section 80P(3) of the Act, it is submitted that whenever, the legislature intended that the deduction allowed under one Section shall affect the computation of deduction allowable under other Section, the legislature has specifically stated so. For example, in Section 80HHB(5), it is provided that notwithstanding anything contained in any other provision under heading ‘C’ of Chapter VI­A, no part of the consideration or of the income covered under Section 80HHB (1) shall qualify for deduction for any assessment year under any other provision. Similarly, Section 80HHD (7) provides that where a deduction under Section 80HHD (1) is claimed and allowed in respect of profits derived from the business of a hotel, such part of profits shall not qualify to that extent for deduction for any assessment year under any other provisions of Chapter VI­A under the heading ‘C’. Since the words ‘such part of profits shall not qualify’ is missing in Section 80IA(9), it is submitted that no inference can be drawn that Section 80IA(9) contemplates that the amount of profits claimed and allowed under Section 80­IA has to be deducted from the profits of business while computing deduction under Section 80HHC.

9. It is further contended on behalf of the assessees that the expression ‘profits of the business’ for the purpose of deduction under Section 80HHC is defined in clause (baa) of Section 80HHC. If the legislature intended that the deduction allowed under Section 80IA has to be excluded from the profits of business while computing the deduction under Section 80HHC, then the legislature would have used the non obstante provision as found in Sections 80HHB (5) and 80HHBA (4). It is submitted that unless the restriction is placed by way of non obstante provision, it would not be possible for the Revenue to tinker with the method / manner of computation of deduction allowable under Section 80HHC of the Act.

10. Counsel for the assessees further submitted that the Special Bench of the Tribunal in the case of Hindustan Mint & Agro Products P. Limited (supra) as also in the case of Commissioner of Income Tax V/s. Rogini Garments reported in 108 ITD 49 (Chen) have failed to appreciate that the effect of Section 80IA(9) has to be given at the stage of allowing deduction and not at the stage of computing deduction. Counsel for the assessees submitted that the restriction under Section 80IA(9) is in respect of the amount of profits for which deduction is claimed and allowed under Section 80IA(1). Therefore, in order to apply Section 80IA(9) it is necessary to establish that on the very same amount of profits on which deduction is allowed under Section 80IA(1), deduction is also claimed under any other provisions under the heading ‘C’ of Chapter VI­A (in the present case Section 80HHC). There is no material on record to suggest that on the very same amount of profits on which deduction is allowed under Section 80IA(1), the assessee is claiming deduction under Section 80HHC. Therefore, there is no scope for reducing the amount allowed as deduction under Section 80IA from the profits of business while computing deduction under Section 80HHC.

11. Counsel for the assessees further submitted that the deduction under Section 80IA is computed on the basis of profits and gains derived by an eligible undertaking, whereas, deduction under Section 80HHC is based on the profits and gains derived by an assessee from the export of goods and merchandise, as computed under the head profits and gains of the business of the assessee. Thus, the basis for deduction under Section 80IA and 80HHC are totally different. Therefore, the restriction imposed under Section 80IA(9) has no relation to the computation of deduction under Section 80HHC.

12. Counsel for the assessees further submitted that Section 80HHC comprehensively set out the method of computation of deduction and the conditions to be fulfilled for allowing deduction under Section 80HHC. In the case of a manufacturer exporter, the deduction under Section 80HHC (1) is to be computed by applying the formula set out under Section 80HHC(3) (a) as follows :

In the case of a trader exporter, Section 80HHC (3) (b), provides that the deduction under Section 80HHC (1) shall be on the export turnover as reduced by the direct costs and the indirect costs attributable to the export of trading goods from the amount of export turnover. Section 80IA(9) does not seek to disturb the above method of computation of deduction provided under Section 80HHC, but it merely seeks to restrict the deduction computed under Section 80HHC to the extent of profits of business reduced by the amount of profits allowed under Section 80IA so that the aggregate deduction under heading ‘C’ of Chapter VI­A does not exceed the profits of the business.

13. It is further contended that the two restrictions contained in Section 80IA(9) viz. the deduction allowed under Section 80IA shall not be allowed under any other provisions under the heading ‘C’ of Chapter VI­A and that in no case the deduction shall exceed the profits and gains of such eligible business of undertaking or enterprise have to be read together and on reading so, it becomes clear that the restrictions in Section 80IA(9) are with reference to allow ability and not computability of deduction under other provisions in heading ‘C’ of Chapter VI­A of the Act.

14. Referring to the memorandum explaining the reasons for inserting Section 80IA(9) by Finance Bill, 1998 and the Board’s circular No. 772 dated 23­12­1998, it is contended that the object of inserting Section 80IA(9) was that in certain cases it was noticed that the assessee’s were allowed deduction in excess of the profits and gains of the undertaking and, therefore, with a view to prevent the tax­payer from taking undue advantage of the existing provisions of the Act by claiming repeated deductions in respect of the same amount of eligible income, in­built restriction were provided by introducing Section 80IA(9) so that unintended benefits are not passed on to the assessees. Thus, Section 80IA(9) restriction is with reference to the allow ability of deduction and not computation of deduction under other provisions in heading ‘C’ of Chapter VI­A of the Act. In other words, it is argued, that the object of inserting Section 80IA(9) is that where deduction is allowable under Section 80IA(1) and any other provision under heading ‘C’ of Chapter VI­A, then deduction should be first allowed under Section 80IA and the deduction computed under other Sections under heading ‘C’ of Chapter VI­A has to be allowed on the profits reduced by the profits allowed under Section 80IA(1), so that the overall deduction shall not exceed the profits and gains of the business of the eligible undertaking.

15. Alternatively, it is contended that if Section 80IA(9) is held to affect the computation of deduction under Section 80HHC, then it needs to be considered that the deduction under Section 80HHC is not claimed on the profits on which deduction is claimed under Section 80IA. In the present case, deduction under Section 80IA is on one part of the profits, while deduction under Section 80HHC is on the profits derived from exports and thus deduction under Section 80IA & 80HHC are not allowed on the same profit. In this connection, reliance is placed on a decision of the Calcutta High Court in the case of Woolcombers of India Limited V/s. Commissioner of Income Tax reported in 134 ITR 219 (cal), which is upheld by the Apex Court in the case of East India Pharmaceutical Works Limited V/s. Commissioner of Income Tax reported in 224 ITR 627 (S.C.).

16. Mr.Vimal Gupta, Mr. Suresh Kumar and Mr. Sahadevan, learned Counsel appearing on behalf of the Revenue submitted that a plain reading of Section 80IA(9), clearly shows that the deduction to the extent of profits claimed and allowed under Section 80IA cannot be taken into account while computing deduction under Section 80HHC. Therefore, the assessing officer as well as the Tribunal were justified in reducing the amount of profits allowed as deduction under Section 80IA while computing the deduction under Section 80HHC of the Act.

17. Counsel for the Revenue further submitted that Section 80IA(9) was introduced to avoid repeated deductions in respect of the same profits claimed and allowed under Section 80IA, which may be eligible for deduction under any other Section covered under part C of Chapter VI­A. Section 80IA (9) is intended to check the misuse of double deduction on the same profits eligible for deduction under Part C of Chapter VI­A. Therefore, to give effect to Section 80IA(9) of the Act, it is necessary to exclude the deduction to the extent of profits claimed and allowed under Section 80IA from the profits available for deduction under Section 80HHC of the Act.

18. Relying on the decision of the Apex Court in the case of Commissioner of Income Tax V/s. K. Ravindranathan Nair reported in 295 ITR 288(S.C.), it is submitted by the Counsel for the Revenue that Section 80HHC is not a self­contained code and hence open to the restrictions and accordingly by inserting Section 80IA(9), the legislature has imposed restrictions on the computation of deduction allowable under Section 80HHC. Therefore, the Tribunal was justified in following the Special Bench decision of the Tribunal in the case of Hindustan Mint & Agro Products (P) Limited (supra), wherein it is held that to the extent of the amount of profits of business on which 80IA deduction is allowed, no other deduction shall be allowed under any other provisions under Part ‘C’ of Chapter VI­A of the Act.

19. The decision of the Special Bench in the case of Hindustan Mint and Agro Products (P) Limited (supra) has been affirmed by the Delhi High Court in the case of M/s.Great Eastern Exports V/s. Commissioner of Income Tax (Tax Appeal No.267 of 2008) decided on 29­11­2010. Similar view has also been taken by the Kerala High Court in the case of Olam Exports (India) Limited V/s. Commissioner of Income Tax reported in (2009) 184 Taxman 373. In these circumstances, it is submitted that similar view be taken in the matter so that there is consistency or uniformity of decision on the question raised in this appeal.

20. Lastly, it is contended on behalf of the Revenue that Section 80IA(9) affects whole of Section 80HHC and it cannot be said that even though Section 80HHC is subject to Section 80IA(9), the manner of computation of deduction under Section 80HHC is not affected. It is submitted that the words ‘profits of business’ defined under clause (baa) of the Explanation to Section 80HHC would be subject to further restriction contained in Section 80IA(9). It is submitted that the expression ‘profits of business’ under Section 80HHC is subject to the restrictions contained in clause (baa) and 80HHC (4B) and the restriction in Section 80IA(9), if the undertaking avails deduction under Section 80IA. Accordingly, it is submitted that the question raised in this appeal be answered in favour of the Revenue and against the assessee.

21. We have carefully considered the rival submissions as also the decisions of two High Courts, wherein similar question has been answered in favor of the Revenue. However, we find it difficult to concur with the views expressed therein for the reasons enumerated herein below.

22. Chapter VI­A of the Act provides for variety of deductions to be made in computing the total income. Chapter VI­A is divided in to four parts viz. Part A, B, C & D. Part A (Sections 80A to 80B) deals with general provisions, Part B (Sections 80C to 80GGC) deals with deductions in respect of certain payments, Part C (Sections 80H to 80TT) provides for deductions in respect of certain incomes and Part D (Sections 80U to 80VV) deals with other deductions.

23. As per Section 80A(2) in part A of Chapter VI­A, the aggregate amount of deduction allowed under Chapter VI­A shall not exceed the gross total income. Thus, the overall deduction allowed under Chapter VI­A cannot exceed the gross total income. However, on noticing that several undertakings were availing deductions under Chapter VI­A within the overall limit of gross total income but exceeding the profits of the undertaking, the legislature introduced sub Section 9A in Section 80IA by Finance Act 1998 with effect from 1­4­1999. By Finance Act, 1999, Section 80IA(9A) has been renumbered as Section 80IA(9).

24. The object of amending Section 80IA by Finance Act 1998 as is evident from the memorandum explaining the provisions in the Finance Bill 1998 [231 ITR (ST) 252] is that it was noticed that certain assessees were claiming more than 100% deduction on the profits and gains of the same undertaking, when they were entitled to deductions under more than one section under heading ‘C’ of Chapter VI­A. With a view to prevent the tax-payer taking undue advantage of the existing provisions of the Act, Section 80IA was amended by Finance Act 1998 so that the deductions allowed under Section 80IA and various Sections under heading ‘C’ of Chapter VI­A are restricted to the profits of the business of the undertaking / enterprise.

25. There is no dispute that in the present case, the assessee is an undertaking entitled to deduction under Section 80IA at 30% of the profits and gains derived from the business and deduction under Section 80HHC at 50% of the profits of the business. Further, there is no dispute that the deduction under Section 80IA has to be computed on the total profits derived from the business. However, the dispute is in computing the deduction under Section 80HHC in view of the insertion of Section 80IA(9) by the Finance Act, 1998. According to the Revenue, Section 80IA(9) mandates that the deduction under Section 80HHC has to be computed not only on the profits of the business as reduced by the amounts specified in clause (baa) and clause (4B) of Section 80HHC but also by reducing the amount of profits and gains allowed as deduction under Section 80IA(1) of the Act. According to the assessee, even after the introduction of Section 80IA(9), the deduction under Section 80HHC has to be computed in the manner specified under Section 80HHC on the profits of the business computed under the head ‘profits & gains of business or profession’ as reduced by the amount set out in clause (baa) of Section 80HHC / 80HHC(4B) as the case may be and there is no scope for reducing the profits of business by the amount of profits allowed under Section 80IA(1) of the Act. According to the assessee, Section 80IA(9) merely affects the allow ability of the deduction computed under Section 80HHC so that the combined deduction under Section 80IA(1) and 80HHC does not exceed the profits and gains of the undertaking.

26. To illustrate, if the profits and gains of the eligible undertaking is Rs.100/­, the deduction allowable under Section 80IA(1) is 30% and the deduction allowable under Section 80HHC is 80%, then according to the Revenue, deduction to be allowed under Section 80IA would be Rs.30/¬(30% of Rs.100/­) and in view of Section 80IA(9), the deduction under Section 80HHC has to be computed not on the profits of the business of Rs. 100/­ but on Rs.70/­ being the profits of the business reduced by the amount of profits allowed under Section 80IA(1). According to the assessee, deduction under Section 80HHC has to be computed on the profits of the business of Rs.100/­ and not on Rs.70/­ as contended by the Revenue, because, according to the assessee, Section 80IA(9) does not affect the computation of deduction under Section 80HHC but affects the allowance of deduction computed under Section 80HHC, so that the aggregate deduction does not exceed the profits of the business.

27. The question, therefore, to be considered is, whether Section 80IA(9) seeks to disturb the mechanism of computing the deduction provided under Section 80HHC (3) of the Act or Section 80IA(9) comes in to operation only at the stage of allowing the deduction computed under Section 80HHC, so that the combined deduction under Section 80IA and 80HHC does not exceed the total profits of the business of the undertaking.

28. Section 80IA(9) consists of three parts:

First Part ­ where any amount of profits and gains of an undertaking / enterprise is claimed and allowed under Section 80IA(1) for any assessment year, then

Second Part ­ deduction to the extent of profits and gains allowed under Section 80IA(1) shall not be allowed under any other provisions under heading ‘C’ of Chapter VI­A of the Act; and

Third Part ­ in no case the deduction allowed shall exceed the profits and gains of the business of the undertaking enterprise.

29. The dispute in the present case is, whether the second part of Section 80IA(9) seeks to disturb the mechanism of computing the deduction provided under Section 80HHC (3) of the Act ? The second part of Section 80IA(9) provided that the deduction to the extent of profits allowed under Section 80IA(1) shall not be allowed under any other provisions. It obviously means that the deductions that is allowable under other provisions under heading ‘C’ of Chapter VIA would be allowed to the extent of profits as reduced by the profits allowed under Section 80IA(1). The second part of Section 80IA(9) does not even remotely refer to the method of computing deduction under other provisions under heading ‘C’ of Chapter VIA. Thus, Section 80IA(9) seeks to curtail allowance of deduction and not computability of deduction under any other provisions under heading ‘C’ of Chapter VIA of the Act.

30. How to compute deduction allowable under Section 80HHC (1) is set out in Section 80HHC (3). In the case of a manufacturer exporter, Section 80HHC (3) (a) provides that the deduction under Section 80HHC (1) has to be computed as per the formula:

Clause (baa) in Section 80HHC defines the term ‘profits of the business’ for the purposes of Section 80HHC to mean the profits of the business as computed under the head ‘profits and gains of business or profession’ as reduced by the amounts specified therein. Therefore, in the case of a manufacturer exporter, deduction under Section 80HHC (1) is statutorily required to be computed on the profits of the business as reduced by the amounts specified in clause (baa) of Section 80HHC. Unless, it is specifically provided by the statute, the profits of the business for the purpose of Section 80HHC cannot be reduced by any amount save and except the amount specified in clause (baa) of Section 80HHC itself. Section 80IA(9) of the Act does not expressly or impliedly provide that the amount of profits allowed as deduction under Section 80IA(1) should be reduced from the profits of the business for the purpose of computing deduction under Section 80HHC or computing deduction under any other provisions in heading ‘C’ of Chapter VI­A and, therefore, the contention of the Revenue to that effect cannot be accepted.

31. In the case of a trader exporter, Section 80HHC (3) (b) provides that the deduction under Section 80HHC(1) has to be computed on the export turnover reduced by the direst costs and indirect costs attributable to the goods or merchandise exported by the assessee. The argument of the Revenue that under Section 80IA(9) the amount of profits allowed under Section 80IA has to be deducted from the profits of business while computing deduction under Section 80HHC is accepted, then the Section becomes unworkable, because in the case of a trader exporter, the deduction under Section 80HHC is computed on the exporter turnover and not on the profits of the business. The words ‘export turnover’ and ‘ profits of business’ are separately defined under Section 80HHC. Therefore, in the case of a trader exporter, Section 80IA(9) can be applied only after the deduction under Section 80HHC(3)(b) is computed. Similarly, in the case of a manufacturer / processor exporter, Section 80IA(9) would be applicable while allowing the deduction computed under Section 80HHC(3)(a) of the Act.

32. If the words used in Section 80IA(9) were ‘shall not qualify’, then, probably it could be said that the legislature intended to affect the quantum of deductions computable under other provisions under heading ‘C’ of Chapter VI­A, because the amount that qualifies for deduction alone forms the basis for computing the deduction. The word ‘qualify’ is an expression relatable to the computation of deduction. The word‘ allowed’ is relatable to allowing the deduction that is computed. The word ‘allowed’ cannot be equated with the word ‘qualify’. Since Section 80IA(9) uses the words ‘shall not be allowed’, in our opinion, the section seeks to restrict the allowance of deduction and not the computation of deduction under any other sections under heading ‘C’ of Chapter VI­A of the Act.

33. Wherever the legislature intended that the deduction allowed under one section should affect the computation of deduction under other provisions of the Act, the legislature has expressly used words to that effect. It may be noted that Section 80HHD(7) and 80IA(9A) [presently 80IA(9)] were introduced by Finance Act, 1998 with effect from 1­4­1999. Section 80HHD (7) provides that the deduction allowed under Section 80HHD(1) shall not qualify to that extent for deduction under any other provisions of Chapter VI­A under the heading ‘C’, whereas, Section 80IA(9A) provides that the deduction allowed under Section 80IA(1) shall not be allowed under any other provisions of Chapter VI­A under heading ‘C’. Similarly, in Section 80IC(5), the words used are that notwithstanding anything contained in any other provision of the Act, in computing the total income of the assessee, no deduction shall be allowed under any other Section contained in Chapter VI¬A or Section 10A or Section 10B in relation to the profits and gains of the undertaking. Thus, the legislature has used specific words whenever it intended to affect the computation of deduction. As the words used in Section 80IA(9) relate to allowance and not computation of deduction, it cannot be inferred that Section 80IA(9) is inserted with a view to affect computation of deduction under any other provisions under heading ‘C’ of Chapter VI­A.

34. It is well established in law that the language of the statute must be read as it is, and the statute must not be read by adding or substituting the words unless it is absolutely necessary to do so. Since Section 80IA(9) uses the words ‘shall not be allowed’, it is not permissible to read Section 80IA(9) by substituting the above words with the words ‘shall not qualify’ or by adding the words ‘shall not be allowed in computing’ the deduction under any other provisions under heading ‘C’ of Chapter VI­A of the Act. When the plain and simple meaning of Section 80IA(9) can be ascertained from the words used in the section, it would not be proper to construe the section by substituting or adding words as suggested by the Revenue.

35. In these circumstances, in our opinion, the reasonable construction of Section 80IA(9) would be that where deduction is allowed under Section 80IA(1), then the deduction computed under other provisions under heading ‘C’ of Chapter VI­A has to be restricted to the profits of the business that remains after excluding the profits allowed as deductions under Section 80IA, so that the total deduction allowed under the heading ‘C’ of Chapter VI­A does not exceed the profits of the business.

36. Strong reliance was placed by the Counsel for the Revenue on the Notes on Clauses explaining the reasons for inserting Section 80IA(9A) [presently 80IA(9)], by Finance Act, 1998, wherein it is stated that the profits allowed under Section 80IA(1) shall not qualify for deductions under any other provisions under heading ‘C’ of Chapter VI­A. As noted earlier, the words used in Section 80IA(9) are ‘shall not be allowed’ and not the words ‘shall not qualify’ or ‘shall not be allowed in computing deduction………….’ Therefore, reading the Section 80IA(9) in the light of the words used in the section, we have no hesitation in holding that the restriction therein relates to the allowance of deduction and not computation of deduction.

37. Strong reliance was also placed by the Counsel for the Revenue on the Special Bench decisions of the Tribunal in the case of Rogini Garments (supra) and Hindustan Ming & Agro Products (P) Ltd. (supra), which are affirmed by the Delhi High Court in the case of Great Eastern Exports (supra). Reliance is also placed on decision of the Kerala High Court in the case of Olam Exports (India) Ltd. (supra) which supports the case of the Revenue.

38. We find it difficult to subscribe to the views expressed by the Delhi High Court in interpreting the provisions of Section 80IA(9). In that case, in fact, the Counsel for the Revenue had argued (see para­38 of the judgment) that Section 80IA(9) applies at the stage of allowing deduction and not at the stage of computing deduction under other provisions under heading ‘C’ of Chapter VI­A. It was argued that in the matter of grant of deduction, the first stage is computation of deduction and the second stage is the allowance of the deduction. Computation of deduction has to be made as provided in the respective sections and it is only at the stage of allowing deduction under section 80IA(1) and also under other provisions under heading ‘C’ of Chapter VI­A, the provisions of Section 80IA(9) comes into operation. While accepting the arguments advanced by the Counsel for the Revenue, it appears that the Delhi High Court failed to consider the important argument of the Revenue noted in para­38 of its judgment. Moreover, without rejecting the argument of the Revenue that Section 80IA(9) applies at the stage of allowing the deduction and not at the stage of computing the deduction, the Delhi High Court could not have held that Section 80IA(9) seeks to disturb the method of computing the deduction provided under other provisions under heading ‘C’ of Chapter VI­A 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 (supra). 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 (supra).

39. In the result, we hold that Section 80IA(9) does not affect the computability of deduction under various provisions under heading ‘C’ of Chapter VI­A, but it affects the allow ability of deductions computed under various provisions under heading ‘C’ of Chapter VI­A, so that the aggregate deduction under Section 80IA and other provisions under heading ‘C’ of Chapter VI­A do not exceed 100% of the profits of the business of the assessee. Our above view is also supported by the C.B.D.T. Circular No.772 dated 23­12­1998, wherein it is stated that Section 80IA(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, the object of Section 80IA(9) being not to curtail the deductions computable under various provisions under heading ‘C’ of Chapter, it is reasonable to hold that Section 80IA(9) affects allow ability of deduction and not computation of deduction. To illustrate, if Rs.100/­ is the profits of the business of the undertaking, Rs.30/­ is the profits allowed as deduction under Section 80IA(1) and the deduction computed as per Section 80HHC is Rs.80/­, then, in view of Section 80IA(9), the deduction under Section 80HHC would be restricted to Rs.70/­, so that the aggregate deduction does not exceed the profits of the business.

40. Accordingly, the appeal is allowed by answering the question raised here­in in the negative, that is, in favor of the assessee and against the Revenue. There shall be no order as to costs.