M/S BROADWAYS OVERSEAS LTD. vs. CIT JALANDHAR

ITA/234/2009HC Punjab & HaryanaPHHC01084320200922 November 2013Author: MR. JUSTICE DR. BHARAT BHUSHAN PARSOON,MR. JUSTICE RAJIVE BHALLA11 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Broadway Overseas Limited, engaged in manufacturing and export of fence fittings, is in appeal against a joint order of the Income Tax Appellate Tribunal (ITAT) dated 30.10.2008. This order pertained to assessment years 2001-02 and 2003-04. The Assessing Officer (AO) had finalized the assessment for AY 2001-02 under Section 143(3) on 27.3.2006, allowing a deduction under Section 80HHC of Rs.1,48,94,112/- without reducing the deduction allowed under Section 80IB of Rs.47,35,855/-. The Commissioner of Income Tax (CIT) initiated proceedings under Section 263, issuing notices and subsequently directing the AO to recompute the total income, considering Section 80IB(13) read with Section 80IA(9). The ITAT affirmed the CIT's order, dismissing the assessee's appeals.

What did the High Court hold?

The High Court held that the restriction under Section 80IA(9), which is applicable to Section 80IB(13), is not merely that the total deduction should not exceed profits and gains. There is a further restriction that deduction allowed under Section 80IA or 80IB acts as a bar to claiming deduction under any other provision of the Chapter. The Court referred to its own judgment in CIT vs. Abhishek Industries Limited, which in turn relied on CIT vs. Honda Siel Power Products Ltd. and CIT vs. Max India Ltd. (SC). It was held that if an assessee claimed deduction under Section 80IB, deduction under Section 80HHC is to be granted only after reducing the profit to the extent already allowed under Section 80IB. This principle was further supported by quoting from Rogini Garments, which stated that Section 80HHC is not a self-contained provision and is subject to the restrictive clause in Section 80IA(9). The Court found that the AO's order was indeed erroneous and prejudicial to the interest of the revenue. Consequently, the orders of the CIT and ITAT were affirmed, and the AO was directed to recompute the total income accordingly. All questions posed by the appellant were decided in favour of the revenue.

What were the issues?

1. Whether the ITAT was justified in confirming the CIT's action under Section 263, holding the AO's finding erroneous and prejudicial to revenue by allowing Section 80HHC deduction without reducing the Section 80IB deduction, contrary to the principle that an AO's order cannot be deemed erroneous if one of many possible views was adopted, as per Malabar Industrial Co. Ltd. vs CIT (243 ITR 83 SC)? 2. Whether the ITAT was justified in confirming the CIT's action under Section 263, holding the AO's finding erroneous and prejudicial to revenue by allowing Section 80HHC deduction without reducing the Section 80IB deduction, contrary to the principle that deductions under various sections like 80HH and 80I are independent, as per JCIT vs Mandideep Eng. and Pkg. Ind. P. Ltd. (292 ITR 1 SC)? 3. Whether the ITAT was justified in concurring with the CIT's action under Section 263, revising the assessment and directing recomputation of total income considering Section 80IB(13) read with Section 80IA(9), as interpreted in Rogini Garments (supra)? 4. Whether the ITAT was justified in concurring with the CIT's order, holding the AO's order erroneous based on SCM Creations vs ACIT (10 DTR 247 Mad), which the assessee argues was factually incorrect regarding the provisions discussed and the applicability of Section 80IA(9)? 5. Whether the ITAT erred in sustaining the CIT's order under Section 263 on grounds not warranted by the Income Tax Act? 6. Whether the orders of the Tribunal and CIT are legally unsustainable and perverse? Assessee's Contentions: The assessee argued that the AO adopted one of many possible views, and the CIT could not invoke Section 263 merely for preferring another view. They relied on Malabar Industrial Co. Ltd. (supra) and JCIT vs Mandideep Eng. and Pkg. Ind. P. Ltd. (supra). The assessee also contended that the AO was aware of Sections 80IB(13) and 80IA(9) as evidenced by a notice dated 2.11.2005. They further argued that Section 80IA(9) only restricts deduction to total profits and gains, and the ITAT's interpretation was erroneous. Revenue's Contentions: The revenue contended that the assessee was allowed Section 80HHC deduction without reducing the Section 80IB deduction, making the AO's order erroneous and prejudicial to revenue. The CIT satisfied both conditions for Section 263 proceedings, and the ITAT rightly upheld the CIT's action.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 80IB,Section 263,Section 80IA(9),Section 80IB(13)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

(1)

I.T.A. No.234 of 2009 (O&M).

Decided on:-November 22, 2013. M/s Broadway Overseas Limited, Suranussi.

.........Appellant.

Versus Commissioner of Income Tax, Jalandhar-1, Jalandhar. .........Respondent.

(2)

I.T.A. No.277 of 2009 (O&M).

Decided on:-November 22, 2013. M/s Broadway Overseas Limited, Suranussi.

.........Appellant.

Versus Commissioner of Income Tax, Jalandhar-1, Jalandhar. .........Respondent. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon.

***** Argued by:- Mr. S.K.Mukhi, Advocate

for the appellant. Mr. Vivek Sethi, Advocate for the respondent. Dr. Bharat Bhushan Parsoon, J These two appeals arise out of a joint order dated 30.10.2008 (Annexure A-1) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as, the Tribunal) in ITA Nos.327 and 328 (Asr)/2008 pertaining to the assessment years 2001-02 and 2003-04. 2. Both the appeals have been taken up together as question of law Yag Dutt 2013.11.29 12:54 I attest to the accuracy and integrity of this document

The order continues below.

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