Madhya Pradesh H.C : Whether the Tribunal is right in law in holding that the deduction under s. 80-I is to be allowed on balance of income after deducting the relief under s. 80HH from gross total income and not from gross total income as defined in s. 80B(5) of the Act.

High Court Of Madhya Pradesh

J.P. Tobacco Products (P) Ltd. vs. CIT

Sections 80HH, 80-I

Asst. Year 1984-85

A.K. Mathur, C.J. & S.K. Kulshrestha, J.

Misc. Civil Case No. 100 of 1994

27th August, 1996

Counsel Appeared

H.S. Shrivastava, for the Applicant : Abhay Sapre, for the Respondent

S.K. KULSHRESTHA, J.:

The Tribunal, Jabalpur Bench, Jabalpur, has referred at the instance of the assessee company on an application being made under s. 256(1) of the IT Act, 1961, the following question of law arising out of Order dt. 16th July, 1992 in ITA No. 246/Jab/87 and Cross Objection No. 46/Jab./1987 for the asst. yr. 1984-85 for the opinion of this Court : “Whether the Tribunal is right in law in holding that the deduction under s. 80-I is to be allowed on balance of income after deducting the relief under s. 80HH from gross total income and not from gross total income as defined in s. 80B(5) of the Act.”

The assessee is a private company engaged in the business of manufacturing and sale of bidis. The assessee were assessed for the asst. yr. 1984-85 and the AO held that the assessee company was not entitled to deductions under ss. 80HH and 80-I of the Act. On an appeal, the CIT(A) held the assessee to be entitled to deduction of Rs. 1,27,818 under s. 80HH and Rs. 4,52,211 under s. 80-I of the Act. In computing the deduction under s. 80-I, the CIT(A), however, reduced the amount of Rs. 1,27,818 allowed under s. 80HH from the profits and gains from the industrial undertakings of the assessee. The assessee, in his cross-objection before the Tribunal, claimed that it was entitled to deduction under s. 80-I on the gross total income but the Tribunal dismissed the Cross Objection. Hence, the above question has been referred for the opinion of this Court.

We have heard learned counsel for the parties and perused the record. Learned counsel for the assessee contended before us that the main ground for refusal to allow deduction on the gross total income under the provisions of s. 80-I of the Act is the interpretation of sub-s. (9) of s. 80HH which provides that where the assessee is entitled also to the deduction under s. 80-I or s. 80J in relation to the profits & gains of an industrial undertaking or the business of a hotel to which s. 80HH applies, effect shall first be given to the provisions of s. 80HH. According to the learned counsel, the said sub-s. (9) of s. 80HH cannot be read to say that for according deductions under s. 80- I or 80J, the deductions allowed under s. 80HH are required to be subtracted from the profits and gains of the industrial undertaking and then allowance is to be given at the rates provided in s. 80-I or 80J on the amount of gross total income so reduced.

The learned counsel for the Department has, however, argued that the purpose of sub-s. (9) of s. 80HH is apparently to first allow deductions admissible under s. 80HH and then to reduce the gross total income by deductions so allowed and consider the income so reduced for the purpose of allowing deductions under s. 80-I or 80J.

6. Sub-s. (9) of s. 80HH, as it stood prior to insertion of 80-I by Finance (No. 2) Act, 1980 w.e.f. 1st April, 1981, originally included only s. 80J. Sec. 80J providing for deduction in respect of the profits & gains from newly established industrial undertakings or ships or hotel business in certain cases did not make any provision for reduction of the gross total income by the amount of deduction admissible to the assessee under s. 80HH. It was only by amendment of the said s. 80J that the provision of reducing gross total income by the amount of deduction under s. 80HH of the Act by Finance (No. 2) Act, 1977 w.e.f. 1st April, 1978 was inserted. Sec. 80-I was inserted in its present form by Finance (No. 2) Act, 1980 w.e.f. 1st April, 1981 and by the same Finance Act, s. 80HH (9) was amended and the words “s. 80-I or” were inserted to make the said provision applicable to s. 80-I as well. However, no provision was made in s. 80-I to provide for deduction of the gross total income by deduction allowed under s. 80HH for the purpose of allowing deduction under s. 80-I. It would, thus, be seen that when s. 80J already existed in sub-s. (9) of s. 80HH, an amendment was made in s. 80J in the year 1977 but no such provision was made insofar as s. 80-I was concerned. This clearly contra-indicates that sub-s. (9) of s. 80HH by itself meant that deduction allowed under s. 80HH is to be reduced from the gross total income for granting the benefit of s. 80J and for that matter, of s. 80-I. It was provided in s. 80J itself by later amendment while no such provision was made in s. 80-I even though inserted on a later date. The provision of law is, therefore, clear that insofar as the benefit of s. 80-I is concerned, it has to be granted on the gross total income and not on the income reduced by the amount allowed under s. 80HH.

7. In the result, we find that the Tribunal was not right in holding that deduction under s. 80-I is to be allowed only on the balance of the income after deducting the relief under s. 80HH from the gross total income and accordingly we answer the said question in favour of the assessee and against the Revenue.

[Citation: 229 ITR 123]

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