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IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 802 OF 2002 M/s. Indian Gum Industries Ltd. 405-408, Navbharat Estate, B-Wing, Zakaria Bunder Road,Sewri (West) Mumbai – 400 015 … Appellant V/s. 1. Joint Commissioner of Income Tax Special Range-28, R.N. 621, VI Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400 020 2. The Commissioner of Income Tax, Mumbai City – VI Mumbai Mumbai City – VI Mumbai 3. Union of India through Ministry of Law, Aayakar Bhavan, M.K. Road, Mumbai – 400 020 … Respondents Mr. S. Sriram a/w Mr. Mayank Thosar i/b B.V. Jhaveri for the Appellant.Mr. Suresh Kumar for the Respondent. CORAM : M.S. SANKLECHA & SANDEEP K. SHINDE, JJ. JUDGMENT RESERVED ON : 6[th] JULY, 2018 JUDGMENT PRONOUNCED ON : 13[th] JULY, 2018 JUDGMENT : (Per M.S. Sanklecha, J.) 1.This Appeal under Section 260A of the Income Tax Act, 1961 (the Act) Uday S. Jagtap 1/16 challenges the order dated 27.09.2007 passed by the Income Tax AppellateTribunal (the Tribunal). 2.This Appeal was admitted on 16.03.2009 on the following substantialquestions of law:- “1. Whether on the facts and in the circumstances of the case, was theTribunal right in law in taking the view that the assessee is entitled toclaim deduction u/s. 80IA on the total income after excluding profits(“deduction”) derived from export business of the two new industrialundertakings where 80HHC claim is allowed? 2. Whether on the facts and in the circumstances of the case, was theTribunal right in law in applying the provisions of Section 80IA(9A) forassessment years 1997-98 and 1998-99?” 3.This Appeal relates to the Assessment Year 1997-1998. 4.The Appellant Assessee is engaged in the manufacture of industrial gums.It has factories situated at Mumbai, Jodhpur and Ahmedabad. In Ahmedabad, ithas four factories, out of which two factories are new factories. The issue is thisappeal is restricted to only the claim for deduction in respect of its two newfactories at Ahmadabad. It is the two new factories whose claim for deductionunder Section 80IA of the Act along with the claim for deduction under Section80HHC of the Act is the subject of this dispute. 5.For the previous year relevant to the subject Assessment year, theAppellant in its return of income claimed 100% deduction in respect of profitsearned by the two new factories derived from its exports under Section 80HHC ofthe Act. Besides, the Appellant also claimed the benefits of deduction under theSection 80IA of the Act to the extent of 30% of the profits and gains derived fromits two new factories at Ahmedabad. The aggregate of deductions claimed wasless than its Gross Total Income as defined under Section 80B(5) of the Act. TheAppellant in its return of income claimed benefits of Section 80HHC of the Act tothe extent of its earning from exports. Thereafter it claimed deduction at 30% ofits profits and gains under Section 80IA of the Act. This 30% deduction underSection 80IA of the Act was computed without deducting / excluding thededuction allowed under Section 80HHC of the Act on profits derived fromexports by the two new units. However, the Assessing Officer did not accept thesame, as he was of the view that the Appellant would be entitled to deductionunder Section 80IA of the Act only on the profits and gains of the two units afterdeducting the amount availed of as deduction under Section 80HHC of the Actwas claimed. The basis of the above conclusion was the reliance upon thedecision of the Supreme Court in Escorts Ltd. v/s Union of India, 199 ITR 43,which dealt with the double claim for deduction under Section 32 and Section 35of the Act. Thus, the Assessing Officer on the above basis by his order dated 31[st]August, 1999 restricted the claim to Rs.87.96 lakhs as against Rs.104.88 lakhsUday S. Jagtap3/16/1616 claimed under Section 80IA of the Act for Assessment Year 1997-98. claimed under Section 80IA of the Act for Assessment Year 1997-98. 6.Being aggrieved with the order dated 31.08.1999 of the Assessing Officer,the Appellant preferred an Appeal to the Commissioner of Income Tax (Appeals)[CIT(A)]. This appeal was dismissed by an order dated 05.06.2000 of theCIT(A). This dismissal was by reliance upon the Apex Court decision in EscortsLtd. (supra) to hold that if there is any doubt on the issue of double deduction,then the Parliament must clarify the law. It held that on the above basis theParliament amended Section 80IA of the Act by introducing thereto by Finance(No.2) Act w.e.f. 1[st] April 1999. Therefore, although the amendment waseffective from 1[st] April 1999, it has to be read as clarificatory / declaratory of thelaw as it was always existed. This on the basis that the Finance (No.2) Bill, 1998when introduced in the Parliament has clearly stated that the amendment wassought to be introduced into Section 80IA of the Act with retrospective effectfrom 1[st] April, 1990. Accordingly, the Appeal was dismissed. 7.Being aggrieved by the order dated 5[th] June, 2000 of the CIT(A), theappellant filed a further appeal to the Tribunal. By the impugned order dated27.09.2001, the Tribunal dismissed the Appellant's appeal by upholding the orderof the CIT(A). In fact, the impugned order dismisses the appeal by holding asunder : - “We have thoroughly scrutinised the appellate order of the CIT(A) and weconcur with his findings and therefore, there being no merit in thiscommon ground of the assessee, we reject the same”. 8.Before considering the rival submission in the context of the twosubstantial questions of law, it would necessary to reproduce the relevantprovisions of law in force during the relevant Assessment Years as under:- “Section 80-B. In this Chapter – (1) to (4) …..... (5)“gross total income” means the total income computed inaccordance with the provisions of this Act, before making any deductionunder this Chapter. Section 80-HHC. (1)Where an assessee, being an Indian company or a person (otherthan a company) resident in India, is engaged in the business of export outof India of any goods or merchandise to which this section applies, thereshall, in accordance with and subject to the provisions of this section, beallowed in computing the total income of the assessee, a deduction of the[profits] derived by the assessee from the export of such goods ormerchandise:Provided …..... Section 80-IA. (1)Where the gross total income of an assessee includes any profits andgains derived from any business of an industrial undertaking or a hotel or[operation of a ship or developing, maintaining and operating anyinfrastructure facility [or scientific and industrial research anddevelopment] [or providing telecommunication services whether basic orcellular] [including radio paging, domestic satellite service or network oftrunking and electronic data interchange services or construction anddevelopment of housing projects] [or operating an industrial park orcommercial production [or refining] of mineral oil in the North EasternRegion] [or in any part of India on or after the 1[st] day of April, 1997] (such business being hereinafter referred to as the eligible business)], towhich this section applies, there shall, in accordance with and subject tothe provisions of this section, be allowed, in computing the total income ofthe assessee, a deduction from such profits and gains of an amount equalto the percentage specified in sub-section (5) and for such number ofassessment years as it specified in sub-section (6). (2) to (8) …......... The Parliament amended Section 80IA of the Act by introducing sub-Section 9A therein by Finance (No.2) Act, 1998 w.e.f. 1[st] April, 1999, which readsas under :- (such business being hereinafter referred to as the eligible business)], towhich this section applies, there shall, in accordance with and subject tothe provisions of this section, be allowed, in computing the total income ofthe assessee, a deduction from such profits and gains of an amount equalto the percentage specified in sub-section (5) and for such number ofassessment years as it specified in sub-section (6). (2) to (8) …......... The Parliament amended Section 80IA of the Act by introducing sub-Section 9A therein by Finance (No.2) Act, 1998 w.e.f. 1[st] April, 1999, which readsas under :- “(9A) Where any amount of profits and gains of an industrial undertakingor of a hotel in case of an assessee is claimed and allowed under thissection for (any) assessment year, deduction to the extent of such profitsand gains shall not be allowed under any other provisions of tis Chapterunder the heading “C- Deduction in respect of certain incomes”, and shallin no case exceed the profits and gains of the undertaking or hotel, as thecase may be.” -9.Regarding Question No.(1): (a)It is an undisputed position before us that prior to 1[st] April, 1999 whenSection 80IA of the Act was amended by Finance (No.2) Act, 1998 introducingSub-Section 9A to Section 80IA of the Act, there was no provision either inSection 80IA or in Section 80HHC of the Act indicating the priority under whichthe deduction is to be taken and / or restricting the deduction only to the extentit has not been availed of under any other section of Chapter VIA Part C of theAct. In fact, Section 80IA (9A) of the Act after its introductions obliges an assessee to first avail of the 30% exemption available under Section 80IA of theAct and only thereafter the balance i.e. after excluding the quantum of deductionwhich is allowed to be deducted that deduction under Section 80HHC of the Actcan be availed in respect of its profits and gains derived from exports. (b)In the above view, it is submitted on behalf of the appellant assessee thatfor the period prior to Assessment Year 1999-00, there was no restrictions eitherin terms of quantum of deduction or even the priority in taking deductions underthe various sections specified in Chapter VI A Part 'C' of the Act. Thus, whileconstruing a fiscal legislation it is submitted nothing can be read into it. It isalso pointed out that it is an undisputed position that the total exemption claimedunder both the sections i.e. 80IA and 80HHC of the Act are less than theappellant's gross total income as defined under Section 80B(5) of the Act.Reliance is also placed upon the decision of the Rajasthan High Court inCommissioner of Income Tax Vs. Rochiram & Sons, 271 ITR 444 and of theMadras High Court in General Optics (Asia) Ltd. Vs. DCIT 315 ITR 400 whereon identical fact situation for the period prior to Assessment Year 1999-2000,deduction as claimed by the appellant was allowed. This on the basis of the lawas then existing. Therefore, it is submitted that the deduction as claimed underSections 80HHC and 80IA of the Act, be allowed. (c)On the other hand, Mr. Suresh Kumar placed reliance upon the orderspassed by the Assessing Officer and CIT(A) which has been upheld by theUday S. Jagtap7/16/1616 7/16/1616 (c)On the other hand, Mr. Suresh Kumar placed reliance upon the orderspassed by the Assessing Officer and CIT(A) which has been upheld by theUday S. Jagtap7/16/1616 7/16/1616 impugned order of the Tribunal. In the aforesaid orders, the authorities reliedupon the decision of the Apex Court in Escorts Ltd. (supra) wherein it has beenobserved that “We see fundamental though unwritten axiom that no legislaturecould have at all intended a double deduction in respect of the same businessoutgoing; and if it is intended, it will be clearly expressed”. In the light of theabove observation, it is submitted that as the appellant had already claimed /availed deduction under Section 80HHC of the Act, the deduction under Section80IA was restricted only to the balance amount of profits and gains availableafter deduction of the benefit claimed under Section 80HHC of the Act. Thisview of the Revenue was in accord with the Apex Court decision in Escorts Ltd.(supra) that no double deduction is permitted in the absence of the legislaturespecifically providing for the same. (d)We have considered the rival submissions. The decision of the SupremeCourt in Escorts Ltd. (supra) has to be understood in the context of the factsarising before it for consideration. The assessee therein was claiming deductionof depreciation under Section 32 of the Act and also deduction under Section 35of the Act which provided for 20% notional deduction in respect of the capitalexpenditure to be allowed for a period of 5 years incurred on scientific researchinnovation. In 1980, there was an amendment by Finance (No.2) Act, 1980 withretrospective effect from 1[st] April, 1961 in Section 35 of the Act to the effect thatwhere deduction has been claimed under Section 35 of the Act, no deductionUday S. Jagtap8/16/1616 8/16/1616 shall be allowed under Section 32 of the Act for the same or in other previousyear in respect of that asset. This amendment was effected on the basis of theDirect Tax Law Committee's (popularly known as Choksi Committee) report.The above decision in Escorts Ltd. (supra) makes a reference to the above reportand notes that the committee had observed that it could not have been theintention of the Legislature to allow double deduction i.e. 200% on the sameasset in the context of Section 32 and 35 of the Act. Moreover, the committeefurther records that “If.......a contrary view is possible on construction of Section 35of the Act, then the law should be clarified to the extent that no depreciation underSection 32 of the Act shall be allowable in respect of capital expenditure for scientificresearch qualifying for deduction under Section 35”. The decision of the ApexCourt was rendered in the context of the 1980 amendment being retrospective ornot. It is to be noted that the amendment itself made by the Finance No.2 Act1980 provided that it shall be retrospective w.e.f. 1[st] April,1961. Theretrospective amendment was held to be valid by the Apex Court as it was in thefacts before it merely clarificatory in nature. In our view, the decision of theApex Court in Escorts Ltd. (supra) would not apply to the facts of the presentcase, as that case dealt with a double deduction being claimed on the sameexpenditure i.e. 200% deduction on expenditure. (e)In the present case, we are not dealing with the claim of deduction onexpenditure being allowed but deduction on profits and gains of business underUday S. Jagtap9/16/1616 (e)In the present case, we are not dealing with the claim of deduction onexpenditure being allowed but deduction on profits and gains of business underUday S. Jagtap9/16/1616 two sections – without any of the sections excluding the deduction obtainedunder the other section. The deductions provided under Chapter VIA Part C ofthe Act are in the nature of incentives to boost exports (under Section 80HHC ofthe Act) and to establish new units (under Section 80IA of the Act). Therefore,the incentive deduction have to be given a liberal interpretation. This isparticularly so in the absence of the relevant sections itself restricting deductionto the extent of deduction under some other section of Chapter VIA Part C of theAct. In fact, as pointed out by Mr. Sriram, whenever the Parliament decided torestrict the deduction under more than one section of Chapter VI – Part C of theAct, it so provided for it. Attention was drawn to Section 80HH(9A) of the Actprohibiting deduction thereunder to the extent deduction is claimed underSection 80HHA of the Act. There is no such prohibition prior to the 1999amendment in Section 80IA of the Act. The Revenue is seeking to add words toSection 80IA of the Act prior to 1998 amendment by restricting the deductionthereunder. It is a settled position that while interpreting a fiscal statute, it is notopen to disregard the literal meaning thereof, in the absence of any ambiguity inthe provision. It is not open to the Courts to add words in a fiscal legislation. InSales Tax Commissioner Vs. Modi sugar Mills, (1961) AIR 1047 (S.C.), theCourt has held “In interpreting taxing statute equitable consideration are entirelyout of place. Nor can taxing statue be interpreted on any presumptions orassumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; itcant imply anything which is not expressed; it cannot import provisions in thestatute so as to supply any assumed deficiency”. (f)In the present case, we are dealing with the deduction claimed by theappellant assessee in respect of the same income under two heads falling underChapter VI-A Part 'C' of the Act. Prior to 1[st] April, 1999, there was no specificprohibition in an assessee taking benefit of deduction on the same income bothunder Section 80HHC as well as under Section 80IA of the Act, provided the totaldeduction claimed was less than the gross total income as defined in Section80B(5) of the Act. Admittedly, in this case, the total deduction claimed is lessthan the gross total income. In the present facts, Section 80IA was amendedw.e.f. 1[st] April, 1999 by introduction of Sub-Section 9A therein which is in accordwith the observations made by the Apex Court in Escorts Ltd. (supra). However,it is to be noted that when the Finance (No.2) Bill of 1998 (Bill No.51 of 1998)introduced, it provided that the amendment should have retrospective effect fromthe year 1990. However, when the Parliament passed the bill and made it intoan Act, it made the amendment prospective w.e.f. 1[st] April, 1999. Thus, thiswould indicate that the Parliament was of the view that the deductions takenunder Section 80IA and 80HHC of the Act even if it does amount to doublebenefit it would be allowed prior to 1[st] April, 1999 i.e. Assessment Year 1999-2000. It was in its wisdom that the Parliament made the amendment prospectiveUday S. Jagtap11/16/1616 even though the bill as introduced by the Finance Minister sought to make theamendment retrospective. This would indicate that the Parliament did not seekto disturb and / or affect cases where deduction is taken twice over i.e. underSection 80IA and 80HHC of the Act on the same profit, provided it was less thanthe gross total income as defined in Section 80B(5) of the Act. even though the bill as introduced by the Finance Minister sought to make theamendment retrospective. This would indicate that the Parliament did not seekto disturb and / or affect cases where deduction is taken twice over i.e. underSection 80IA and 80HHC of the Act on the same profit, provided it was less thanthe gross total income as defined in Section 80B(5) of the Act. (g)In the above view, for the period prior to Assessment Year 1999-2000, theappellant would be entitled to claim deduction under Section 80IA of the Act onits entire profits without excluding the deduction available under other heads ofChapter VI A Part 'C' of the Act. Our above view is fortified by the fact that anidentical fact situation, the Rajasthan and Madras High Court in Rochiram & Sons(supra) and General Optics (Asia) Ltd. (supra) have held that prior toAssessment Year 1999-2000, the benefit of Section 80IA of the Act is availablewithout exclusion of the deduction claimed under Section 80HHC of the Act.Even on being specifically asked, the Revenue was not able to inform us whetherthe above two decisions have been appealed to the Apex Court and the resultthereof, if any. (h)In the above view, question no.(1) is answered in the negative i.e. infavour of the appellant assessee and against the respondent Revenue. 10.Regarding question no.(2):- (a)In the present case, it is an undisputed fact that Sub-Section 9A of Section 80IA of the Act was introduced by Finance (No.2) Act, 1998 w.e.f. 1[st] April, 1999.Mr. Sriram, in support submits that the above amendment being prospectivew.e.f. 1[st] April, 1999 cannot be applied to earlier periods as in this case. On theother hand, Mr. Suresh Kumar for the Revenue supports the impugned order ofthe Tribunal. (b)We note that the amendment by introduction of Sub-section 9A to Section80IA of the Act is explicitly prospective w.e.f. 1[st] April, 1999. It is neitherdeclaratory or clarificatory nor is it in the nature of explanation. Thus, strictreading of fiscal statute would prevent the amendment being read asretrospective in the absence of the statute providing for the same. (c)In any case, in the present facts, it is to be noted that when the FinanceNo.2 Bill 1998 (Bill No.15 of 1998) was introduced in the Parliament by theFinance Minister, the bill provided that Sub-section 9A of Section 80IA of the Actwould be introduced with retrospective effect from 1[st] April, 1990. However,when the Parliament passed the bill making into Act of Parliament, it was madeprospective i.e. effective only from 1[st] April, 1999. (d)In fact, the Apex Court in Sasoon J. David & Co. Pvt. Ltd. Vs.Commissioner of Income Tax, 118 ITR 261 had occasion deal with a similar factsituation. In that case, the Court was concerned with the Income Tax Bill 1961,which was introduced in the Parliament and after the due consideration by theParliament, it was passed as Income Tax Act, 1961. In the Income Tax Bill ofUday S. Jagtap13/16/1616 1961 as introduced in the Parliament, the deduction allowable under Section37(1) of the Bill as introduced was as under :- “any expenditure …...... laid out or expended wholly necessarily andexclusively for the purposes of business or profession shall be allowed.....”. (emphasis supplied) However, when the bill become an Act of Parliament being Income TaxAct, 1961, the word “necessarily” was absent in the Section 37 of the Act. It readas under :- “any expenditure …...... laid out or expended wholly and exclusively forthe purposes of business or profession shall be allowed.....”. 1961 as introduced in the Parliament, the deduction allowable under Section37(1) of the Bill as introduced was as under :- “any expenditure …...... laid out or expended wholly necessarily andexclusively for the purposes of business or profession shall be allowed.....”. (emphasis supplied) However, when the bill become an Act of Parliament being Income TaxAct, 1961, the word “necessarily” was absent in the Section 37 of the Act. It readas under :- “any expenditure …...... laid out or expended wholly and exclusively forthe purposes of business or profession shall be allowed.....”. Thus, for the purposes of deduction under Section 37 of the Act all thatwas required was that the expenditure must be laid out wholly and exclusivelyfor the purposes of business or profession. The requirement of “necessarily” forthe purposes of business was done away with and an attempt on the part of theRevenue to read the word “necessarily” into the Act of Parliament on the basis ofit being the part of the bill, was not accepted. Therefore, Section 37 of theIncome Tax Act, 1961 was read by the Apex Court in the absence of the word“necessarily” as it was not found in the Act. Similarly, in the present facts, themere fact that the bill was introduced with the intention of making itretrospective from 1[st] April, 1990 will not enable the Revenue to successfullycontend that because the bill was introduced with retrospective effect, for it mustbe read to be retrospective in effect, notwithstanding the fact that the Act of Parliament makes it prospective. (e)Further, attention was also drawn to the Central Board of Direct Taxes(CBDT) Circular dated 23[rd] December, 1998 explaining the amendments made byFinance (No.2) Act, 1998. This was the Act which introduced sub-section 9A intoSection 80IA of the Act. This CBDT Circular inter alia explained that theamendment to Section 80IA of the Act and specifically provides it will take effectfrom 1[st] April, 1999 and accordingly, apply in relation to Assessment Year 1999-2000 and subsequent assessment years. This CBDT circular is binding upon theDepartment as held by the Supreme Court in K.P. Varghese Vs. Income TaxOfficer, 131 ITR 597. In the above case, the Supreme Court had occasion todeal with the efficacy of the circular which has been issued while explaining thescope of the provisions of the Finance Act, 1964. The Apex Court observed thatsuch circulars issued by the CBDT are binding upon the Revenue and theprovisions would have to be read in the light of the Executive's understanding ofthe same. Further, the Apex Court in Union of India Vs. Aazadi BachavAndolan, 263 ITR 706 has observed that a circular issued by the CBDT inexercise of its powers under Section 119 of the Act are legally binding upon theRevenue inter alia following its earlier decision in K.P. Varghese (supra). (f)Thus, the above circular issued by the CBDT has while explaining theprovisions of the Finance No.2 Act 1998 stated in terms that the amendment byinsertion of Sub-section 9A of Section 80IA of the Act would not haveUday S. Jagtap15/16 retrospective effect. This is binding upon the Revenue. It cannot now urge thatit is retrospective in operation. (g)In any event, as held by the Supreme Court in DCIT Vs. Core Health Ltd.,298 ITR 194 that when a provision is introduced with effect from a particulardate, then it would not have retrospective effect unless it is expressly stated to beso. In this case, sub-section 9A of Section 80IA of the Act was introduced w.e.f.1[st] April, 1999. Thus, it cannot have retrospective effect to impact the assessmentthe subject Assessment Year 1997-98. (h)In the above view, the substantial question of law at question no.2 above isanswered in the negative i.e. in favour of the appellant assessee and against therespondent Revenue. 11.Thus, the substantial questions of law at Nos. (1) and (2) are bothanswered in the negative i.e. in favour of the appellant assessee and against therespondent Revenue. (g)In any event, as held by the Supreme Court in DCIT Vs. Core Health Ltd.,298 ITR 194 that when a provision is introduced with effect from a particulardate, then it would not have retrospective effect unless it is expressly stated to beso. In this case, sub-section 9A of Section 80IA of the Act was introduced w.e.f.1[st] April, 1999. Thus, it cannot have retrospective effect to impact the assessmentthe subject Assessment Year 1997-98. (h)In the above view, the substantial question of law at question no.2 above isanswered in the negative i.e. in favour of the appellant assessee and against therespondent Revenue. 11.Thus, the substantial questions of law at Nos. (1) and (2) are bothanswered in the negative i.e. in favour of the appellant assessee and against therespondent Revenue. 12.The appeal is allowed in the above terms. (SANDEEP K. SHINDE, J.) (M.S. SANKLECHA, J.)