Supreme Court: Shital Fibers Ltd. v. Commissioner of Income Tax (and connected cases) [CIVIL APPEAL NO. 14318 OF 2015]
Background:
In this case, the appellant had claimed deductions under Section 80-HHC (export profits) and Section 80-IA/80-IB (industrial profits). However, the Income Tax Department disallowed these claims, contending that Section 80-IA (9) prohibits availing double benefits on the same profits, a view later upheld by the Punjab & Haryana High Court, leading the appellant to approach the Supreme Court.
Department’s Contentions:
The Department submitted that if an assessee claims any deduction under the provisions of Section 80-IA and 80-IB, he cannot claim any deduction to the extent of such profits and gains which had been claimed and allowed under the provisions of Section 80-HHC. The Reason being Section 80-HHC is included in Heading ‘C’ of Chapter VI-A of the IT Act. He submitted that the profits in respect of which deduction was allowed under section 80- HHC has also been previously allowed under section 80-IB.
Decision of the High Court
The appeal preferred by the appellant against the said Order was dismissed by Commissioner of Income Tax (Appeals). In appeal preferred by the appellant before the ITAT, the appellant was unsuccessful. Thereafter, an appeal was preferred before the Punjab and Haryana High Court which came to be dismissed by the impugned judgment and order. The High Court took the view that Sub-section (9) of Section 80-IA bars claim for deduction under any other provision of Chapter VI-A, if deduction under Section 80-IA has been allowed. HC noted that section 80-IA (9) has been introduced with a 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- IA(9) being not to curtail the deductions computable under various provisions under heading C of Chapter VI-A, it is reasonable to hold that section 80-IA(9) affects allowability of deduction and not computation of deduction.
Decision of the Supreme Court
The bench comprising Justices Abhay S Oka, Ahsanuddin Amanullah and AG Masih delivered the verdict while answering a reference after a matter was referred to the larger bench due to split verdict in Assistant Commissioner of Income Tax v. Micro Labs Limited (2015) on the issue of whether deductions claimed under Section 80-IA/80-IB (for industrial profits in certain categories) and Section 80-HHC (for export profits) could be cumulatively allowed. One view rendered by Justice Anil R. Dave was that the deduction under Section 80-IA must first reduce gross total income before computing deductions under other provisions (like Section 80-HHC). Opposing Justice Dave’s view, Justice Dipak Misra held that Section 80-IA (9) does not alter the computation of deductions under other provisions but only restricts the aggregate deduction to not exceed the eligible profits. The case was referred to a 3-judge bench due to a split decision. The judgment authored by Justice Oka upheld the view taken by Justice Misra, stating that assessees do not have to subtract the Section 80-IA deduction before calculating the Section 80-HHC deduction, i.e., both the deductions can be calculated separately.
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