Limitex Vs ACIT (Madras High Court)
The appeal concerned the assessment year 2004-05, where the assessee challenged the Tribunal’s order holding that deduction under Section 80-HHC should be restricted after allowing deduction under Section 80-IB by applying Section 80-IA(9) of the Income-tax Act. The substantial questions of law were whether deduction under Section 80-IB should be reduced from business profits before computing deduction under Section 80-HHC and whether deduction under Section 80-HHC should instead be granted prior to deduction under Section 80-IB.
During the hearing, the assessee submitted that the issues stood covered by the Supreme Court’s decision in Shital Fibres Limited. The Madras HC reproduced the Supreme Court’s interpretation of Section 80-IA(9), which held that the provision restricts the extent of deduction available under other provisions in Chapter VI-A, Heading “C”, to the extent of profits already allowed under Section 80-IA. It further held that Section 80-IA(9) does not require deduction allowed under Section 80-IA to be reduced from the gross total income while computing deductions under other provisions.
In view of the authoritative pronouncement of the Supreme Court, the Madras HC set aside the Tribunal’s order and remanded the matter to the Assessing Officer to recompute the tax payable in accordance with the principles laid down by the Supreme Court. As the first substantial question was remanded for fresh computation, the Court found no necessity to answer the second question, which had been raised as an alternative plea.
