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Deduction u/s 80HHD need not be reduced while Computing Deduction u/s 80HHC: ITAT Kolkata [Read Order]

In the case of DCIT, Circle-10, Kolkata v. Vesuvious India Ltd, the division bench of the ITAT, Kolkata ruled that Vesuvious India Ltd there is no need to reduce the deduction under section 80HHD of the Income Tax Act while computing deduction u/s 80HHC under the provisions of the Income Tax Act, 1961.

Coming to the facts of the case, the appellant-assessee filed return claiming deduction u/s 80HHC of the IT Act. The assessee subsequently revisedthe return and reduced the amount of claim with the support of a certificate issued by the Chartered Accountant.While computing deduction u/s 80HHC under the normal provisions of the Act, adjustment was made in respect of profits eligible for deduction u/s 80IB. During the assessment proceedings, the assessee, by relying upon the decision in Toshica Creations vs. ITO, contended that the deduction u/s 80HHC be allowed from the gross total income without reducing it by deduction available u/s 80IB.AO rejected the contention and completed assessment.

On appeal, the CIT(A), nullified the assessment and therefore, the Revenue approached the ITAT by invoking a question that, whether in view of the provision of section 80-IB read with Sec. 80IA(9) deduction u/s 80IB should be reduced from the profits of the business for the purpose of computing deduction u/s 80HHC which AO held is correct.

The bench noticed the decision in EIH Ltd vs DCIT in ITA wherein the co-ordinate bench of the ITAT, on the basis of the ration laid down by the Delhi High Court in the case of Great Eastern Exports, held that for the purpose of computing deduction u/s 80lA,the deduction u/s 80HHD need not be reduced as both the deductions are independent ofeach other, which we agree and concur with the said view.

“It is also a well settled position of law that in a case where two views are possible, the view which favours the assessee must be adopted. The said view has been affirmed by the Hon’ble Supreme Court in CIT -vs.- Vegetable Products Ltd.(1973) 88 ITR 192(SC) wherein it has been held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted, which is a well-accepted rule of construction. Similar view has been taken in ACIT -vs.- Hindustan Steel Industries (2005) 94 TIT 1094 (Agra Trib) and DCIT- vs.- Oxemberg Fashions Ltd. (2007) 111 TTJ 0737 (Mum) and so applying the same principle when there are divergent views, the view favourable to the assessee is upheld and therefore also we concur with the contention of the assessee and thus confirm the order of the ld. CIT(A).”

Read the full text of the order below.

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