The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that deductions under Section 80HHC of the Income Tax Act, 1961 cannot be claimed for the same income if deductions under Section 80IA have already been availed.
Inox India Limited, the assessee, is a company that manufactures vacuum-insulated tanks and related products. During the assessment years under consideration (2000-01, 2002-03, 2003-04, and 2004-05), the assessee claimed deductions under Section 80HHC ( profits from exports ) and Section 80IA ( income derived from eligible industrial undertakings ).
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The assessee included income from lease rentals derived from leasing unsold manufactured vacuum-insulated tanks as part of its business income.
The Assessing Officer ( AO ) rejected the assessee’s treatment of lease rental income as business income, categorizing it instead as “Income from Other Sources” and recomputed the allowable deductions under Sections 80HHC and 80IA, excluding lease rental income from the computation.
The AO invoked Section 80IA(9) to deny simultaneous deductions for the same lease rental income under Sections 80HHC and 80IA.
On appeal, CIT(A) disallowed simultaneous deductions under Section 80HHC for the same lease rental income citing the restrictions under Section 80IA(9).
The assessee appealed before the ITAT Ahmedabad Bench arguing that simultaneous deductions under Section 80HHC for the same lease rental income are allowable and relied on some judicial precedents.
The two-member bench comprising Dr. BRR Kumar ( Vice President ) and Siddhartha Nautiyal ( Judicial Member ) analyzed prior judicial rulings and observed that in cases like Atul Intermediates ( Gujarat High Court ) and Shah Alloys Ltd ( Gujarat High Court ), it was held that Section 80IA(9) prevents simultaneous deductions under Sections 80HHC and 80IA.
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The tribunal also observed that the Gujarat High Court in Atul Intermediates clarified that Section 80IA(9) ensures that profits already claimed under Section 80IA are not eligible for further deductions under Section 80HHC or any other provisions of Chapter VI-A.
In light of the above observation, the tribunal ruled that deduction under Section 80HHC is not allowable if Section 80IA deductions are already claimed. The assessee’s appeal was partially allowed.
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