Global Energy Consulting Engineers Pvt.Ltd., Hyderabad V. DCIT, Hyderabad

ITA 1656/HYD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5982 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 14-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V MADHUVANI
• Assessee Lawyers: M V ANIL KUMAR
• Section: 80HHC; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1655/H/2008 ASSESSMENT YEAR 2002-03 ITA NO.1656/H/2008 ASSESSMENT YEAR 2003-04 ITA NO.1657/H/2008 ASSESSMENT YEAR 2004-05 M/S GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERABAD (PAN AABCG 4974 F) VS THE DCIT, CIRCLE 2 (3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI M.V. ANIL KUMAR RESPONDENT BY: SMT. V. MADHUVANI, DR O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE THREE APPEALS PREFERRED BY THE ASSESSEE I S DIRECTED AGAINST THE COMMON ORDER PASSED BY THE CIT(A) III, HYDERABAD DATED 3.9.2008 AND PERTAINS TO THE ASSESSMENT YEARS 2002- 03, 2003-04 & 2004- 05. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN ITS APPEALS: 1. THE CIT(A) IS ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REDUCING THE DEDUCTION ALLOWED U/S 80IB FROM THE GROSS TOTAL INCOME FOR COMPUTING THE ELIGIBLE DEDUCTION U/S 80H HE OF THE IT ACT. 2. THE CIT(A) OUGHT TO HAVE ALLOWED THE COMPUTATION OF DEDUCTION U/S 80HHE ON THE GROSS TOTAL INCOME AS PER THE PROVISIONS OF SEC TION 80HHE ONLY AND THE DEDUCTIONS U/S 80IB AND 80HHE OUGHT TO HAVE BEEN AL LOWED AS CLAIMED BY THE ASSESSEE. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH AT PROVISIONS OF SECTION 80IB(9) ARE NOT APPLICABLE IN PARTICULAR TO THE CALCULATION ENVISAGED FOR COMPUTATION OF DEDUCTION U/S 80HHC/80HHE OF THE ACT. 4. THE CIT(A) AS WELL AS THE ASSESSING OFFICER ERRED IN LAW AND FACTS OF THE CASE IN REWORKING THE DEDUCTION U/S 80HHE. THE CALCULATION OF THE AMOUNT OF DEDUCTION U/S 80HHE IS INDEPENDENT OF SECTION 80IB(9) OF THE ACT. ITA NO.1655 TO 1657 OF 2008 GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERA BAD 2 2 5. THE ASSESSING OFFICER ERRED IN LAW AND FACTS IN APPLYING THE PROVISIONS OF SECTION 80IB(9) OF THE ACT FOR COMPUTATION OF DEDUCTION U/S 80HHE OF THE ACT. 2. THE CONTENTION OF THE ASSESSEES COUNSEL IS T HAT THE ASSESSEE IS TO BE GIVEN DEDUCTION U/S 80HHE OF THE IT ACT NOT ON THE REMINDER OF THE PROFIT OF THE UNDERTAKING I.E. NOT AFTER REDUCING THE DEDUCTION CLAIMED U/S 80IB OF THE ACT AND THE ASSES SEE DID NOT ATTEMPT TO GET MORE THAN 100% OF THE PROFIT OF THE UNDERTAKING AS DEDUCTION IN TERMS OF SECTION 80IB AND 80HHE OF THE ACT. EVEN, IF TH ESE DEDUCTIONS ARE ALLOWED ONE AFTER THE OTHER, THE PURPOSE OF SECTION 80IA(9) COULD BE SERVED. HE SUBMITTED THAT HIS ARGUMENT IS IN ACCORDANCE WIT H THE DECISION OF THE TRIBUNAL , SPECIAL BENCH DELHI IN THE CASE OF ACIT VS. HINDUSTAN MINT (315 ITR 401 (AT) (DELHI) WHEREIN IT WAS HELD THAT : THE RESTRICTIONS CONTAINED IN SECTION 80IA OR 80IB NOT TO ALLOW REPEATED DEDUCTIONS ARE APPLICABLE TO THE SAME PROF IT. THIS IS MORE THAN CLEAR FROM THE USE OF WORDS SUCH PROFIT IN SECTIO N 80IA/80IB. IN OTHER WORDS, THERE HAS TO BE IDENTITY OF PROFITS ON WHIC H DEDUCTION UNDER MORE THAN ONE PROVISION UNDER CHAPTER VI-A IS CLAIMED BY THE ASSESSEE. THE PROVISIONS ARE APPLICABLE WHERE ON THE PROFIT OF TH E UNDERTAKING OR ENTERPRISE, DEDUCTION IS CLAIMED U/S 80IA OR 80IB A ND THEN ON THE SAME PROFIT OF THE UNDERTAKING, DEDUCTION UNDER OTHER PR OVISIONS LIKE 80HHC IS CLAIMED. IN SUCH CASES, THE RESTRICTIONS CONTAINED IN THE ABOVE PROVISIONS WOULD APPLY. IF THE PROFITS ARE DERIVED FROM A SEP ARATE UNDERTAKING, THE RESTRICTION CONTAINED IN THE ABOVE PROVISION WOULD NOT BE APPLICABLE. HE ALSO RELIED ON THE FOLLOWING JUDGEMENTS: 1. MYSODET (P) LTD. VS. CIT (305 ITR 276) (SC) WHEREIN IT WAS HELD THAT SECTION 80HHC(3) STATUTORILY FIXES THE QUANTUM OF DEDUCTION ON THE BASIS OF PROPORTION OF BUSINESS PROFITS UNDER THE H EAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IRRESPECTIVE OF WHAT COULD STRICTLY BE DESCRIBED AS PROFITS DERIVED FROM EXPORT OF GOODS OUT OF INDIA. EVEN IN CLAUSE 9 THE ILLUSTRATION GIVEN INDICATES THAT THE RATIO MENTION ED IN SUB SECTION (3) HAS TO BE APPLIED TO BUSINESS PROFITS COMPUTED UNDER TH E PROVISIONS OF SECTIONS 28 TO 43D OF THE IT ACT . 2. CIT VS. K. RAVINDRANATHAN NAIR (295 ITR 228) (S C) WHEREIN IT WAS HELD THAT: ITA NO.1655 TO 1657 OF 2008 GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERA BAD 3 3 T HE EXPRESSION PROFIT OF THE BUSINESS STOOD DEFINE D TO MEAN THE PROFIT OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFIT AN D GAINS OF BUSINESS U/S 28 TO 44D OF THE IT ACT. THEREFORE, BEFORE GIVING DEDUCTION U/S 80HHC, THE GROSS TOTAL INCOME OF THE ASSESSEE BEING PROFITS FR OM BUSINESS HAD TO BE ARRIVED AT IN TERMS OF CLAUSE (BAA) OF THE SAID EXP LANATION. HOWEVER, ONE POINT NEEDS TO BE NOTED, NAMELY, WHILE CALCULATIN G BUSINESS PROFITS THE SAME HAD TO BE DONE IN TERMS OF SECTION 28 TO S.44D OF THE IT ACT ALONE. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT IN VIEW OF THE PROVISIONS OF SECTION 80IA(9) OF THE IT ACT, THE DEDUCTION COMPUTED BY ASSESSING OFFICER IS JUSTIFIED AND SHE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE SPECIAL BE NCH (CHENNAI) TRIBUNAL IN THE CASE OF ROGINI GARMENTS (108 ITD 49) (CHEN NAI) (SB) WHEREIN IT WAS HELD THAT: SECTION 80HHC IS NOT A SELF CONTAINED PROVISION. THE DEDUCTION UNDER THE SAID SECTION CANNOT BE ALLOWED IGNORING RESTRICTIVE CLAUSE CONTAINING SECTION 80IA(9). THE RESTRICTIVE CLAUSE IN SECTION 80IA MAKES IT ABUNDANTLY CLEAR THAT WHEREVER DEDUCTION UNDER ANY OTHER SECTI ON OF CHAPTER VI A (C ) IS CLAIMED, THE COMPUTATION WILL BE SUBJECT TO THE RESTRICTIONS LAID DOWN IN SECTION 80IA(9). IT PRECLUDES PRO TANTO, ALL THE D EDUCTION OF SUCH PROFIT AND GAINS CLAIMED UNDER CHAPTER VIA-(C ). SECTION 80HH C PART OF CHAPTER VIA - (C ). IT IS NOT A SELF CONTAINED PROVISION. THERE IS ABSOLUTELY NO AMBIGUITY ON THIS ASPECT. THEREFORE, RELIEF U/S 80IA SHOULD BE DEDUCTED FROM THE PROFITS AND GAINS OF THE BUSINESS BEFORE COMPUTING RELIEF U/S 80HHC. 5. SHE ALSO RELIED ON THE ORDER OF THIS TRIBUNAL DATED 29.1.2008 IN ITA NOS.1035 & 1036/HYD/2006 IN THE CASE OF KRE BS BIOCHEMICALS & INDUSTRIES LTD. HYDERABAD WHEREIN IT WAS HELD THAT : 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF SPECIAL BENC H OF THIS TRIBUNAL AT CHENNAI IN THE CASE OF ROGINI GARMENTS (SUPRA). THE SPECIAL BENCH, AFTER CONSIDERING THE PROVISIONS OF LAW, HAS OBSERVED AS FOLLOWS: FROM THE ABOVE IT IS CLEAR THAT IF RESTRICTIVE CL AUSE, NOT IN THE SAME SECTION BUT IN SOME OTHER PROVISION, IS CLEARL Y SHOWING THE MENS ITA NO.1655 TO 1657 OF 2008 GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERA BAD 4 4 LEGIS IT HAS TO BE GIVEN FULL EFFECT. THEREFORE, I F RESTRICTION IS PLACED ON THE CLAIM OF REPETITIVE DEDUCTION IN SEC.80IA(9) AND IS MADE APPLICABLE IN RESPECT OF ALL DEDUCTIONS UNDER CHAPT ER VI-A THEN THIS RESTRICTION IS TO BE APPLIED. SINCE THE WORDINGS U SED ARE ANY OTHER DEDUCTION UNDER CHAPTER VA-A FULL EFFECT IS TO BE GIVEN TO THIS PROVISION AND WHENEVER AN ASSESSEE WANTS TO CLAIM D EDUCTION U/S 80IA(9) RESTRICTION IS TO BE READ IN EVERY OTHER PR OVISION PROVIDING FOR DEDUCTION UNDER CHAPTER VI-A. IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THI S TRIBUNAL, IN OUR OPINION, THE DEDUCTION U/S 80IB HAS TO BE REDUCED F ROM THE ELIGIBLE PROFIT OF THE BUSINESS FOR THE PURPOSE COMPUTING DE DUCTION U/S 80HHC. SIMILAR VIEW WAS TAKEN BY THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF LEBEN LABORATORIES LTD. (SUPRA). TH E JUDGEMENT OF THE APEX COURT IN THE CASE OF MANDIDEEP ENGINEERING AND PACKAGING INDUSTRIES P LTD. (SUPRA) IS REGARDING CLAIM OF THE ASSESSEE U/S 80I AND S.80HH. THE APEX COURT HELD THAT DEDUCTION CAN BE CLAIMED UNDER BOTH SECTIONS. THE APEX COURT HAS NOT CONSIDERED T HE ISSUE OF DEDUCTION OF DEDUCTION GRANTED UNDER ONE SECTION WH ILE COMPUTING THE ELIGIBLE PROFIT FOR DEDUCTION UNDER ANOTHER SEC TION. THEREFORE, THIS JUDGEMENT OF THE APEX COURT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT OF THE APEX COURT IN THE CASE OF PADMASUNDARA RAO(SUPRA). THIS JUDGEMENT RELATES TO INTERPRETATION OF STATUTE AND DOES NOT R ELATE TO DEDUCTION U/S 80IBOR SECTION 80HHC. THEREFORE, THIS JUDGEMEN T OF THE APEX COURT ALSO IS NOT APPLICABLE TO THE FACTS OF THIS C ASE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, WE CONFIRM THE SAME. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTI ON OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASPECT OF CLAI MING DOUBLE DEDUCTION AS PER THE PROVISIONS OF SUB SECTION (9) OF SECTION 80IA IS TO BE CONSIDERED IN VIEW OF THE PROVISIONS OF SEC. 80IB (13) WHILE C OMPUTING THE DEDUCTION U/S 80IB AND 80HHE OF THE IT ACT. THE SPECIAL BE NCH OF THE TRIBUNAL CITED SUPRA HELD THAT A PLAIN READING OF SPECIFIC P ROVISION OF SECTION 80(IA) (9) WOULD INDICATE THAT THE LEGISLATIVE INTENT IS T O PREVENT REPETITIVE DEDUCTION BEING CLAIMED ON THE SAME PROFIT, UNDER D IFFERENT PROVISIONS OF THE CHAPTER. THIS RULING PROVIDES GUIDANCE THAT WH ERE THE SAME PROFIT IS ITA NO.1655 TO 1657 OF 2008 GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERA BAD 5 5 ELIGIBLE FOR DEDUCTION UNDER BOTH THE SECTIONS VIZ. , 80IB AND 80HHE, THE DEDUCTION U/S 80HHE WILL HAVE TO BE COMPUTED BY RE DUCING THE DEDUCTION ALLOWED U/S 80IA/80IB OF THE ACT. AS PER THE SPECIAL BENCH RULING, THE ISSUE CAN BE ILLUSTRATED THAT THE ASSES SEES GROSS TOTAL INCOME MAY BE ASSUMED TO BE RS.100, COMPRISING SOLELY OF P ROFITS AND GAINS FROM MANUFACTURE AND EXPORT BY THE INDUSTRIAL UNDERTAKIN G. THE AVAILABLE DEDUCTION U/S 80IB AND 80HHE IS ASSUMED AT 30% OF P ROFIT OF THE UNDERTAKING AND 50 OF THE EXPORT PROFIT RESPECTIVEL Y. THE COMPARATIVE CLAIMS OF THE ASSESSEE AND THE REVENUE ON THE QUANT UM OF DEDUCTION ALLOWABLE U/S 80HHE : A CLAIM OF THE ASSESSEE PROFIT OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR D EDUCTION RS.100/- LESS DEDUCTION U/S 80IB AT 30% RS.30/- DEDUCTION U/S 80HHE AT 50% RS.50/- NET TAXABLE INCOME RS.20/- B: AS PER SPECIAL BENCH RULING: PROFIT OF THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR D EDUCTION RS.100 LESS: DEDUCTION U/S 80IB AT 30% RS.30 DEDUCTION U/S 80HHE AT 50% OF (RS.100-30) RS.35 NET TAXABLE INCOME RS.35 7. THUS, IT IS CLEAR FROM THE ABOVE WORKING LAID DOWN BY THE SPECIAL BENCH THAT THE DEDUCTION ALLOWABLE U/S 80HH E OF THE ACT FROM THE EXPORT PROFIT IS AT A LOWER FIGURE, BY COMPUTING TH IS DEDUCTION AFTER REDUCING THE DEDUCTION ALLOWED U/S 80IB OF THE ACT. THE SPECIAL BENCH RULING RELIED ON THE SPECIFIC PROVISIONS OF SECTION 80IA(9) OF THE ACT. ITA NO.1655 TO 1657 OF 2008 GLOBAL ENERGY CONSULTING ENGINEERS (P) LTD., HYDERA BAD 6 6 8. ACCORDINGLY, WE ARE OF THE OPINION THAT THE OR DER OF THE LOWER AUTHORITIES IS IN ACCORDANCE WITH THE RATIO LAID DO WN BY THE SPECIAL BENCH IN ITS ORDER CITED SUPRA. AS SUCH, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES AND THE SAME IS CONFIRMED. 9. IN THE RESULT, THE THREE APPEALS OF THE ASSESS EE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30.12.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH DECEMBER, 2010 COPY FORWARDED TO: 1. C/O SHRI M. ANANDAM & CO., CAS, 7A SURYA TOWERS, SD ROAD, SECUNDERABAD-3. 2. THE DCIT, CIRCLE 2(3), HYDERABAD 3. CIT(A)-III HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP