Ita/267/2008 Of Great Eastern Exports v. Assistant Commissioner Of Income Tax

REPORTABLE * IN THE HIGH COURT OF DELHI AT NEW DELHI ITA 267 OF 2008, ITA 1316 OF 2008 ITA 4 OF 2009, ITA 907 OF 2009 ITA 906 OF 2008, ITA 1002 OF 2008 % Judgment reserved on:13.07.2010 Date of Decision:29.11.2010. (1)ITA 267 OF 2008 M/s Great Eastern Exports Through: ….APPELLANT Mr. Kanan Kapoor, Advocate Versus ….RESPONDENT The Commissioner o f Income Tax Through: Ms. Prem Lata Bansal, Advocate (2) ITA 1316 OF 2008 ….APPELLANT M/s Arctic India Engg. (P) Ltd. Through: Ms. Shashi M. Kapila, Advocate Versus ….RESPONDENT Dy. Commissioner of Income Tax Through: Ms. Prem Lata Bansal, Advocate (3) ITA 4 OF 2009 ….APPELLANT The Commissioner of Income Tax Through: Ms. Prem Lata Bansal, Advocate Versus M/s S.M. Flanges Pvt. Ltd Through: ….RESPONDENT Mr. K. Sampath, Advocate (4) ITA 907 OF 2009 ….APPELLANT The Commissioner of Income Tax Through: Ms. Prem Lata Bansal, Advocate Versus M/s S.M. Flanges Pvt. Ltd Through: ….RESPONDENT Ms. Shashi M. Kapila, Mr.Siddharth Kapila and Mr. R. R.Maurya, Advocates. (5) ITA 906 OF 2008 ….APPELLANT Through: Mr. Anoop Sharma, Advocate with Mr. Manu K. Giri, Advocate Eastern Medikit Ltd. Versus ….RESPONDENT Dy. Commissioner of Income Tax Through: Ms. Prem Lata Bansal, Advocate (6) ITA 1002 OF 2008 ….APPELLANT Neetee Clothing Private Ltd. Through: Dr. Rakesh Gupta, Advocate with Mr. Ashwani Taneja, Ms. Poonam Ahuja and Ms. Aarti Saini, Advocates Versus …RESPONDENT Ms. Prem Lata Bansal, Advocate. The Commissioner of Income Tax Through: CORAM :- HON’BLE MR. JUSTICE A.K. SIKRI HON’BLE MS. JUSTICE REVA KHETRAPAL 1. Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? A.K. SIKRI, J. 1. In all these appeals, we are concerned with the manner in which profits and gains of the business are to be ascertained before computing the relief under Section 80HHC of the Income Tax Act (hereinafter would be referred to as „the Act‟). There are certain deductions which are allowed under Section 80IA of the Act as well. Therefore, to put it precisely question for consideration is: once a particular Undertaking or Enterprise becomes entitled to claim and is allowed deduction of certain amount of the profits and gains under Section 80IA of the Act, whether deduction to the extent of such profits claimed under Section 80IA would not be allowed for computing deduction under Section 80 HHC or whether the profits and gains are to be computed and deduction undertaken independently all over again, irrespective of the deduction already claimed and allowed under Section 80 IA of the Act. This question revolves around the interpretation which is to be given to sub-Section (9) of Section 80IA of the Act and that provision reads as under: “(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”. “(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”. 2. It is manifest that a the plain reading of the aforesaid provision suggests that the amount of profits and gains claimed by the assessee and allowed to it under that provision is not to be allowed again and to the extent of such profits and gains, the profits and gains are to be reduced to that extent while claiming deduction under other provisions under the heading “C-deductions in respect of certain incomes” and that would include Section 80HHC. According to the counsels for the assessees, however, the answer is not that simple and they exhort us to examine the question in the context of the aim of Chapter VIA which contains these provisions and also the case law which has emerged on the interpretation thereof. Therefore, before reverting back to the question again, we would like to traverse through relevant provisions of the said Chapter as well as case law relied upon. Scheme of Chapter VI A before its amendment: 3. Chapter VIA of the Act deals with certain deductions. It is in three parts. Part A described as „General‟ details the scheme of deductions. Part B enumerates specific deductions which are allowed in respect of certain payments and Part-C contains the provisions for allowing certain deductions in respect of profits and gains from business. A reading of the provisions falling in Part-A would demonstrate that deductions under this Chapter are to be made from “the gross total income”. Various kinds of deductions are provided in Part B and C. However, the general provision contained in Section 80A mandates that the aggregate amount of deductions under this Chapter would not exceed “the gross total income” of the assessee. Section 80 A reads as under:- “Section 80A - Deductions to be made in computing total income-(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80Cto 80U. (2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. (3) Where, in computing the total income of an association of persons or a body of individuals, any deduction is admissible under section 80G or [section 80GGA or section 80GGC] or section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA [or section 80-IB] [or section 80-IC] [or section 80-ID or section 80-IE] or section 80J or section 80JJ, no deduction under the same section shall be made in computing the total income of a member of the association of persons or body of individuals in relation to the share of such member in the income of the association of persons or body of individuals. (4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 1 0B or section 10BA or in any provisions of this Chapter under the heading “C-Deductions in respect of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. (4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 1 0B or section 10BA or in any provisions of this Chapter under the heading “C-Deductions in respect of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. (5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading “C.--Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder.] (6) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading “C-Deductions in respect of certain incomes”, where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date. Explanation.--For the purposes of this sub-section, the expression “market value”,-- (i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any.] [(7) Where a deduction under any provision of this Chapter under the heading "C.--Deductions in respect of certain incomes" is claimed and allowed in respect of profits of any of the specified business referred to in clause (c) of sub-section (8) of section 35AD for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.” 4. The “gross total income” is defined in Section 80B (5) to mean the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter. 5. A conjoint reading of Section 80A (2) and 80B (5) would bring out the fact that various deductions provided in this Chapter are to be computed on the “gross total income‟. It also follows that where such gross total income is found to be a net loss in the year concerned, no deduction under this Chapter is to be allowed. 6. The contours and scope of the scheme contained in Chapter- VIA has come up for discussion before various High Courts. Interplay of Section 80HHC and 80-I involving same kind of issue first came up for consideration before Madhya Pradesh High Court and was discussed elaborately in its decision contained in J.P. 5. A conjoint reading of Section 80A (2) and 80B (5) would bring out the fact that various deductions provided in this Chapter are to be computed on the “gross total income‟. It also follows that where such gross total income is found to be a net loss in the year concerned, no deduction under this Chapter is to be allowed. 6. The contours and scope of the scheme contained in Chapter- VIA has come up for discussion before various High Courts. Interplay of Section 80HHC and 80-I involving same kind of issue first came up for consideration before Madhya Pradesh High Court and was discussed elaborately in its decision contained in J.P. Tabacco Private Limited Vs. Commissioner of Income Tax, 229 ITR 123 (M.P.). The question which was framed for the opinion of the Court, in that case was of following nature :- “Whether the Tribunal is right in law in holding that the deduction under section 80-I 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 ?” 7. The Court answered the question in the negative and in favour of the assessee holding that the two provisions are independent and deductions under Section 80-I is not be allowed on the balance of income after deducting the relief under Section 80 HH from the gross total income. The Court traced the history of various legislative amendments made in the aforesaid provisions following in Chapter VIA of the Act and following discussion ensued thereupon:- “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 80Ior" 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. 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”. 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”. 8. Special Leave petition against this decision was dismissed by the Supreme Court. (See 245 ITR (ST) 71). The Judgment of Madhya Pradesh High Court was thereafter repeatedly followed by the same Court as well as other High Courts. All these judgments were taken and Packaging India Private Ltd. 292 ITR 1 (SC) which passed the following short and crisp order in that case:- “1.The point involved in the present case is whether sections 80HH and 80-I of the Income-tax Act, 1961, are independent of each other and therefore a new industrial unit can claim deductions under both the sections or the gross total income independently or that deduction under Section 80HH can be taken on the reduced balance after taking into account the benefit taken under section 80HH. 2. The Madhya Pradesh High Court in J.P. Tobacco Products P. Ltd. Vs. CIT reported in (19980 229 ITR 123 took the view that both the sections are independent and, therefore, the deductions could be claimed both under sections 80HH and 80-I on the gross total income. Against this judgment, special leave petition was filed in this court which was dismissed on the ground of delay on July 21, 2000 (see {2000} 245 ITR (St.) 71). The decision in J.P. Tobacco Products P. Ltd. {1998) 229 ITR 123 (MP) was followed by the same High Court in the case of CIT Vs. Alpine Solves P. Ltd. In IT.A. No. 92 of 1999 decided on May 2, 2000. Special leave petition against the decision was dismissed by this court on January 12,2001, (see {2001} 247 ITR (St.) 36). This view has been followed repeatedly by different High Courts in a number of cases against which no special leave petitions were filed meaning thereby that the Department has accepted the view taken in these judgments. See CIT v. Chokshi Contacts P. Ltd. {2001} 251 ITR 587 (Raj); CIT v. Amod Stamping {2005} 274 ITR 176 (Guj}; CIT v. Mittal Appliances P. Ltd. {2004} 270 IUTR 65 (MP); CIT v. Rochiram and Sons {2004} 271 ITR 444 (Raj); CIT v. Prakash Chandra Basant Kumar {2005} 276 ITR 664 (MP); CIT v. S.B. Oil Industries P. Ltd. (2005) 274 ITR 495 (P & H); CIT v. SKG Engineering P. Ltd. {2005} 119 DLT 673 and CIT v. Lucky Laboratories Ltd. {2006} 200 CTR 305 (All). Since the special leave petitions filed against the judgment of the Madhya Pradesh High Court have been dismissed and the Department has not filed the special leave petitions against the judgments of different High Courts following the view taken in those judgments cannot be permitted to take a contrary view in the present case involving the same point. According, the civil appeal is dismissed. No costs.” Since the special leave petitions filed against the judgment of the Madhya Pradesh High Court have been dismissed and the Department has not filed the special leave petitions against the judgments of different High Courts following the view taken in those judgments cannot be permitted to take a contrary view in the present case involving the same point. According, the civil appeal is dismissed. No costs.” 9. It is thus clear that the consistent view taken by various High Courts was affirmed by the Supreme Court. It is not necessary to discuss all these judgments. However, we would like to reproduce certain observations from the judgment of Rajasthan High Court in CIT Vs. Chokshi Contacts P. Ltd.,251, ITR 587 (Raj.) as it discusses the issue in greater details and in fact discusses the scheme of the Act in short and highlights Chapter VIA in particular. The scheme of the Act which is taken note of by the Court and described is that Chapter 1 deals with preliminary definitions by defining various expressions used in the Act subject to the context of the issue. Chapter II deals with the basis of charge for levying income tax and additional income tax and deals with charging of the tax of income and the scope of total income determined for the purpose of computation of income and certain other matters. Chapter III deals with the incomes which do not form part of the total income at all. Chapter IV deals with computation of total income from different sources. For this purpose it divides the sources of income in six sub-heads on the basis of which income from each source is to be computed. Part D of Chapter IV deals with the computation of income from profits and gains of business or profession with which we are concerned. Chapter E deals with computation of capital gains and Part F deals with the income from other sources. Remaining Part A and Part C dealing with income from salaries and from house property respectively. Part B of Chapter IV which dealt with the income from interest on securities has since been deleted. Part D of Chapter IV deals with computation of profits and gains of business or profession providing which of the incomes fall within the definition of profits and gains of business or profession, what deductions or adjustments are to be allowed, and what deductions are not permissible and the extent of permissible adjustments and allowance of deduction of various nature with which we are not presently concerned. Chapter V deals with income of other persons to be included in assessee's total income. Chapter VI deals with aggregation of the income from different sources and to set off or carry forward of loss computed under different sources of income of the assessee. 10. The Court then proceeded to discuss the scheme of Chapter VIA in the following manner:- “Chapter VI-A which consists of Sec. 80-A to Sec. 80-W deals with specified concession in computing tax as well as specified deduction to be made in computing total income. These concessions or deductions are extended in connection with certain investment expenses and areas of business and trade activity with object of incentive to savings, and promotion to experts as well as economic development with emphasis on providing new industries in backward areas. We in the present case are concerned with specific deductions to be made in computing total income of the assessee under that Chapter. It is further significant to notice that Chapter VIA becomes operative on reaching the last stage of computation of income from different sources until Chapter VI. While ultimately net taxable income “Chapter VI-A which consists of Sec. 80-A to Sec. 80-W deals with specified concession in computing tax as well as specified deduction to be made in computing total income. These concessions or deductions are extended in connection with certain investment expenses and areas of business and trade activity with object of incentive to savings, and promotion to experts as well as economic development with emphasis on providing new industries in backward areas. We in the present case are concerned with specific deductions to be made in computing total income of the assessee under that Chapter. It is further significant to notice that Chapter VIA becomes operative on reaching the last stage of computation of income from different sources until Chapter VI. While ultimately net taxable income for any assessment year is determined only after reaching net result after applying all provisions, as are applicable in respect of different matter. Yet each Chapter deals with independent subject matter al different stages. As noticed briefly above, the Chapter IV sets the stage for computing income from different sources. On computing income from each different sources, and income of other persons in certain cases to be added in total income, stage is reached for making adjustments of losses of the current year from any sources as well as losses carried forward from previous year to be adjusted against income of current year.” 11. Reading various provisions of this Chapter together, the Court was of the view that specific provisions were made that the gross total income computed before reaching the stage of invoking the provisions of Chapter VIA, was not to be further adjusted in quantifying any claim to further deduction under that Chapter. The Court noted that the “gross total income” was assigned a special meaning under this Chapter by defining the same in Section 80B (5) of the Act. The Court then took note of the provisions contained in Section 80 AB of the Act which read as under:- “Section 80AB:- Where any deduction is required to be made or allowed under any Section (except section 80M) included in this Chapter under the heading "C.--Deductions in respect of certain incomes" in respect of any income of the nature specified in that Section which is included in the gross total income 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 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.” 12. Interpreting Section 80 B (5) and Section 80 AB of the Act together, the Court opined that once the gross total income is computed, no further deduction there from was permissible for the purpose of arriving at the gross total with a view to allow deduction under various provisions of Chapter VIA. Some of the relevant passages containing important discussions are extracted below:- “There is no room of doubt that computation of gross total income of the industrial undertaking for the purpose of deduction u/S. 80-HH and 80-1 operate independently and has to be made without making any deduction under Chapter VIA. Thus, for the purpose of computing gross total income', of such industrial undertaking in respect of which deduction is to be made under Sec. 80-HH or 80-I, deduction quantified under any of the provision can be deducted before computing eligible gross total income for the purpose of computing deduction under other. In other words, for the purpose of computing eligible gross total income to quantify deduction @ 20% under Sec. 80-I and 20 per cent or 25 per cent, as the case may be, under Sec. 80-HH no deduction under either provision can be made for the purpose of computing deduction under the other. In each case gross total income shall have to be computed without making any reducing it by deduction permitted u/S. 80-HH or 80-1 or for that matter under any other provision of the Chapter VIA, and taken to be basis on the basis of which prescribed percentage is to deduct from such income of the assessee. The question then arises whether Section 80-HH(9) to which reference has been made and reliance has been placed by the learned counsel for the revenue, provides anything to contrary and militates against our above conclusion. That provision reads as under: “80-HH (9): In a case where the assessee is entitled also to the deduction under Section 80-I or Section 80-J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section applies, effect shall first be given to the provisions of this Section.” The language and intent of this provision is clear in itself. While envisaging that all the three deductions viz. u/S. 80-HH, 80-1 and 80-J are simultaneously permissible, and not mutually exclusive, the provision only fixes priority of order in which deduction under each provision is to be adjusted in the gross total income derived from such industrial undertaking to which Section 80-HHor Section 80-Ior 80-Jrespectively apply simultaneously.” 13. The general scheme contained in para A of Chapter VIA, on the basis of aforesaid judgments can be summed up as under:- (a)In general the statute does not prescribe any order of priority in which the various deductions are to be allowed. Therefore deductions can be claimed by an assessee so as to ensure to his best advantage. There are however, a few places where the statute indicates a priority and these have to be given effect to. (b)Each relief under each section of Chapter VI-A is a separate one. Each relief operates in a separate realm to fulfill different economic or social objectives. When an assessee is entitled to more than one relief, each relief has to be independently determined. The Courts have held that one relief cannot be abridged or diluted by any other relief which assessee may be rightly entitled. separate one. Each relief operates in a separate realm to fulfill different economic or social objectives. When an assessee is entitled to more than one relief, each relief has to be independently determined. The Courts have held that one relief cannot be abridged or diluted by any other relief which assessee may be rightly entitled. The amendment: 14. So far so good. However, what needs to be highlighted at this stage is that in all these judgments, the Courts were concerned with the assessment years for the period prior to 1[st] April, 1999. With effect from 1[st] April, 1999 amendments were made by inserting Clause-9 in Section 80 IA and clause 13 in Section 80 IB. These provisions read as under:- “80-IA (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” Sec. 80IB (13) states that the provisions of sub-sec. (9) to Sec. 80IA shall, so far as may be, apply to the eligible business under this section” The Question of law and the controversy: “80-IA (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” Sec. 80IB (13) states that the provisions of sub-sec. (9) to Sec. 80IA shall, so far as may be, apply to the eligible business under this section” The Question of law and the controversy: 15. We are, in these cases, concerned with the post amendment provisions and, therefore, cases are to be decided in the light of this amendment. In this context, question of law which is formulated in all these cases for determination is as to whether deduction allowed under Section 80 IA is to be reduced from the gross profits for the purpose of computing deduction under Section 80 HHC. There is marginal difference in the language in which the question of law is framed in different appeals. However, essence remains the same and, therefore, our purpose would be served by reproducing the question of law framed in one of these cases. In ITA 267/2008, the question of law has been formulated in the following words:- “Whether the Income Tax Appellate Tribunal was correct in law in holding that the business profits as per Explanation (baa) of Section 80 HHC of the Income Tax Act, 1961 was to include the amount of deduction allowable under Section 80 IB of the Act for the purpose of computing deduction under Section 80 HHC of the Act” 16. The contention of the learned counsel for the assessees is that the aforesaid insertion has not made any change in so far as the manner of computation and deduction is to be made under various provisions of Part –C in Chapter VIA. According to them, the only thrust of this provision is that the total deduction to be allowed under various provisions in Part-C is not to exceed the profits and gains. Total accumulation should not exceed the profits and gains and, therefore, the principle as interpreted in JP Tabacco (supra) and other judgments and affirmed in Mandideep case (supra), still hold the field. 17. The Revenue on the other hand insists that introduction of sub Section 9 in Section 80 IA has made a clear departure and legislative intent is manifest in this provision namely once the deduction is claimed under Section 80-IA in respect of certain amount of profits and gains, “to the extent of such profits and gains”, deduction shall not be allowed and this has to be reduced while computing deduction under other provisions namely Section 80 HHC in the instant cases. Conflicting views of ITAT and the decision of the Special Bench: 18. This controversy has received attention at the hands of various Benches of the Tribunal. In view of conflicting opinionsa three member Special Bench of Chennai ITAT was constituted in the case of ACIT Vs. Rogini Garments(2007) 294 ITR 15. Before the decision of Special Bench of Chennai ITA various Division Benches had, in the past, dealt with the issue and decided it mainly in favour of assessee for reasons recorded therein. The Special Bench in case of Rogini Garments essentially being influenced by the literal interpretation of the provisions of Section 80-IA (9), held that the relief under Section 80-IA should be deducted from the profits and gains of business before computing relief under section 80HHC. Subsequent to the decision of Special Bench of Chennai ITAT (supra) the issue came up for consideration before the Madras High Court in the case of SCM Creations Vs. ACIT (2008) 304 ITR 319 wherein a similar issue as involved before the Special Bench of Chennai ITAT was considered and decided. came up for consideration before the Madras High Court in the case of SCM Creations Vs. ACIT (2008) 304 ITR 319 wherein a similar issue as involved before the Special Bench of Chennai ITAT was considered and decided. 19. However, the controversy still persisted as various nuances of the provisions were argued and there was a controversy about the ratio of S.C.M. decision of Madras High Court and in these circumstances, a five member Special Bench of the Tribunal at Delhi was constituted in the case of Hindustan Mint and Agro Product Limited, 305 ITR (AT) (SB) 401 (Delhi). 20. This five member Special Bench has decided the question of law in favour of the Revenue. In the meantime, as various Benches had decided the issue differently, these appeals have been preferred. It is clear from the fact that in these batch of appeals the Tribunal has given conflicting judgments and, therefore, some appeals are filed by the revenue while others by the assessees. The Arguments: Assessees: 21. Now we proceed to take note of the submissions advanced by the various counsels who appeared in these cases on behalf of the assessees. 22. Ms. Kapila who led the team of assessees‟ counsels submitted that interpretation given by Special Bench in Hindustan Mint(supra) had the effect of rendering the provisions of Section 80 AB, 80B (5) and 80HHC Explanation (4) clause (baa) inert, lifeless and redundant. She pointed out that Section 80 AB of the Act begins with a non-obstante clause and was therefore to prevail over Section 80 IA (9). She thus submitted that there appeared to be a head on collision between Section 80AB/80B(5)/80HHC on the one hand and Section 80IA(9)/80IB (13) on the other hand, if rule of literal interpretation is applied.She argued that Section 80AB and Section 80IA (9) operate in same field, viz deductions under Division C of Chapter VI-A. Section 80AB begins with a non-obstante clause, and is the governing & controlling section for operating deduction under Division C of Chapter VI-A. The very foundations of computation of deduction under Chapter VI-A is “gross total income” This was glossed over by the Tribunal. The consequence of the interpretation of Section 80IA (9) given by the Tribunal overrides this non-obstante clause contained in Sec. 80 AB and shifts the foundation base from “gross total income” to “net income”. Thus ITAT‟s interpretation would render sections 80AB and 80B (5), inert, lifeless and redundant. Furthermore, Clause (baa) to Explanation 4 to Sec. 80HHC would become also lifeless. She pointed out that the Supreme Court has held that section 80AB has been given an overriding effect over all other sections in Chapter VIA of the Act {IPCA Laboratory Ltd. Vs. DCIT (2004) 266 ITR 521 (SC) and in the case of CIT Vs. Shirke Constructions Equipment Ltd. 291 ITR 380 (SC)}. 23. Continuing her submission along this line, Ms. Kapila contended that unlike the language in Section 80AB, the provision of Section 80IA (9) does not contain a non-obstante clause so as to supersede the non-obstante provision of Sec. 80AB, or Section 80B (5). If the provision of Section 80 IA (9) are to be read as diluting all deductions under the heading „C‟ by computing them on reduced profits after deducting relief u/S 80IA or 80IB, then such interpretation would be in manifest contradiction to the provisions of Section 80AB which overrides all the provisions of Chapter VIA and which specifically provide by way of non-obstante clause that in computing deduction under any section under the heading „C‟ of Chapter VIA, the foundation base is “gross total income”, as defined and explained by Rajasthan High Court in Chokshi’s case (supra). under the heading „C‟ by computing them on reduced profits after deducting relief u/S 80IA or 80IB, then such interpretation would be in manifest contradiction to the provisions of Section 80AB which overrides all the provisions of Chapter VIA and which specifically provide by way of non-obstante clause that in computing deduction under any section under the heading „C‟ of Chapter VIA, the foundation base is “gross total income”, as defined and explained by Rajasthan High Court in Chokshi’s case (supra). 24. After projecting the aforesaid scenario where Section 80 AB of the Act was to be given primacy, her submission was that rule of “literal interpretation” could not be applied, as done by the Special Bench which resulted in serious anomalies. Therefore, challenge was to harmonize the two sets of provisions by applying the principle of harmonious construction. Her submission was that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible effect should be given to both. The Courts have also to keep in mind that an interpretation which reduced one of the provisions to a „dead letter‟ or „useless lumber‟ is not harmonious construction. To harmonize is not to destroy any statutory provision. She suggested that it was possible to harmonize all the statutory provisions. The object of insertion of Section 80-IA (9), was to prevent deduction of more than 100 per cent of profits and gains of the undertaking by claiming multiple deductions under different sections. It was not to dilute claims of deduction under more than one section, under Chapter VI-A, but only to ensure that the sum total of the deductions so claimed by the assessee under different sections does not exceed the profits and gains of the undertaking in respect of which deductions are allowable. 25. This has been explained in CBDT Circular No. 772, dated 23.12.1998 extracted herein under:- “1 Under the provisions of Chapter VI-A of the Income Tax Act, various deductions from the profits and gains are allowed to specified appellants, subject to fulfilling certain requirements specified under the relevant sections. The total deductions under Chapter VIA of the IT Act are restricted to the gross total income in respect of the appellant as a whole. Income Tax Act, various deductions from the profits and gains are allowed to specified appellants, subject to fulfilling certain requirements specified under the relevant sections. The total deductions under Chapter VIA of the IT Act are restricted to the gross total income in respect of the appellant as a whole. 2. However, it was noticed that certain assessees claimed more than 100 per cent deduction on such profits and gains of the same undertaking, when they were entitled to deductions under more than one section of Chapter VI-A. With a view to providing suitable statutory safeguard in the Income-tax Act to prevent taxpayer from taking undue advantage of existing provisions of the Act by claiming repeated deductions in respect of the same amount of eligible income, even in cases where it exceeds such eligible profits of an undertaking or a hotel, in built restrictions in section 80HHD and 80 IA have been provided by amending the section, so that such unintended benefits are not passed on to the appellant. 3. These amendments will take effect from 1-4-1999 and will accordingly, apply in relation to assessment year 1999-2000 and subsequent years”. 26. She argued that this Circular made it abundantly clear that the only and limited object of the amendment to Section 80IA (9) was to ensure that an assessee does not claim more than 100% of 3. These amendments will take effect from 1-4-1999 and will accordingly, apply in relation to assessment year 1999-2000 and subsequent years”. 26. She argued that this Circular made it abundantly clear that the only and limited object of the amendment to Section 80IA (9) was to ensure that an assessee does not claim more than 100% of deductions by claiming multiple deductions on same profits and gains Under Sec. 80 IA and 80 IB under certain circumstances 100% deduction is available on profits of an undertaking. In cases where the assessee is eligible for deduction under more than one section then deduction will be restricted to 100% of the eligible profits. In this way limbs (a) and (b) of the Sec. 80 IA (9) amendment get harmonized. 27. She also stressed o the binding nature of Circulars issued by CBDT and constitute contemporanea expositio furnishing legitimate aid in the construction of statutory provisions and are binding on Revenue authorities { See CIT Vs. K.P. Varghese131 ITR 597 (SC)}.Further the Supreme Court affirmed in Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 that Circulars issued by CBDT are binding on the Department even if they deviate from the provisions of the Act. In CIT Vs. Vaidya (M.K.) 224 ITR 186 the Karnataka High Court held that Circulars issued by the CBDT are not only binding on the Income Tax Department but are also in the nature of contemporanea expositio furnishing legitimate aid in the construction of a provision. 28. Other counsels argued on almost similar lines. Mr. Anoop Sharma also highlighted the conflict between the two sets of provision and submitted that the rule of “literal interpretation” could not be invoked in such a scenario while interpreting sub-Section 9 of Section 80 IA. He suggested that departure from this rule was legitimate in such circumstances, quoting following passage from „Principle of Statutory Interpretation‟ by G.P. Singh:- “It has already been seen that a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between a section and other parts of the statute. It is the duty of the Courts to avoid a “head on clash” between two sections of the same Act and whenever it is possible to do so to construe provisions which appear to conflict so that they harmonise”. 29.He also referred to various judgments of the Apex Court in this behalf, namely; Raj Krishna Bose Vs. Binod Kanungo, AIR 1954 SC 202, Sultana Begum Vs Prem Chand Jain, AIR 1997 SC 106,Siraj-ul-Haq and Others Vs. The Sunni Central Board of Waqf U.P. AIR 1959 SC 198 and D. Sanjeevayya Vs. Election Tribunal AIR 1967, SC 1211. 30. He thus reiterated the submissions made by Ms. Kapila namely that the a avowed objective of inserting sub Section (9) of Section 80 IA was limited to the extent that it ensures that the total deductions under Chapter VI A of the Act are restricted to the „gross total income‟ in respect of the assessee as a whole, as was clear from the Circular No. 772 dated 23.3.1998 of CBDT. 31. Mr. Kanan Kapoor argued in the same vein with added passion and additionally highlighted that wherever benefit granted under one provision is to be reduced in other provisions, specific language to this effect is used in those proceedings and gave the following examples:- 30. He thus reiterated the submissions made by Ms. Kapila namely that the a avowed objective of inserting sub Section (9) of Section 80 IA was limited to the extent that it ensures that the total deductions under Chapter VI A of the Act are restricted to the „gross total income‟ in respect of the assessee as a whole, as was clear from the Circular No. 772 dated 23.3.1998 of CBDT. 31. Mr. Kanan Kapoor argued in the same vein with added passion and additionally highlighted that wherever benefit granted under one provision is to be reduced in other provisions, specific language to this effect is used in those proceedings and gave the following examples:- “Section 80P (3): In a case where the assessee is entitled also to the deduction under Section 80 HH or Section 80HHA or Section 80 HHB or Section 80 HHC, or Section 80 HHD or Section 80-I or Section 80-IA or Section 80J or Section 80 JJ, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under Section 80 HH, Section 80 HHA, Section 80 HHB, Section 80 HHC, Section 80HHD, Section 80-I, Se