Madhya Pradesh High Court
J.P. Tobacco Products Pvt. Ltd. vs Commissioner Of Income-Tax on 27 August, 1996
Equivalent citations: [1998]229ITR123(MP)
Bench: A.K. Mathur, Chief Justice
JUDGMENT S.K. Kulshrestha, J.
1. The Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred at the instance of the assessee-company on an application being made under Section 256(1) of the Income-tax Act, 1961, the following question of law arising out of the order dated July 16, 1992, in I. T. A. No. 246/Jab of 1987 and cross-objection No. 46/Jab. of 1987 for the assessment year 1984-85 for the opinion of this court :
" Whether the Tribunal is right in law in holding that the deduction under Section 80I is to be allowed on balance of income after deducting the relief under Section 80HH from gross total income and not from gross total income as defined in Section 80B(5) of the Act ?"
2. The assessee is a private company engaged in the business of manufacturing and sale of bidis. The assessees were assessed for the assessment year 1984-85 and the Assessing Officer held that the assessee-company was not entitled to deductions under Sections 80HH and 80I of the Act. On appeal, the Commissioner of Income-tax (Appeals) held the assessee to be entitled to deduction of Rs. 1,27,818 under Section 80HH and Rs. 4,52,211 under Section 80I of the Act. In computing the deduction under Section 80I, the Commissioner of Income-tax (Appeals), however, reduced the amount of Rs. 1,27,818 allowed under Section 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 Section 80I 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.
3. We have heard learned counsel for the parties and perused the record.
4. 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 Section 80I of the Act is the interpretation of Sub-section (9) of Section 80HH which provides that where the assessee is entitled also to the deduction under Section 80I or Section 80J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which Section 80HH applies, effect shall first be given to the provisions of Section 80HH. According to learned counsel, the said Sub-section (9) of Section 80HH cannot be read to say that for according deductions under Section 80I or 80J, the deductions allowed under Section 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 Section 80I or 80J on the amount of gross total income so reduced.
5. Learned counsel for the Department has, however, argued that the purpose of Sub-section (9) of Section 80HH is apparently to first allow deductions admissible under Section 80HH and then to reduce the gross total income by the deductions so allowed and consider the income so reduced for the purpose of allowing deductions under Section 80I or 80).
6. Sub-section (9) of Section 80HH, as it stood prior to insertion of Section 80I by the Finance (No. 2) Act, 1980, with effect from April 1, 1981, originally included only Section 80J. Section 80J providing for deduction in respect of. the profits and 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 Section 80HH. It was only by an amendment of the said Section 80J that the provision for reducing the gross total income by the amount of deduction under Section 80HH of the Act by the Direct Taxes (Amendment) Act, 1974, with effect from April 1, 1974, was inserted. Section 80I was inserted in its present form by the Finance (No. 2) Act, 1980, with effect from April 1, 1981, and by the same Finance (No. 2) Act, Section 80HH(9) was amended and the words "Section 80I or" were inserted to make the said provision applicable to Section 80I as well. However, no provision was made in Section 80I to provide for deduction of the gross total income by deduction allowed under Section 80HH for the purpose of allowing deduction under Section 80I. It would, thus, be seen that when Section 80J already existed in Sub-section (9) of Section 80HH, an amendment was made in Section 80J in the year 1974 but no such provision was made in so far as Section 80I was concerned. This clearly centra-indicates that Sub-section (9) of Section 80HH by itself meant that deduction allowed under Section 80HH is to be reduced from the gross total income for granting the benefit of Section 80J and, for that matter, of Section 80I. It was provided in Section 80J itself by later amendment while no such provision was made in Section 80I even though inserted on a later date. The provision of law is, therefore, clear that in so far as the benefit of Section 80I is concerned, it has to be granted on the gross total income and not on the income reduced by the amount allowed under Section 80HH.
7. In the result, we find that the Tribunal was not right in holding that deduction under Section 80I is to be allowed only on the balance of the income after deducting the relief under Section 80HH from the gross total income and accordingly we answer the said question in favour of the assessee and against the Revenue.