By K. B. Bhujle | Advocate
New Page 1
Unreported :
41 Business deductions :
Computation of the amount for deduction and the amount allowable as deduction :
Restriction u/s. 80IA(9) of Income-tax Act, 1961 : A.Y. 2003-04 : Restriction
u/s.80IA(9) applies for the total amount allowable as deduction and not for the
computation.
[Associated Capsules Pvt.
Ltd. v. Dy. CIT, (Bom.); ITA No. 3036 of 2010, dated 10-1-2011]
The following question was
considered by the Bombay High Court regarding the restriction u/s. 80IA(9) of
the Income-tax Act, 1961 :
“Whether the Tribunal was
justified in holding that S. 80IA(9) of the Income-tax Act, 1961 mandates that
the amount of profits allowed as deduction u/s.80IA(1) of the Act has to be
reduced from the profits of the business of the undertaking while computing
deduction under any other provisions under heading ‘C’ in Chapter VI-A of the
Income-tax Act, 1961.”
The High Court answered the
question in the negative, i.e., in favour of the assessee and held as under :
“(i) In our opinion, the
reasonable construction of S. 80IA(9) would be that where deduction is
allowed u/s.80IA(1), then the deduction computed under other provisions
under heading ‘C’ of Chapter VI-A has to be restricted to the profits of the
business that remains after excluding the profits allowed as deduction
u/s.80IA, so that the total deduction allowed under the heading ‘C’ of
Chapter VI-A does not exceed the profits of the business.
(ii) S. 80IA(9) does not
affect the computability of deduction under various provisions under heading
‘C’ of Chapter VI-A, but it affects the allowability of deductions computed
under various provisions under heading ‘C’ of Chapter VI-A, so that the
aggregate deduction u/s.80IA and other provisions under heading ‘C’ of
Chapter VI-A do not exceed 100% of the profits of the business of the
assessee.
(iii) Our above view is
also supported by the CBDT Circular No. 772, dated 23-12-1998, wherein it is
stated that S. 80IA(9) has been introduced with a view to prevent the
tax-payers from claiming repeated deductions in respect of the same amount
of eligible income and that too in excess of the eligible profits.
(iv) Thus, the object of
S. 80IA(9) being not to curtail the deductions computable under various
provisions under heading ‘C’ of Chapter, it is reasonable to hold that S.
80IA(9) affects allowability of deduction and not computation of deduction.
(v) To illustrate, if
Rs.100 is the profit of the business of the undertaking, Rs.30 is the
profits allowed as deduction u/s.80IA and the deduction computed as per S.
80HHC is Rs.80, then, in view of S. 80IA(9), the deduction u/s.80HHC would
be restricted to Rs.70, so that the aggregate deduction does not exceed the
profits of the business.”
