Commissioner Of Income Tax Jai v. M/S Modern Threads (I) Ltd. Ja

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 337 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus M/S Modern Threads (I) Ltd. Ja ----Respondent _____________________________________________________ For Appellant(s) : Mr. R.B. MathurFor Respondent(s) : Mr. Sandeep Taneja _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHURJudgment 08/02/2017 1.By way of this appeal, the appellant has assailed thejudgment & order of the Tribunal whereby the Tribunal hasdismissed the appeal preferred by the department. 2.This Court while admitting the matter dated 3[rd] November,2008, framed the following question of law:- “i) Whether in the facts and circumstances ofthe case the ITAT and CIT(A) were justified inlaw and have not acted perversely in allowingthe deductions u/s 801 & 80HH when theassessee has not maintained separate books ofaccounts for claiming deduction which cannotbe ascertained? ii) Whether in the facts and circumstances ofthe case, the assessee can be entitled fordeductions u/s 80I on the gross total amountbefore deductions u/s 80HH of the IT Act?” 3.Counsel for the appellant contended that in view of thedecision of Gujarat High Court in the case of Transpek SiloxIndustry Ltd. vs. Deputy Commissioner of Income Tax Circle 4decided on 25[th] July, 2016 wherein it has been held as under:- “28. It is true, as pointed out by the counsel for theassessee that in different provisions the Legislature hasused different language for restricting or limiting theclaim of deductions. The use of language in statutoryprovisions in such complex situations must be peculiarto every situation the Legislature may seek to meetwith. Merely because in some of the provisions certaindisallowances are expressed in different language would not by itself mean that sub-section (9)of section 80IA was aimed to have restricted andlimited scope of application. 29. The contention that no such matching provisionwas made in section 80HHC of the Act would clearlyindicate the Legislative intent also, in our opinion, isnot a valid argument. Sub-section (9) of section 80IAwas enacted to have universal application to alldeductions under sub-chapter C of Chapter VI. It wasneither possible nor expected of the Legislature tomake individual matching provisions in large number ofstatutory provisions recognizing deductions undervarious situations. Such provisions are often timesmade for a limited period, new deductions areintroduced from time to time and old deductionswithdrawn. 31. We are unable to follow the line of logic adopted bythe Bombay High Court in case of Associated CapsulesP. Ltd. (supra) that section 80IA(9) of the Act in thecontext of section 80HHC would operate not at thestage of computation but at the stage of allowing thededuction. In plain terms sub-section (9) of section80IA disentitles an assessee from claiming deductionunder any other provision of sub-chapter C to theextent deduction is already claimed and allowed forcertain profit or gain of an undertaking or enterpriseunder section 80IA. Such provision, therefore, wouldhave to be applied at the very stage to assessee's claimfor deduction under section 80HHC of the Act isconsidered. While computing such deduction the effectof sub-section (9) of section 80IA would have to begiven. We do not think that in the process we aretinkering with the formula for computation of eligibleprofit for deduction under section 80HHC of the Act. Wehave noticed that different formulae have beenprovided for manufacturing exporter and trader and in case of an assessee whose exports comprise of boththe sources. It is, therefore, at the stage of sub-section(3) of section 80HHC effect of sub-section (9) ofsection 80IA would apply. It is true that clause (baa) toexplanation to section 80HHC defines a term `profits ofthe business'. While working out the business profits asspecified therein, in terms of sub-section (9) of section80IA the profit or gain which had already been alloweddeduction to the extent mentioned therein would haveto be ignored.” 6.In view of above observations of this Court,present appeals are dispose of and the questions posedfor our consideration are decided in favour of therevenue and against the assessee. However, theAssessing Officer may give effect to this order onlyafter the decision of the Larger Bench of the SupremeCourt in the case referred to it by the decision reportedin [2016] 380 ITR 1 (SC). Accordingly, the issue isdecided in favour of the revenue and against theassessee, subject to the decision of the Supreme Court. 4.The same view was taken by this Court in Tax Appeal No.185/2004 (Vijay Solvex Ltd. vs. Commissioner of Income Tax)reported in [2014] 31 ITR 382 (Raj.), wherein the view wastaken in favour of the department. 5.However, counsel for the respondent contended that earlierdifferent view was taken by this Court reported in 271 ITR 444(Commissioner of Income Tax vs. Rochiram & Sons) and in TaxAppeal No. 110/2006 (Commissioner of Income Tax vs. VijaySolvex Ltd.) decided on 17[th] March, 2015. 6.We have heard both the sides. 7.Taking into consideration two Division Bench judgmentswhich were confirmed by the Hon’ble Supreme Court andtherefore, the subsequent Division Bench rightly followed theearlier decision. The judgment which has been cited of VijaySolvex Ltd. vs. Commissioner of Income Tax decided on 6[th] January, 2014 has not referred the earlier judgment which wasconfirmed by the Hon’ble Supreme Court. 8.In view of the above, it is well settled position that theearlier view which was confirmed by the Hon’ble Supreme Courtis required to be followed since other Division Bench has notfollowed the earlier decisions. 9.In that view of the matter, the issue is answered in favourof the assessee and against the department subject to the viewwhich is also referred to Larger Bench as per the order of theHon’ble Supreme Court reported in [2016] 380 ITR 1 (SC).Therefore, parties will be abide by the decision of the Hon’bleSupreme Court which is subject to applicability of the provisionfor the relevant assessment year. The appeal stands disposed off. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. A.Sharma/110