Under the Income Tax Act, 1961, what was the object of enacting Sub-section (9) of Section 80-IA with effect from 1st April, 1999?

It is an in-built restriction introduced to prevent the taxpayers from taking undue advantage of the existing provisions by claiming repeated deductions in respect of the same amount of eligible income, and that too in excess of the eligible profits — the object recorded in Central Board of Direct Taxes Circular No. 772 dated December 23, 1998. That object supports reading the sub-section as affecting allowability and not computation.

Income Tax Act, 1961 — s.80-IA(9) — s.80-HHC — s.80-IB — Chapter VI-A, heading ‘C’ — Deductions — Computation of deduction and allowing a deduction distinguished — Reference answered — Income Tax Act, 1961 — s.80-IA(9) — Restriction on allowance, not on computation — Held: On a plain reading, Sub-section (9) of Section 80-IA restricts the deduction allowable under any other provision under heading ‘C’ to the extent already claimed and allowed under Section 80-IA. The restriction is not on computing the total gross income. (¶20, 21) Income Tax Act, 1961 — s.80-IA(9) — s.80-HHC — Computation of deduction unaffected — Held further: Allowing a deduction and computation of deduction have separate and distinct meanings. Gross total income for computing the deduction under Section 80-HHC is not reduced by the Section 80-IA deduction, though the aggregate cannot exceed the profits and gains of such eligible business. (¶21, 23) Income Tax Act, 1961 — s.80-IA(9) — Conflicting High Court views — Reference answered — Held further: The interpretation made by the Bombay High Court in Associated Capsules (P) Ltd. is logical and correct. The reference is answered accordingly and the appeals directed to be placed before the appropriate Bench. (¶24, 25)

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