ORDER
Deepak R. Shah, AM
This appeal by the assessee is directed against the order of learned Commissioner of Income-Tax (A) – III, Bangalore, dated 14-1-2001.
2. The assessee company has set up a unit which is eligible for exemption under section 10A of the Act. While computing the total income, the assessee was allowed exemption under section 10A of the Act. The profit of the business was arrived at thereafter. The assessee is also eligible for deduction under section 80HHC. While computing profit of the business eligible for deduction under section 80HHC, profit eligible for exemption under section 10A was reduced. While adopting the export turnover, it also included turnover of the unit eligible for exemption under section 10A. The assessing officer held that profit of EHTP unit, the income from which it is exempt under section 10A, the export turnover of said unit could not be included in the export turnover for the purpose of computing deduction under section 80HHC. It is pertinent to note that the export turnover on F.O.B. basis is Rs. 15,11,77,684 as computed by assessee. At the same time, it is also mentioned that export turnover of EHTP unit eligible under section 10A is Rs. 15,55,42,387. The assessing officer held that since the entire export turnover relates to EHTP unit, the assessee is not entitled to any deduction under section 80HHC as the profit arising from such turnover is exempt under section 10A. While so holding, the assessing officer and the learned Commissioner (Appeals) relied upon the decision of Hon’ble Supreme Court in the case of Escorts Ltd. v. Union of India(1993) 199 ITR 43 (SC).
2.1 Learned counsel for assessee Shri Parthasarathy submitted that the claim of deduction under section 80HHC of the Act by the appellant with respect to profits of the EHTP unit is correct notwithstanding the fact that the income from the said unit is exempt under section 10A of the Act. The decision relied on by the appellant in Jindal Exports (P) Ltd. v. Assistant Commissioner (1989) 31 ITD 217 (Delhi) is squarely applicable to the appellant’s case. The decision relied on by the learned assessing authority in Escorts Ltd. case (supra) is not at all applicable to the appellant’s case. He further submitted that while computing the profit of business, the assessee has reduced the profit of EHTP unit. But only for purpose of computing deduction under section 80HHC, the turnover of said unit is included in export turnover, as admittedly, the turnover is in respect of export of eligible goods.
2.2 Learned Departmental Representative on the other hand strongly supported the appellate order. Apart from relying upon the decision of Hon’ble Supreme Court in Escorts Ltd. case (supra), he further relied upon the decision of Hon’ble Gauhati High Court in the case of CIT v. Sudarshan Plywood Industries Ltd. (2000) 245 ITR 75 (Gau).
3. We have carefully considered the relevant facts and the arguments advanced. The important question to be determined is whether while computing deduction under section 80HHC, turnover of units claiming exemption under section 10A is also to be included or not. As per section 80AB of the Act, deduction under section 80HHC in Chapter VIA is to be granted only in respect of income of the nature specified in section 80HHC, which is included in the gross total income of the assessee. Admittedly, the income out of export of goods by EHTP unit is not included in gross total income of the assessee. The income of such unit is totally exempt under section 10A of the Act. Section 80HHC(1) allows deduction of the profit derived from the business of export of goods or merchandise to which section 80HHC applies. While computing deduction under section 80HHC, as per sub-section (3), the sum is in respect of export of trading goods or manufactured goods to which this section applies. Similarly, the words “export turnover” is defined which means ,sale proceeds of any goods or merchandise’ to which section 80HHC applies. Admittedly, the export turnover is of the unit eligible for exemption under section 10A. Thus, the turnover of unit eligible for exemption under section 10A do not form part of turnover to which section 80HHC applies. Thus, though it is true that the assessee is not claiming deduction under section 10A as well as under section 80HHC in respect of the same profit, yet it is clear that the profit will arise only when there is turnover or sale of goods. Thus, the turnover of unit exempt under section 10A do not become export of goods to which section 80HHC applies.
3.1 Hon’ble Supreme Court in the case of Escorts Ltd. (supra) held thus :
“There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions-both under section 10(2)(vi) and section 10(2)(xiv) of the 1922 Act or both under section 32(1)(ii) and section 35(1)(iv) of the 1961 Act. The use of the words “in respect of the same previous ycar”in clause (a) of the proviso to section 10(2)(xiv) of the 1922 Act and section 35(2)(iv) of the 1961 Act is to indicate that there is a basic scheme, unspoken but clearly underlying the Acts, that the two allowances cannot be and are not intended to be granted in respect of the same asset or expenditure. These provisions mandate that the assessee should, in a case where the assessee qualifies for both the allowances, be granted the special allowance for scientific research and not the routine annual one for depreciation”.
3.2 Hon’ble Gauhati High Court in the case of Sudarshan Plywood Industries Ltd. (supra) held thus:-
“The question of allowing deductions will arise only in case the income is included in the total income chargeable to income tax and not otherwise. Section 5 itself begins with the words, “subject to the provisions of this Act, the total income of any previous year. . . .”. Thus, the total income, as genet-ally it would mean under section 5, shall be subject to the other provisions of the Act. Section 10 provides that in computing the total income agricultural income shall not be included and would not form part of the total income. The language of section 32AB makes it clear that it is subject to the other provisions of that section and relates to an assessee whose total income includes income chargeable to tax under the head “Profits and gains of business or profession”. It is out of such income that deductions are admissible. Sections 10 and 32AB are mutually exclusive of each other for the purposes of total income and section 5 of the Act is rendered neutral being subject to the provisions of the Act. There could not be a situation where both the provisions could be applied as section 10 provides for non-inclusion of agricultural income in computing the total income whereas section 32AB applied where the total income includes income chargeable to tax under the head “Profits and gains of business or profession”.
Though the above case laws are not directly on the subject, it provides that identical amount cannot be claimed as deduction under two different sections unless specifically provided for. Since we have held that profits of the export turnover of EHTP unit does not form part of gross total income, such turnover cannot be included while computing export turnover for the purpose of computing deduction under section 80HHC also.
3.3 Hon’ble Supreme Court in the case of IPCA Laboratory Ltd. v. Dy. CIT (2004) 266 ITR 521 (SC) held that section 80AB governs section 80HHC also.
3.4 The decision of ITAT, Delhi bench in Jindal Exports (P.) Ltd, v. Asstt, CIT (1989) 31 ITD 217 (Del) held that if the assessee is eligible for deduction under section 10A as well as section 80HHC, it should be granted. We agree with the same view. However, since the profit of 10A unit and deduction under section 80HHC is in the sections. Section 80AB clearly provides that deduction under the heading “Deduction in respect of certain income in Chapter VI-A shall be such sum, which is included in the gross total income of the assessee”.
In the result, the appeal is dismissed.