# 11S.C.R.1154 ASSTI. COMMR. OF l.T. BANGALORE v. M/S. MICRO LABS LTD

- **Citation:** [2015] 11 S.C.R. 1154
- **Court:** Supreme Court of India
- **Decided:** 2015-12-10
- **Case number:** Civil Appeal No. 7427 of 2012
- **Bench:** Anil R. Dave, Dipak Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/11s-c-r-1154-assti-commr-of-l-t-bangalore-v-m-s-micro-labs-ltd-30276
- **Pages:** 46

## Headnote

Income Tax Act, 1961: s.80-1 -
Whether while
considering the deduction under the provisions of s. 801A or/
ands. 80-18, assessee is not entitled to deduction in respect
of the profits and gains under the provisions of s. 80HHC or
whether the assessee is entitled to deductions under the
stated all the three sections in respect of the same profits i.e.
whether deduction allowed uls. 801A is to be reduced from the
gross profits while computing deduction uls. 80HHC - In view
of difference of opinion, matter referred to larger bench.
Referring the matter to Larger Bench (in view of
difference of opinion), the Court
PER: ANIL R. DAVE, J.:
F
HELD: One can very well see from the provisions
of Section 80-IA(9) that if an Assessee is engaged in
infrastructure development as well as in the export
business, he cannot claim deduction of his entire profits
and gains under the provisions of Section 80HHC as well
G as under Section 80-IA or/and Section 80-18 of the Act.
H
Section 80-IA(9) is quite unambiguous, which clearly
provides that if an assessee claims any deduction under
the provisions of Section 80-IA, then the assessee
cannot claim deduction to the extent of such profits and
1154
ASSTT. COMMR OF l.T. BANGALORE v. M/S. MICRO
1155
LABS LTD.
gains under heading 'C' of Chapter VIA of the Act, which, A
in the present case, was claimed and wrongly allowed
to the Assessee. The intention of the legislature is very
clear to the effect that if an assessee claims any
deduction under the provisions of Sections 80-IA or/and
80-18, he cannot claim deduction to the extent to such B
profits and gains which had been claimed and allowed
under the provisions of Section 80HHC of the Act,
because Section 80HHC is included in heading 'C' of
Chapter VIA of the Act. The High Court was in error while
permitting the assessee to get benefit in respect of C
Section 80HHC as it did not take into account the fact
that the profits in respect of which deduction was
allowed under Section 80HHC had also been previously
allowed under Section 80-18. This is. not permissible D
under Section 80-18(13) read with Section 80-IA(9)
because by virtue of Section 80-18(13) provisions of
Section 80-IA(9) are also applicable to Section 80-18.
[Paras 22, 23, 27, 28] [1168-A-C; 1169-C-F]
PER DIPAK MISRA, J. (Dissenting):
1. The deduction under sub-section (a) of Section
80HHC(3) is computed by ascertaining eligible profits,
which is the profits of business in the same proportion
E
as the export_ turnover in respect of such goods, bears F
to the total turnover of business. A separate formula is
prescribed under clause (b) of sub-section (3) to Section
80HHC in case of a trader exporter and under clause (c)
in respect of an assessee, who is both a manufacturer/
processor and a trader exporter. The Section is a detailed· G
one and provides complete method and mechanism to
"
compute deduction under Section 80HHC. There is no
dispute that sub-section (9) to Section 801 would be
applicable as the assessee would be entitled to H
1156
SUPREME COURT REPORTS
(2015] 11 S.C.R.
A deduction under Section BOIA as well as under Section
BOHHC. The second limb of Section 9 to Section BOIA
has been enacted to prevent cascading effect of
deductions under Section BOIA and BOHHC. There was
already a cap or the upper limit stipulated in sub-section
B (2) to Section BOIA that the deductions cannot exceed
the gross total income of the assessee. However subsection 9 to Section BOIA stipulates that in no case
deduction shall exceed profits and gains of such eligible
business of undertaking and enterprise. ,The said
C provision does not make a reference to the gross total
income but it refers to the profit and gains of such eligible
business of undertaking and enterprise. Thus read, it
cannot be $aid that the last part of sub-section (9) to
0
Section BOIA would be rendered meaningless being a
mere reproduction of sub-section (2) to Section BOA. The
first part of sub-section (9) to Section BOIA refers to the

## Text

_Characters 0–39,645 of 83,289. This is a partial read: ask again with offset=39645 for what follows._

A
B
c
D
E
[2015) 11S.C.R.1154
ASSTI. COMMR. OF l.T. BANGALORE
v.
M/S. MICRO LABS LTD.
(Civil Appeal No. 7427 of 2012)
DECEMBER 10, 2015
[ANIL R. DAVE AND DIPAK MISRA, JJ.]
Income Tax Act, 1961: s.80-1 -
Whether while
considering the deduction under the provisions of s. 801A or/
ands. 80-18, assessee is not entitled to deduction in respect
of the profits and gains under the provisions of s. 80HHC or
whether the assessee is entitled to deductions under the
stated all the three sections in respect of the same profits i.e.
whether deduction allowed uls. 801A is to be reduced from the
gross profits while computing deduction uls. 80HHC - In view
of difference of opinion, matter referred to larger bench.
Referring the matter to Larger Bench (in view of
difference of opinion), the Court
PER: ANIL R. DAVE, J.:
F
HELD: One can very well see from the provisions
of Section 80-IA(9) that if an Assessee is engaged in
infrastructure development as well as in the export
business, he cannot claim deduction of his entire profits
and gains under the provisions of Section 80HHC as well
G as under Section 80-IA or/and Section 80-18 of the Act.
H
Section 80-IA(9) is quite unambiguous, which clearly
provides that if an assessee claims any deduction under
the provisions of Section 80-IA, then the assessee
cannot claim deduction to the extent of such profits and
1154
ASSTT. COMMR OF l.T. BANGALORE v. M/S. MICRO
1155
LABS LTD.
gains under heading 'C' of Chapter VIA of the Act, which, A
in the present case, was claimed and wrongly allowed
to the Assessee. The intention of the legislature is very
clear to the effect that if an assessee claims any
deduction under the provisions of Sections 80-IA or/and
80-18, he cannot claim deduction to the extent to such B
profits and gains which had been claimed and allowed
under the provisions of Section 80HHC of the Act,
because Section 80HHC is included in heading 'C' of
Chapter VIA of the Act. The High Court was in error while
permitting the assessee to get benefit in respect of C
Section 80HHC as it did not take into account the fact
that the profits in respect of which deduction was
allowed under Section 80HHC had also been previously
allowed under Section 80-18. This is. not permissible D
under Section 80-18(13) read with Section 80-IA(9)
because by virtue of Section 80-18(13) provisions of
Section 80-IA(9) are also applicable to Section 80-18.
[Paras 22, 23, 27, 28] [1168-A-C; 1169-C-F]
PER DIPAK MISRA, J. (Dissenting):
1. The deduction under sub-section (a) of Section
80HHC(3) is computed by ascertaining eligible profits,
which is the profits of business in the same proportion
E
as the export_ turnover in respect of such goods, bears F
to the total turnover of business. A separate formula is
prescribed under clause (b) of sub-section (3) to Section
80HHC in case of a trader exporter and under clause (c)
in respect of an assessee, who is both a manufacturer/
processor and a trader exporter. The Section is a detailed· G
one and provides complete method and mechanism to
"
compute deduction under Section 80HHC. There is no
dispute that sub-section (9) to Section 801 would be
applicable as the assessee would be entitled to H
1156
SUPREME COURT REPORTS
(2015] 11 S.C.R.
A deduction under Section BOIA as well as under Section
BOHHC. The second limb of Section 9 to Section BOIA
has been enacted to prevent cascading effect of
deductions under Section BOIA and BOHHC. There was
already a cap or the upper limit stipulated in sub-section
B (2) to Section BOIA that the deductions cannot exceed
the gross total income of the assessee. However subsection 9 to Section BOIA stipulates that in no case
deduction shall exceed profits and gains of such eligible
business of undertaking and enterprise. ,The said
C provision does not make a reference to the gross total
income but it refers to the profit and gains of such eligible
business of undertaking and enterprise. Thus read, it
cannot be $aid that the last part of sub-section (9) to
0
Section BOIA would be rendered meaningless being a
mere reproduction of sub-section (2) to Section BOA. The
first part of sub-section (9) to Section BOIA refers to the
computation of profits and gains of an undertaking or
enterprise allowed under Section BOIA in any
E assessment year and the amount so calculated shall not
be allowed as a deduction under any other provisions
of this Chapter. There is a difference between allowing
a deduction and computation of deduction. The two have
separate and distinct meanings. Computation of
F deduction is a stage prior and helps in quantifying the
amount, which is eligible for deduction. Sub-section (9)
to Section BOIA does not bar or prohibit the deduction
allowed under Section BOIA from being included in the
gross total income, when deduction under Section
G 80HHC(3) of the Act is computed. In this context it has
been held that the expression "shall not be allowed"
cannot be equated with the words "shall not qualify" or
"shall not be allowed" in computing deduction. The
effect thereof would be that while computing deduction
H under Section BOHHC, the gross total income would
ASSTT. COMMR. OF l.T. BANGALORE v. M/S. MICRO
1157
LABS LTD.
mean the gross total income before allowing any A
deduction under Section 801A or other sections of part
C of Chapter VIA of the Act. But once the deduction under
Section 80HHC has been calculated, it will be allowed,
ensuring that the deduction under Section 80HHC and
801A when aggregated do not exceed profits and gains B
of such eligible business of undertaking and enterprise.
[Paras 14, 20, 21) [1183-H; 1184-A-B; 1191-A-D; 1192-EH; 1193-A-C]
Associated Capsules Private Limited v. Deputy
Commissioneroflncome Tax andAnr. (2011) 332
ITR 42 (Born)- approved.
Jeyar Consultant and Investment Private Limited
v. Commissioner of Income Tax, Madras (2015)
7 SCC 705: 2015 (6) SCR 979- Distinguished.
c
D
2. The legislature has used the expression "shall
not qualify"_ in Section 80HHB(5) and 80HHD(7), but the
said expression has not been used in sub-section (9) to
Section 801A. The formula prescribed in sub-section (3) E
to Section 80HHC is a complete code for the purpose of
the said computation of eligible profits and gains of
business from exports of mercantiles and goods. It has
reference to total turnover, turnover from exports in
proportion to profits and gains from business in clause F
(a) and so forth under clause (b) and (c) of Section
80HHC(3) of the Act. In case the gross total income is
reduced or modified taking into account the deduction
allowed under Section 801A, it would lead to absurd and G
unintended consequences. It would render the formula
· under sub-section (3) to Section 80HHC ineffective and
unworkable. [Para 22) [1193-C-F]
Great Eastern Exports v. Commissioner of
Income-Tax (2011) 332 ITR 14; Joint CIT v.
H
1158
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 11 S.C.R.
Mandideep Engineering and Packaging
Industries Private Limited (2007) 292 ITR 1 (SC);
J.B. Tobacco Products Private Limited v. CIT
(1998) 229 ITR 123; Great Eastern Exports v.
Commissioner of Income-Tax (2011) 332 ITR 14;
Assistant Commissioner of Income-tax v. Ragini
Garments (2007) 294 ITR (AT) 15; IPCA
Laboratories Limited v. CIT (2004) 12 SCC
742: 2004 (2) SCR 1075; A.M. Moosa v. CIT
(20v7) 7 sec 647: 2007 (9) SCR 831; ACG
Associated Capsules Private Limited v.
Commissioner of Income Tax, Central-IV,
Mumbai (2012) 3 SCC 321: 2012 (2) SCR 401;
Distributors (Baroda) (P) Limited v. Union of India
(1986) 1sec43: 1985 (1) Suppl. SCR 778; CIT
v. K. RavindranathanNair(2007) 15 SCC 1: 2007
(11) SCR1097;. Topman Exports v CIT (2012) 3
SCC 593: 2012 (4) SCR 684- referred to.
Case Law Reference
DIPAK MISRA, J.
(2011) 332 ITR 42 (Born)
approved.
Para 4
(2011) 332 ITR 14
referred to.
Para 5
(2007) 292 ITR 1 (SC)
referred to.
Para 10
(1998) 229 ITR 123
referred to.
Para 11
(2011) 332 ITR 14
referred to.
Para 18
(2007)2941TR(AT)15
referred to.
Para 19
2015 (6) SCR 979
distinguished Para 23
2004 (2) SCR 1075
referred to.
Para 23
2007 (9) SCR 831
referred to.
Para 23
2012 (2) SCR 401
referred to.
Para 28
ASSTT. COMMR. OF l.T. BANGALORE v. M/S. MICRO
1159
LABS LTD.
1985 (1) Suppl. SCR 778
2007 (11 ) SCR 1097
2012 (4) SCR 684
referred to.
Para 29
referred to.
Para 30
referred to.
Para 31
A
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
B
7427 of2012
From the Judgment and Order dated 11.07.2011 of the
High Court of Karnataka at Bangalore in ITANo. 471 of 2008
WITH
C.A. NO. 78470F2012
C.A. NOS. 4544, 5341OF2013
c
C.A. NOS. 14295, 14297, 14298, 14299, 14300, 14301, D
14302, 14303, 14304, 14305, 14306, 14307, 14308, 14309,
14310,14311,14312, 14313,14314,14315,1431~ 14317,
14318, 14319, 14320, 14322,14323, 14324, 14325, 14326,
14327, 14328, 14329, 14330, 14331, 14332-14333, 14334,
14335, 14336, 14337, 14338, 14339, 14340, 14341;14342, E
.14343, 14344, 14345, 14346, 14347, 1890 OF 2015
K. Radhakrishnan, Gargi Khanna, Arijit Prasad, Sadhna
Sandhu,. Rash mi Malhotra, Vishwamar.i Khanddwal, (for Anil
Katiyar), Shashi M. Kapila, Vikas Mehta, R. R. Navya, Pravesh
F
Sharma, Sanjay Kumar, Balraj Dewan, Bhargava V. Desai,
Bhushan Kapur, Y. K. Kapur, Rajin.der Mathur, Avinash Kumar,
Ambhoj Kumar Sinha, Deepanshu Jain, Namita Choudhary,
Siddharth Mittal, Anupam Yadav, S. K. Sabharwal, Rakesh
Gupta, Pramod Dayal, Nikunj Dayal, Payal Dayal for the G
Appellant.
K. V. Mohan, R. K. Raghavan, K.V. BalaKrishnan, Nikhil
Nayyar, Ravindra Keshavrao Adsure, F. V. Irani, Rustom B.
Hathikhanawala, Kamal Mohan Gupta, Jay Savla, Renuka
H
1160
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A
Sahu, Ravi Mishra, Vipin Nair, P. B. Suresh, Vishnu Shankar
Jain, (for Temple Law Firm), Pramod B. Agarwala, Prashant
Mehra for the Respondent.
B
The Judgment of the Court was delivered by
ANIL R. DAVE, J. 1. Leave granted in all the Special
Leave Petitions.
2.These are several appeals which involve the same
issue as in Civil Appeal No. 7 427 of 2012 and therefore, all the
C appeals have been heard together at the request of the learned
counsel appearing for both the sides but for U '7 purpose of
· deciding all these appeals, I have considc: ed facts of
C.A.No.7427 of2012, which are as under:
D
3. Being aggrieved by the judgment delivered in ITA471
of 2008 dated 11'h July, 2011 by the High Court of Karnataka
at Bangalore, this appeal has been filed by the Assistant
Commissioner of Income Tax, Bangalore. The appellant has
been referred to hereinafter as 'the Revenue', whereas the
E
respondent Mis. Micro Labs Ltd. has been referred to as 'the
Assessee'.
4 .The Assessee was aggrieved by the Order dated 11th
January, 2008 passed in ITA No.367/Bang/07 by the Income
F Tax Appellate Tribunal, Bangalore Bench and had, therefore,
approached the High Court of Karnataka at Bangalore. The
High Court allowed the appeal and therefore, the Revenue has
filed this appeal.
G
5.The question which had to be considered by the
Tribunal as well as by the High Court was whether, while
considering the deduction under the provisions of Section 80IAor/and 80-IB of the Income Tax Act, 1961 (hereinafter referred
to as 'the Act'), theAssessee is also entitled to the deduction
H in respect of the profits and gains under the provisions of
ASSTT COMMR. OF l.T. BANGALORE v. M/S. MICRO
1161
LABS LTD. [ANIL R. DAVE, J. ]
Section 80HHC of the Act or whether the Assessee is entitled
A
to deductions under ihe aforestated all the three Sections in
respect of the same profits. Upon perusal of the aforestated
Sections <md looking at the facts of the case, the Tribunal had
come to the conclusion that the Assessee was not entitled to
deductions under Sections 80HHC and 80-IB of the Act but
B
the High Court did not agree with the said conclusion arrived
at.by the Tribunal and decided in favouroftheAssessee to the
effect that though the Assessee had claimed and was allowed
.deductions under Section 80HHC of the Act, the Assessee
was also entitled to deductions under the provisions of Section C
80-IB of the Act in respect of the same profits.
6. Thus, in this appeal what is to be considered is whether
theAssessee was entitled to the deductions claimed by it under
the aforestated Sections as decided by the High Court in favour D
oftheAssessee, The.case of the Rel(enue is that looking at
the provisions of the aforestated Sections, the Assessee is
not entitled to the deductions under all the aforestated Sections
of the Act.
7. On the aforestated subject, different views have been
taken by different High Courts and therefore, this appeal had
been admitted. The High Court of Bombay has decided cases
in favour of the Assessee whereas a different view has been
E
taken by the High Court of Delhi.
F
8. For the purpose of better understanding of the issue,
relevant extracts of the said Sections of the Act have been
reproduced hereinbelow:
G
"80-IB. Deduction in respect of profits and gains
from certain industrial undertakings other than
infrastructure development undertakings. - (1)
Where the gross total income of an Assessee inciudes
any profits and gains derived from any business referred H
1162
SUPREME COURT REPORTS
(2015] 11 S.C.R.
A
to in sub-Sections (3) to (11), (11A) and (118) (such
business being hereinafter referred to as the eligible
business), there shall, in accordance with and subject
to the provisions of the Section, be allowed, in
computing the total income of the Assessee, a deduction
B
from such profits and gains of an amount equal to such
percentage and for such number of assessment years
c
D
E
F
G
H
as specified in this Section.
· ·
(2) to (12)
xxx
xxx
xxx
(13) The provisions contained in sub-Section (5) and
sub-Section (7) to (12) of Section 80-IA shall, so far as
may be, apply to the eligible business under this
Section."
\
"80-IA. Deductions in respe.ct of profits and gains
from industrial undertakings or enterprises engaged
in infrastructure development, etc. -
(1) to (8)
xxx
xxx
xxx
(9) Where any amount of profits and gains of an
(undertaking) or of an enterprise in the case of an
Assessee is claimed and allowed under this Section
for any assessment year, deduction to the extent of such
profits and gains shall not be allowed under any other
provisions of this Chapter under the heading "C.-
Deductions in respect of certain incomes", and shall in
no case exceed the profits and gains of such eligible
business of (undertaking) or enterprise, as the case may
be."
"BOHHC. Deduction in respect of profits retained for
export business.-(1) Where an Assessee, being an
Indian company or a person (other than a company)
resident in India, is engaged in the business of export
ASSTT. COMMR. OF l.T. BANGALORE v. M/S. MICRO
1163
LABS LTD. [ANIL R. DAVE, J.]
out of India of any goods or merchandise to which this A
Section applies, there shall, in accordance with and
subject to the provisions of this Section, be allowed, in
computing the total income of the assessee, [a
deduction to the extent of profits, referred to in subsection (1 B)] derived by the assessee from the export B
of such goods or merchandise:
Provided that if the assessee, being a holder of an Export
House Certificate or a Trading House Certificate
(hereafter in this .Section referred to as an Export House C
or a Trading House, a_s the case may be), issues a
certificate referred to in clause (b) of sub-Section (4A),
that in respect of the amount of the export turnover
specified therein, the deduction under this sub-Section
is to be allowed to a supporting manufacturer, then the D
amount of deduction in the case of the assessee shall
be reduced by such amount which bears to the [total
profits derived by the assessee from the export of
trading goods, the same proportion as the amount of
export turnover specified in the said certificate bears to
E
the total export turnover of the assessee in respect of
such trading goods.
(1A) xxxxxx
xxx
(18) For the purposes of sub-Sections (1) and (1A}, the
F
extent of cjeduction of the profits shall be an amount
equal to-
(i) eighty per cent thereof for an assessment year
beginning on the 1" day of April, 2001;
G
(ii) seventy per cent thereof for an assessment year
beginning on the 1st day of April, 2002;
(iii) fifty per cent thereof for an· assessment year
beginning on-the 1st day of April, 2003;
H
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[2015] 11 S.C.R.
A
(iv) thirty per cent thereof for an assessment year
beginning on the 151 day of April, 2004;
and no deduction shall be .allowed in respect of the
assessment year beginning on the 151 day of April, 2005
B
and any subsequent assessment year."
9. So far as Civil Appeal No.7427 of 2012 is concerned,
which is against the judgment delivered by the High Court of
Karnataka at Bangalore, as stated hereinabove, the same has
c been decided in favour of the Assessee and in the
circumstances, the Revenue has preferred the present appeal
as it has been aggrieved by the way in which the deductions
were permitted by the High Court from the same profits and
gains of the business to the Assessee under Sections 80HHC
o and 80-IB of the Act. According to the case of the Revenue,
the Tribunal was right in deciding the case of the Assessee
and the High Court committed an error while interpreting the
legal provisions of the Sections referred to hereinabove.
E
10. The learned counsel appearing for the Revenue had
submitted that the intention behind enactment of the aforestated
three Sections of the Act was to see that no assessee gets
deductions twice under the provisions of the aforestated
Sections. In nutshell, the submission on behalf of the Revenue
F was that having once obtained deduction under the provisions
of Sections 80-1 B or/and 80-IA of the Act, no assessee can
then avail deductions under Section 80HHC of the Act in
respect of the same profits. It had been specifically stated on
behalf of the Revenue that Section 80-IA(9) of the Act had been
G amended with effect from 1 '1 April, 2000 so as to see that the
total deduction does not exceed total profits and gains of the
business and in respect of the same profits, deductions under
Section 80HHC and Sections 80-IA or 80-IB together cannot
be allowed.
H
ASSTT. COMMR. OF l.T. BANGALORE v. M/S. MICRO
1165
LABS LTD. [ANIL R. DAVE, J.]
11. The learned counsel appearing for the Revenue had A
read and tried to interpret each of the aforestated Sections
and specifically put his emphasis on that part of the Section
which prevents the assessee from taking advantage of having
deductions from both of the Sections referred to hereinabove.
12. Section SOHHC, according to the learned coi.msel
appearing for the Revenue, deals with the deductions which
can be availed by the assessee who is engaged in the
business of export out of India of any goods or merchandise
B
to which the said Section applies. The said Section deals C
with the manner in which the deduction can be claimed by the.
assessee.
13. So far as Section 80-IA is concerned, it pertains to
deductions in respect of profits and gains from industrial D
undertakings or enterprises engaged in the business of
· infrastructure development. Section 80-IA(9) of the Act
specifically provides that when any deduction is claimed and
allowed under the provisions of Section SO.IA of the Act,
deduction to the extent of such profits and gains cannot be E
allowed under any other provisions under heading "C. -
Deductions in respect of certain incomes" of the Chapter in
which Section SOHHC has been included. Similarly, it had
been submitted by the learned counsel that so far as Section
80-IB is concerned, it pertains to deduction in respect of profits
F ·
and gains from certain jndustrial undertakings other than the
business of infrastructure development. He had further
submitted that Section 80-IB(13) also provides that certain
provisions of Section 80-IA would also apply to Section 80-IB,
like the provisions of Sub-Section (5) and Sub-Sections (7) to G
(12) of Section 80-IA. ·
14. The learned counsel had, thus, submitted that by virtue
of the provisions of Section 80-IB(13), the provisions applicable
to industrial undertakipgs to whom deductions under Section
H
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[2015] 11 S.C.R.
A
80-IA are granted, would also apply to certain extent. By virtue
of the aforestated provisions of Section 80-1B(13), provisions
of Section 80-IA(9) would also apply to the industrial units who
claim benefit of deduction under Section 80-IB of the Act.
B
15. According to the learned counsel, Section 80-IA(9)
is clear to the effect that once a deduction is claimed under
Section 80-IA, no deduction can be claimed under heading
'C' of Chapter VIA. Section 80HHC is included in heading 'C'
of Chapter VIA and therefore, if an assessee claims and is
C allowed deduction under Section 80-IA or Section 80-IB, he
cannot be allowed any deduction under Section 80HHC or any
other Section that falls under heading "C" of Chapter VIA of
the Act.
D
16. Now, let us look at the case with which we are
concerned. The Assessee in the main appeal is having several
industrial units having different activities or different
businesses. The Assessee being also in the business of
export, had also claimed and was allowed deduction under
E
Section 80HHC. In spite of the fact that the Assessee had
claimed deduction in respect of the provisions of Section 801 B, theAssessee had also claimed deduction under Section
80HHC with respect to the same profits. The Assessing Officer
had allowed deductions under Section 80HHC without
F
considering the fact that the Assessee had also claimed and
was allowed deduction under the provisions of Section 80-IB.
In the aforestated circumstances, the Commissioner of IncomeTax, exercising his power under Section 263 of the Act vide
order dated 26'" February, 2007, observed thatthe Assessing
G Officer was not correct in allowing deductions under Section
80-IB as well as under Section 80HHC and therefore, directed
the Assessing Officer to revise the assessment order.
17. The said order passed by the Commissioner of
H Income-Tax had been challenged by the Assessee before the
ASSTT. COMMR. OF IT BANGALORE v. M/S. MICRO
1167
LABS LTD. [ANIL R. DAVE, J.]
Tribunal and the Tribunal was pleased to dismiss the appeal A
and therefore, the Assessee had filed an appeal before the
High Court which has been allowed. Being aggrieved, the
Revenue has filed this appeal.
18. On the other hand, the learned counsel appearing
B
for the Assessee in Civil Appeal No.7427 of 2012 and other
connected appeals had submitted that the view expressed by
the High Court is absolutely correct. According to the learned
counsel, the statute wants to give deduction to the Assessee
in respect of both the activities, namely in respect of export of c
goods as well as with respect to infrastructure development
etc. and as the assesses in all the cases are engaged in the
business of export as well as in the business of infrastructure
development etc., the assesses are entitled to claim
deductions in respect of export business as well as D
infrastructure development aetivities, etc.
19. According to the learned counsel, if there is any
confusion or any ambiguity in the tax law, benefit thereof should
be given to the assessee and the High Court of Karnataka
E
and some other High Courts in the country had rightly permitted
the assesses to claim deductions under both the Sections.
Thus, the counsel appearing for the assesses had supported
the reasons given by the High Court and had submitted that
the appeals filed by the Revenue deserve dismissal.
F
20. I have heard the learnedcounsel and considered the
judgments referred to by them and the provisions of the Act
concerning the subject of the appeals: .
21. Upon perusal of the Sections referred to hereinabove G
and the judgments discussed during the course of the hearing,
I am of the view that the High Court of ·Karnataka is not right
when it decided to allow deductions in respect of same profits
under Section 80HHC as well as under Section 80-IA or
Section 80~1B.
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22. One can very well see from the provisions of Section
80-IA(9) that if an Assessee is engaged in infrastructure
development as well as in the export business, he cannot claim
deduction of his entire profits and gains under the provisions
of Section 80HHC as well as under Section 80-IA or/and
B Section 80-IB of the Act.
23. Section 80-IA(9) is quite unambiguous, which clearly
provides that if an assessee claims any deduction under the
provisions of Section 80-IA, then the assessee cannot claim
c deduction to the extent of such profits and gains under heading
'C' of Chapter VIA of the Act, which, in the present case, was
claimed and wrongly allowed to the Assessee.
24. Section 80HHC, which pertains to deduction in
respect of profits and gains from export business, is included
D under heading 'C', of ChapterVIAoftheAct.
25. If an assessee claims and is allowed any deduction
under Section 80HHC, then to the extent to which deduction
has been granted to him under Section 80-IA or/and 80-IB, he
E cannot be allowed further deduction under Section 80HHC.
F
G
The language is not only very clear, but is also absolutely
unambiguous, as it says:
"Where any amount of profits and gains of an
(undertaking) or of an enterprise in the case of an
Assessee is claimed and allowed under this Section
for any assessment year, deduction to the extent of such
profits and gains shall not be allowed under any other
provisions of this Chapter under the heading ''.C.-
Oeductions in respect of certain incomes'', and shall in
no case exceed the profits and gains of such eligible
business of (undertaking) or enterprise, as the case may
be."
26. Admittedly, the Assessing Officer had allowed
H deductions not only under Section 80HHC but also under
ASSTI. COMMR. OF 1.T. BANGALORE v. MIS. MICRO
1169
LABS LTD. [ANILR. DAVE, J.]
Section 80-IB in respect of the entire profits and.gains of the A
business of the Assessee. In the opinion of the Commissioner,
it was not proper and therefore, he had taken the matter in
revision under Section 263 of the Act. He, ultimately, directed
the Assessing Officer to re-assess the income in the light of
the observations made in the order passed under Section 263
B
of the Act and the said order passed by the Commissioner
had also been confirmed by the Tribunal. However, the order
of the Tribunal, when challenged before the High Court, was
quashed and set aside.
c
27. In the instant case, I also find that the intention of the
legislature is very clear to the effect that if an assessee claims.
any deduction under the provisions of Sections 80-IA or/and
80-IB, he cannot claim deduction to the extent to such profits
and gains which had been claimed and allowed under the D
provisions of Section 80HHC of the Act, because Section
80HHC is included in heading 'C' of Chapter VIA of the Act.
28. In my opinion, the High Court was in error while
permitting the Assessee to get benefit in respect of Section
E
80HHC as it did not take into account the fact that the profits in
respect of which deduction was allowed under Section 80HHC
had also been previously allowed under Section 80-IB. In my
opinion, this is not permissible under Section 80-IB(13) read
with Section 80-IA(9) because by virtue of Section 80-IB(13)
F
provisions of Section 80-IA(9) are also applicable to Section
80-IB.
29. For the aforestated reasons, I am not in agreement
with the view expressed by the High Court and therefore, I G
decide the appeals in favour of the Revenue by holding that
the Assessee who had claimed and had been allowed
deductions in respect of profits under Section 80-IB, could not
have been allowed deductions in respect of the same profits
under Section 80HHC of the Act.
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30. Other issues, though referred to in the memo of
appeals, had not been pressed seriously and therefore, I am
not deciding the same by keeping the said issues open.
31.The appeals, thus, stand disposed of as allowed in
B favour of the Revenue with no order as to costs.
Dipak Misra, J. 1. Leave granted in the special leave
petitions.
2. Having perused the judgment of my esteemed brother,
C for whom I have the deepest respect, I am unable to concur
with the view expressed by him. Hence, I pen a 'separate
opinion.
3. In this batch of appeals, the issue that really arose
D before the different High Courts is :
"Whether the Tribunal was justified in holding that section
80-1 A(9) of the Income-Tax Act, 1961 mandates that the
amount of profits allowed as deduction under section 80E
1A(1) of the Act has to be reduced from the profits of the
business of the undertaking while computing deduction
under any another provisions under heading C in Chapter
VI-A of the lncome-taxAct, 1961?"
·
F
4. Be it stated, I have taken the said question from the
judgment of the High Court of Bombay in Associated
Capsules Private Limited v. Deputy Commissioner of
Income Tax and another' and the said judgment has been
placed reliance upon by the High Court of Bombay in the appeal
G arising out of Special Leave Petition (Civil) No. 26002 of 2011.
The High Court allowing the appeal of the assessee did not
agree with the view of the High Court of Delhi and opined thus:-
H
1 [2011] 332 ITR 42 (Born)
ASSTT COMMR. OF l.T. BANGALORE v. MIS. MICRO
1171
LABS LTD. [DIPAK MISRA, J.]
"We find it difficult to subscribe to the views expressed A
by the Delhi High Court in interpreting the provisions of
. section 80-1A(9). In that case, in fact, the counsel for the
Revenue had argued (see para 38 of the judgment) that
section 80-1A(9) applies at the stage of allowing
deduction and not at the stage of computing deductio~ B
under other provisions under heading C of Chapter VIA It was argued that in the matter of grant of deduction,
the first stage is computation of deduction and the second
stage is the allowance of the deduction. Computation of
deduction has to be made as provided in the respective C
sections and it is only at the stage of allowing deduction
under section 80-1A(1) and also under other provisions
under heading C of Chapter VI-A, the provisions of
section 80-1A(9) come into operation. While accepting D
the arguments advanced by the counsel for the Revenue,
it appears that the Delhi High Court failed to consider
the important argument of the Revenue noted in
paragraph 38 of its judgment Moreover, without rejecting
the argument of the Revenue that section 80-1A(9) E
applies at the stage of allowing the deduction and not at
the stage of computing the deduction, the Delhi High
Court could not have held that section 80~1A(9) seeks to
disturb the method of computing the deduction provided
under other provisions under heading C of Chapter VI-A F ·
of the Act In these circumstances, we find it difficult to
concur with the views expressed by the Delhi High Court
in the case of Great Eastern Exports [2011] 332 ITR 14.
For the same reason, we find·it difficult to subscribe to
the views expressed by the Kerala High Court in the case G
of 0/am Exports [2011] 332 ITR 40.
In the result, we hold that section 80-1A(9) does not affect
the computability of deduction under various provisions
under heading C of Chapter VI-A, but it affects the H
1172
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B
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SUPREME COURT REPORTS
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allowability of deductions computed under various
provisions under heading C of Chapter VI-A, so that the
aggregate deduction under section 80-1A and other
provisions under heading C of Chapter VI-A do not
exceed 100 per cent of the profits of the business of the
assessee. Our above view is also supported by the
Central Board of Direct Taxes Circular No. 772 dated
December 23, 1998 ([1999) 235 TR (St.) 35), wherein it
is stated that section 80-1A(9) has been introduced with
the view to prevent the taxpayers from claiming repeated
deductions in respect of the same amount of eligible
income and that too in excess of the eligible profits. Thus,
the object of section 80-1A(9) being not to· curtail thi:
deductions computable under various provisions under
heading C of Chapter VI-A, it is reasonable to hold that
section 80-1 A(9) affects allowability of deduction and not
computation of deduction. To illustrate, if Rs. 100 is the
profits of the business of the undertaking, Rs. 30 is the
profits allowed as deduction under section 80-1A(1) and
the deduction computed as per section 80HHC is Rs.
80, then, in view of section 80-1A(9), the deduction under
section 80HHC would be restricted to Rs. 70, so thatthe
aggregate deduction does not exceed the profits of the
business."
5. The High Court of Delhi in Great Eastern Exports v.
Commissioner of lncome-Tax2 while interpreting the said
provision has applied the test of literal construction and
observed:-
"We are not in a position to subscribe to the contention
of the learned counsel for the assessees that where the
Legislature intended to deduct the amount out of some
other deduction a different phraseology was used as
noticed above. This was sought to be demonstrated by
H '- [2011] 332 ITR 14 (Delhi)
ASSTT. COMMR. OF 1.T. BANGALORE v. M/S. MICRO
1173
LABS LTD. [DIPAK MISRA, J.]
refereeing to sub-section (5) of section 80HHB, subA
section (4) of section 80HHBA and sub-section (4) of
section 80-1 E etc. which provisions start with the use of
a non obstante clause. Merely because section 80-1 B
is not worded in a similar fashion that would not mean
· that we have to do violence to the plain language used in
B
that provision, which is capable of only one meaning. A
particular section of an enactment, the intention of which
is otherwise manifest, cannot be read by adopting such
an insidious approach, by referring to othe·r sections. It
is well known that the Legislature adopts different ways C
and means in order to achieve its goal and there is no
justification for insistence on identical language.
Likewise, as rightly pointed out by the Special Bench of
the Tribunal, the notice and objects of accompanying 0
reasons are only an aid to construction. Such aid to
construction is needed when a literal reading of the
provision leads to an ambiguous result or absurdity."
6. To appreciate the controversy it is absolutely necessary
to understand the scheme of the Act and the purpose and the E
schematic impact of the provisions which are required to be
interpreted in the context of Chapter in which they occur.
7. The Income Tax Act, 1961 (for short, "the Act") is
arranged chapter-wise. Chapter I deals with preliminary F
definitions, subject to the context in issue. Chapter II gives
contours of the charge for levy of income tax and ambit and
scope of total income and certain other matters. Chapter Ill
relates to incomes, which do not form part of the total income
at all. Chapter IV relates to computation of total income under ' G
different sources, i.e., six sub heads, which have been divided
into parts (A) to (F}, Chapter V deals with income of other
persons, which are to be included in the assessee's total
income. Chapter VI postulates aggregation of income from
different sources or set off or carry forward of loss computed
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under different sourc?.s and to the next assessment year.
Chapter VIA, with which we are concerned, deals with
deductions to be made in computing total income. The said
Chapter is divided into four parts namely, A to D. The said
Chapter becomes operative on reaching the last stage of
B computation of income from different sources as per the
provisions of Chapter I to VI. It is to be borne in mind that each
chapter deals with independent subject rpatters at different
stages. In other words, before reaching the stage of invoking
provisions of Chapter VIA, the assessee is required to work
C out the gross total income by applying the provisions upto the
stage of Chapter VI. It is in this context that in part A of Chapter
VIA under the heading "General" it is postulated in subsection(1) to Section BOA that an assessee shall be allowed
0
from his gross total income in accordance with and subject to
the conditions of this Chapter, the deductions specified in
Sections BOC to BOU. As per mandate of sub-section (2) to
Section BOA, the aggregate amount of such deductions in
Chapter VIA cannot exceed the gross total income of the
E assessee. Sub-section (3) stipulates that°where an assessee
is an association of persons or body of individuals to whom
specified deductions have been allowed, then no deduction
under the specified section shall be allowed in relation to share
of such member of association of the persons or body of
F individuals.
G
H
B. Having stated the scheme as is reflective from the
Chapter, it is ne_cessary to reproduce Section AB which is
relevant. It reads as follows:-
"Deductions to be made with reference to the income
included in the gross total income.
BOAB. Where any deduction is required to be made or
allowed under any section included in this Chapter under
the heading "C.- Deductions in respect of certain
incomes" in respect of any income of the nature specified
ASSTT. COMMR. OF 1.T. BANGALORE v. M/S. MICRO
1175
LABS LTD. [DIPAK MISRA, J.)
in that section which is included in the gross total income A
of the assessee, then, notwithstanding anything
contained in that section, for the purpose of computing
the deduction under that section, the amount of income
of that nature as computed in accordance with the
provisions of this Act (before making any deduction under B
this Chapter) shall alone be·deemed to be the amount of
income of that nature which is derived or received by the
assessee and which is included in his gross total
income"."
The aforesaid section stipulates that notwithstanding
anything contained in Sections 80C to 80U for the purpose of
computing deduction under the aforesaid section, the amount
c
of income of that nature as computed in accordance with the
provisions of the Act before making any deduction, shall alone D
be deemed to be the income derived or received by the
assessee and included in his gross total income. The section,
a non-obstante provision, overriding any section in part 'C' and
postulates that deduction under each section shall be
separately computed in respect of income of that nature, which
E
is received or derived by the assessee and included in the
gross total income. This provision is significant and accepts
that an assessee may be entitled to multiple deductions under
Section 80C to 80U, when conditions precedent stipulated in
the section are satisfied.
F
· 9. The expression 'gross total income' has been defined
in sub-section(5) to Section 808 and it reads as under:-
"808. In this ChapterG
(5) "gross total income" means the total income
computed in accordance with the provisions of this Act,
before making any deduction uJlder this Chapter;"
On a conjoint and harmonious reading of Sections 80A8
and 808(5), it is apparent that once 'gross total income' is
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computed in accordance with the provisions of the Act but
before making any deduction under the provisions of Sections
BOC to SOU. Gross total income is computed by applying
provisions upto Chapter VI, without or before making any
deduction under Sections SOC to SOU,' but the quantum of
B income which qualifies for ?eduction under Sections SOC to
SOU would be amount of income of that nature, derived or
received by the assessee.
10. As I perceive, there is no difficulty to this extent. The
c difficulties arise when there are overriding provisions, which
tend to control a deduction, because deduction has been
allowed in another provision.