Law: Income Tax Act, 1961

Section: 80IA(9)

JUDGMENT Akil Kureshi, J. - The Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 18th August 2006. While admitting the appeal, following substantial question of law was framed: "Whether the Appellate Tribunal is right in law and on facts in holding that the assessee can claim deduction both under section 80HHC as also under section 80IA despite the provisions of section 80IA(9)?" 2. The question involves the interpretation of sub-section (9) of section 80IA of the Income Tax Act, 1961 (`the Act' for short) in the context of assessee's claim of deduction under section 80HHC of the Act. The controversy is whether the assessee can claim deduction under section 80HHC of the Act, ignoring the deduction already claimed and allowed under section 80IA of the Act, unless and until the combined effect of the deductions flowing from both the sections is to exceed the profit and gain of the eligible business of the undertaking or enterprise. The controversy arises in the following background. 3. Respondent-assessee is a company. For the assessment year 2001-02, the assessee filed its return of income on 29th October 2001. The assessee claimed deduction of Rs. 16.54 lakhs (rounded of) under section 80IA of the Act and of Rs.52.75 lakhs (rounded of) under section 80HHC, and declared total income of rupees nil. The return of the assessee was taken in scrutiny. The Assessing Officer questioned the assessee why in terms of sub-section (9) of section 80IA of the Act, the claim of deduction of the assessee under section 80HHC for the profits from the sale of goods as a supporting manufacturer be not restricted to the extent of deduction already allowed under section 80IA of the Act. 4. In response to such objection of the Assessing Officer, the assessee raised various contentions in written submissions dated 19th March 2004, and opposed the proposal of the Assessing Officer to restrict the assessee's claim of deduction under section 80HHC of the Act. 5. The Assessing Officer, however, held that with the introduction of sub-section (9) of section 80IA, statute had barred double deductions. The amount of deduction claimed and allowed under…