ITAT, MUMBAI BENCH ‘I’ Scope for reduction of eligible profits u/s 80HHC by invoking provisions of section 80-IA(9) of IT Act, 1961

Scope for reduction of eligible profits u/s 80HHC by invoking provisions of section 80-IA(9) of IT Act, 1961



To invoke the provisions of section 80-IA(9) it is the condition that the deduction u/s 80HHC and section 80-IA has to be in respect of the same undertaking.



ITAT, MUMBAI BENCH ‘I’

ACIT

v.

Grasim Industries Ltd.

ITA Nos. 4201 to 4204/Mum/06

September 23, 2009

RELEVANT EXTRACTS:

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6. We have heard the rival submissions. The issue that arises for consideration in the appeal by the Revenue is no longer res integra and has been answered by the Hon'ble Bombay High Court. We find that in the case of Godrej Agrovet Ltd. vs. AC IT, 290 1TR 252 (Bom), the assessee was a multi unit and multi product company engaged in the business of manufacturing, trading and export. One of its unit at Vijayawada and Sachin Plant. 2 was entitled to deduction u/s. 80IB of the Act. Another manufacturing unit viz., Plant 1 of Sachin Unit and Panvel Unit were entitled to claim deduction u/s.80HHC of the Act. The products in respect of which 80IB deduction was claimed and 80HHC deduction was claimed were different. In other words, the export of goods for which deduction u/s. 80HHC was claimed was of goods for which deduction u/s. 80IB was not claimed by the assessee. In the original assessment deduction u/s. 80HHC was allowed without reducing the deduction allowed u/s. 80IB of the Act. Assessment was later on reopened on the ground that u/s. 80IA(9) of the Act. deduction u/s. 80HHC ought to have been allowed after reducing the profits and gains on which deduction u/s 801A was allowed. The question of validity of initiation of re assessment proceedings came up for consideration before the Hon’ble Bombay High Court. While dealing with the provisions of section 80IA(9) the Hon'ble Bombay High Court observed as follows: (at page 259)

"The next contention of the Revenue is that in the regular assessment, the AO has not discussed the provisions of s. 80-IB(13) r.w.s. 80 IA(9) of the Act and if those provisions were taken into consideration there would be negative profit and consequently deduction under s. 80HHC could not he granted. This argument is also without any merit because, in the affidavit-in-reply filed on behalf of the Revenue it is admitted that the assessee had not made exports of the goods manufactured in the industrial units eligible for deduction under s. 80-IB. If the goods manufactured in the units availing deduction under s. 80 IB were not exported, then obviously, the goods manufactured in those units would not. be taken into account for computation of deduction under s. 80HHC. In thai event, the question of applying the principles laid down in s. 80-IA(9) while computing the deduction under s. 80HHC does not arise at all."

It is clear from the aforesaid pronouncement of the Hon’ ble Bombay High Court that to invoke the provisions of section 80IA(9) it is the condition that the deduction u/s. 80HHC and section 80IA of the Act has to be in respect of the same undertaking. In the present case it is the claim of the assessee that the deduction u/s. 80IA of the Act had been claimed in respect of and undertaking which was different and independent it and manufacturing different product and the undertaking in respect of which deduction u/s. 80HHC had been claimed by the assessee was engaged in export of altogether different products. In the circumstances, the question of reducing profits eligible for deduction u/s. 80IA of the Act from the profit eligible for deduction u/s. 80HHC does not arise for consideration. In this regard, it was submitted that the intention behind the provisions of section 80IA(9) of the Act is to ensure that on the same profits and gains of an undertaking of an assessee deduction should not be claimed both u/s. 80HHC and 80IA of the Act. The Assessee has filed a chart at page 39 of the paper book in ITA No. 4201/Mum/06 showing the different undertakings in respect of which the Assessee claimed deduction u/s. 80HHC and 80IA/80IB of the Act. From this chart, it appears that the assessee has not claimed deduction both u/s. 801IHC and 80IA/80IB in respect of the profits of any of the undertakings. This aspect needs to be verified by the AO and if found correct the AC) shall not apply the provisions of section 80IA(9)/80IB(13). For this limited purpose of verification, the issue is rendered to the AG. For statistical purposes, the appeals of the Revenue are treated as allowed.

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