C.I.T. & ANR versus MIS YOKOGAWA INDIA LTD

Citation: [2016] 9 S.C.R. 163 · Decided: 16-12-2016 · Supreme Court of India · Bench: RANJAN GOGOI

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Judgment (excerpt)

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(2016) 9 S.C.R. 163 
C.I.T. & ANR. 
v. 
MIS YOKOGAWA INDIA LTD. 
(Civil Appeal No. 8498 of201J) 
DECEMBER 16, 2016 
[RANJAN GOGOi AND PRAFULLA C. PANT, JJ.] 
l11come Tax Act, 1961: s.JOA (as amended) - Deduction or 
Exemption - Held: The introduction of the word 'deduction' in s. l OA 
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by the amendment, clearly enunciates the legislative decision to alter 
its nature from one providing for exemption to one providing for 
deductions - Though s.lOA, as amended, is a provision for 
deduction, the stage of deduction would be while computing the 
gross total income of the eligible undertaking under Chapter IV of 
the Act and not at the stage of computation of the total income 
under Chapter Vl 
Disposing of the appeals, the Court 
HELD:l. The amendment of Section lOAoftheAct, by the 
Finance Act, 2000 with effect from 1.4.2001, specifically uses the 
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words 'deduction of profits and gains derived by an eligible unit 
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...... from the total income of the assessee'. There are other 
provisions of Sectio·n JOA, as amended, which could be suggestive 
of the fact that by the amendment made by Finance Act, 2000, 
Section• JOA had changed its colour from being an-exemption 
section to a provision providing for deduction. Yet, Section JOA. 
continued to remain in Chapter III of the Act which Chapter deals 
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with incomes which do not form part of the total income. A look 
at the Circulars issued from time to time shows a fair amount of 
ambiguity therein as to the true nature and effect of .the 
amendment. Specifically, Circular No. 7 dated 16.07.2013 as well 
as Circular No. 01/2013 dated 17.01.2013 which appear to be 
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conflicting and contradictory to each other; in the former Circular 
the provision, i.e., Section JOA is referred to as providing for 
deductions whereas the later Circular uses the expression 
"exempti~n" while referring to the provisions of Sections JOA 
and ton of the Act. Even the Income Tax Return Forms i.e. 
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SUPREME COURT REPORTS 
[2016) 9 S.C.R. 
A Form No. 1 dated 17.08.2001 and Form No. 6 for the assessment 
year 2012-13 are equally contradictory. [Para 9) [173-C-F] 
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The retention of Section lOA in Chapter III of the Act 
after the amendment made by the Finance Act, 2000 would be 
merely suggestive and not determinative of what is provided by 
the Section as amended, in contrast to what was provided by the 
no-amended Section. The true and correct purport and effect of 
the amended Section will have to be construed from the language 
used and not merely from the fact that it has been retained in 
Chapter III. The introduction of the word 'deduction' in Section 
lOA by the amendment, in the absence of any contrary material, 
and in view of the scope of the deductions contemplated by Section 
lOA it has to be understood that the Section embodies a clear 
enuneiation of the legislative decision to alter its nature from 
one providing for exemption to one providing for deductions. 
The difference between the two expressions 'exemption' and 
'deduction', though broadly may appear to be the same i.e. 
immunity from taxa1ion, the practical effect of it in the light of the 
specific provisions contained. in different parts of the Act would 
be wholly different. [Paras 13, 14) [175-F-H; 176-A-B] 
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Sub-section (4) of Section lOA which provides for pro 
rata exemption, necessarily involving deduction of the profits 
arising out of domestic sales, is one instance of deduction provided 
by the amendment. Profits of an eligible unit pertaining to 
domestic sales would have to enter into the computation under 
the head "profits and gains from business" in Chapter IV and 
denied the benefit of deduction. The provisions of Sub-section 
(6) of Section lOA, as amended by the Finance Act of 2003, 
granting the benefit of adjustment of losses and unabsorbed 
depreciation etc. commencing from the year 2001-02 on 
completion of the period of tax holiday also virtually works as a 
deduction which has to be W-Orked out at a future point of time, 
namely, after the expiry of period of tax holiday. The absence of 
any reference to deduction under Section lOA in Chapter VI of 
the Act can be understand by acknowledging that any such 
reference or mention would have been a repetition of what has 
already been provided in Section lOA. The provisions of Sections 
80HHC and 80HHE of the Act providing for somewhat similar 
C.l.T. & ANR. v

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