Supreme Court of India· 20 May 2025

Under the Income Tax Act, 1961, where a deduction has been claimed and allowed under Section 80-IA, does Sub-section (9) of Section 80-IA reduce the gross total income for computing a deduction under Section 80-HHC, or does it only restrict what may be allowed?

Shital Fibers Limited v. Commissioner of Income Tax

2025 INSC 743 · CIVIL APPEAL NO.14318 OF 2015
Coram: Abhay S. Oka; Ahsanuddin Amanullah; Augustine George Masih

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Answer

It only restricts what may be allowed. On a plain reading of Sub-section (9) of Section 80-IA, the restriction is not on computing the total gross income; it restricts the deduction under any other provision under the heading ‘C’ of Chapter VI-A to the extent of the deduction claimed and allowed under Section 80-IA. The gross total income is therefore not reduced by the Section 80-IA deduction when the Section 80-HHC deduction is computed.

Headnote

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)

In the Court's own words

Paragraph 20Therefore, on plain reading of Sub-section (9) of Section 80-IA, if a deduction of profits and gains under Section 80-IA is claimed and allowed, the deduction to the extent of such profits and gains in any other provision under the heading ‘C’ is not allowed. The deduction to the extent allowed under Section 80-IA cannot be allowed under any other provision under heading ‘C’. Therefore, if deduction to the extent of ‘X’ is claimed and allowed out of gross total income of ‘Y’ under Section 80-IA and the assessee wants to claim deduction under any other provision under the heading ‘C’, though he may be entitled to deduction ‘Y’ under the said provision, he will get deduction under the other provisions to the extent of (Y-X) and in no case total deductions under heading ‘C’ can exceed the profits and gains of such eligible business of undertaking or enterprise.

Paragraph 21Sub-section (9) of Section 80-IA, on its plain reading, does not provide that when a deduction is allowed under Section 80-IA, while considering the claim for deduction under any of the provision under heading ‘C’, the deduction allowed under Section 80-IA should be deducted from the gross total income. The restriction under sub-section (9) of Section 80-IA is not on computing the total gross income. It restricts deduction under any other provision under heading ‘C’ to the extent of the deduction claimed under Section 80- IA.

Acts & Sections

s.80-IA(9) Income Tax Act, 1961s.80-HHC Income Tax Act, 1961s.80-IB Income Tax Act, 1961s.80-AB Income Tax Act, 1961s.80-A Income Tax Act, 1961s.147 Income Tax Act, 1961s.4 Income Tax Act, 1961

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Also decided in this judgment

Under the Income Tax Act, 1961, what turns on the difference between ‘allowing’ a deduction and ‘computation’ of a deduction when Sub-section (9) of Section 80-IA is applied?Under the Income Tax Act, 1961, is there a ceiling on the aggregate of deductions claimed under Section 80-IA and under other provisions under heading ‘C’ of Chapter VI-A?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?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections