The Supreme Court has conclusively interpreted the scope and application of Section 80-IA(9) of the Income Tax Act, 1961, in the context of claims for multiple deductions under Chapter VI-A. The controversy before the Court pertained to whether an assessee, having claimed and been allowed a deduction under Section 80-IA or Section 80-IB, is disentitled from claiming or computing deductions under other provisions falling under Heading “C” of Chapter VI-A, particularly Section 80-HHC.

The Revenue contended that once profits and gains have been allowed as a deduction under Section 80-IA, the same profits must be excluded from the gross total income while computing deductions under Section 80-HHC. The assessee, on the other hand, argued that Section 80-IA(9) merely restricts the extent of deduction allowable and does not affect the statutory method of computation prescribed under other deduction provisions.

The Supreme Court rejected the interpretation advanced by the Revenue and held that Section 80-IA(9) does not operate at the stage of computation of deductions under other provisions of Chapter VI-A. The restriction contained in Section 80-IA(9) applies only at the stage of allowance, ensuring that the aggregate of deductions claimed under Section 80-IA and other provisions under Heading “C” does not exceed the profits and gains of the eligible business.

The Court emphasized the clear distinction between the computation of a deduction and its allowance. It was held that deductions under provisions such as Section 80-HHC must be computed independently in accordance with the formula and mechanism provided under the respective section, without reducing the profits by the amount already allowed under Section 80-IA. Only after such computation can the restriction under Section 80-IA(9) be applied to cap the total allowable deduction.

In affirming the view taken by the Bombay High Court in Associated Capsules (P) Ltd. v. DCIT and approving the reasoning adopted in ACIT v. Micro Labs Ltd., the Supreme Court clarified that Section 80-IA(9) is intended to prevent multiple deductions in excess of eligible profits, and not to curtail or disturb the computation provisions expressly laid down under other sections of Chapter VI-A.

The judgment finally settles the legal position by holding that while double deduction of the same profits beyond the permissible limit is impermissible, the statutory scheme does not prohibit independent computation of deductions under different provisions of Chapter VI-A, subject to the overall cap prescribed by law.

SOURCE LINK- https://api.sci.gov.in/supremecourt/2011/23423/23423_2011_3_1502_61934_Judgement_20-May-2025.pdf

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