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CaseIQ

Commissioner Of Income-Tax v. Arvind Mills Ltd.

Gujarat High Court

Sep 11, 2001

Judgment

Subsequent
References

CaseIQ

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Structured Summary of the Provided Opinion (D.A. Mehta, J.)

Factual and Procedural Background

The Income Tax Appellate Tribunal, Ahmedabad Bench A, referred five questions to the Gujarat High Court for its opinion. The assessment year in question is 1984-85 and the relevant accounting period is 1983. The five referred questions concern (i) treatment of reimbursement of medical expenses and house rent allowance for purposes of disallowance under Section 40(c) of the Income Tax Act, 1961; (ii) whether cash payment of house rent allowance to employees is to be considered for disallowance under Section 40A(5); (iii) entitlement to deduction of Rs. 2,69,842 paid to Mettur Beardsell Ltd. by way of royalty; (iv) whether disallowance under Rule 60D (Rule 6D in the opinion) must be computed by grouping all tours by a person in the year; and (v) entitlement to deduction under Section 80HHC of the Act.

For questions 1 to 4 the parties accepted that the issues were concluded by earlier decisions of the Supreme Court or this Court, and therefore detailed factual exposition was deemed unnecessary. For question 5 the Tribunal relied on its own earlier order (Income Tax Appeal No. 2689/AHD of 1985 with cross-objection No. 69/AHD of 1986 for assessment year 1983-84) and the matter had also been registered as Income Tax Reference No. 134 of 1987. The reference was heard by consent of both sides at the High Court.

Counsel appearing: Mr. B.B. Nayak, learned standing counsel for the Revenue, and Shri J.P. Shah, learned counsel for the assessee.

Legal Issues Presented

Whether the reimbursement of medical expenses and house rent allowance to the managing directors are to be considered for the purpose of computing the disallowance under Section 40(c) of the Act?
Whether the cash payment of house rent allowance to the employees is to be considered for the purpose of computing the disallowance under Section 40A(5) of the Act?
Whether, in law and on facts, the assessee is entitled to a deduction of Rs. 2,69,842 paid to Mettur Beardsell Ltd., on account of royalty?
Whether the disallowance under Rule 60D is to be computed by grouping together all the tours undertaken by a person during the year?
Whether, in law and on facts, the assessee was entitled to deduction under Section 80HHC of the Act?

Arguments of the Parties

Revenue's Arguments (Mr. B.B. Nayak)

Submitted that Section 80AB applies to all sections under the heading "C — Deductions in respect of certain incomes", and that Section 80HHC falls within that heading; consequently Section 80AB should govern Section 80HHC.
Contended that a deduction under Section 80HHC presupposes profits from export activity; in the absence of such profits the Tribunal was in error in allowing the deduction and in allowing it against income under another head (capital gains) in the present case.
Relied on the following authorities in support of these submissions: CIT v. V.T. Joseph [1997]225 ITR 731 (Ker), CIT v. K.K. Doshi and Co. [2000]245 ITR 849 (Bom), H.H. Sir Rama Varma v. CIT [1994]205 ITR 433 (SC), and CIT v. M.K. Raju Consultants (P.) Ltd. [1999]239 ITR 232 (Mad).

Assessee's Arguments (Shri J.P. Shah)

Submitted that Section 80HHC is unambiguous and on its plain reading cannot be treated as governed by Section 80AB; Section 80HHC does not require that export business produce profits before the deduction can be claimed.
Argued that Section 80HHC provides a deduction equal to specified percentages of export turnover (one per cent and additional five per cent where applicable), that deduction is not a percentage of income, and the section does not condition the deduction on any specified income being included in gross total income.
Emphasized textual differences between Section 80HHC and other provisions under heading C and relied upon the statutory language to support the assessee's position.
Relied on general interpretative principles and precedent support: CIT v. Strawboard Manufacturing Co. Ltd. [1989]177 ITR 431 (SC) (advocating a liberal interpretation of relief-giving provisions) and Mysore Minerals Ltd. v. CIT [1999]239 ITR 775 (SC) (in favour of an interpretation beneficial to the assessee where two interpretations are possible).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Aroon K. Basak v. Union of India [1999]236 ITR 931 (Delhi)	That reimbursement of medical expenses must be considered for computing disallowance under Section 40(c) of the Act.	The court applied this precedent to answer the first portion of Question No. 1 (reimbursement of medical expenses) against the assessee.
CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. [1996]219 ITR 644 (SC)	That house rent allowance is not to be included for the purpose of disallowance under Section 40(c); and that cash payment of house rent allowance is not to be considered for disallowance under Section 40A(5).	The court applied Mafatlal to answer the second portion of Question No. 1 (HRA) in favour of the assessee and to answer Question No. 2 in the negative (in favour of the assessee and against the Revenue).
CIT v. Ashoka Mills Ltd. [1996]218 ITR 526	That payment on account of royalty to Mettur Beardsell Ltd. is a deductible item of expenditure.	The court applied this decision to answer Question No. 3 in the affirmative (in favour of the assessee and against the Revenue).
CIT v. Nulan Mills Ltd. [2002]254 ITR 519 (Guj) (unreported decision dated Feb. 6, 2001)	That disallowance under rule 6D (Rule 60D in the reference) must be computed by treating each trip separately; tours of a person in a year should not be clubbed for the purpose of computing the disallowable limit.	The court applied this ruling to answer Question No. 4 in the negative (in favour of the Revenue and against the assessee).
CIT v. V.T. Joseph [1997]225 ITR 731 (Ker)	Relied upon by the Revenue in support of its contention concerning the application of Section 80AB to Section 80HHC (i.e., support for Revenue's position as presented).	The court considered this decision among others relied upon by the Revenue but ultimately noted other decisions that contradicted it and did not accept the Revenue's contention.
CIT v. K.K. Doshi and Co. [2000]245 ITR 849 (Bom)	Relied upon by the Revenue in support of its submissions regarding Section 80AB/80HHC.	Noted as relied upon by the Revenue; the court did not adopt the Revenue's overarching submission that Section 80AB controls Section 80HHC.
H.H. Sir Rama Varma v. CIT [1994]205 ITR 433 (SC)	Relied upon by the Revenue among authorities cited in support of its contention.	Taken into account as cited by the Revenue; the court's analysis did not accept the conclusion urged by the Revenue.
CIT v. M.K. Raju Consultants (P.) Ltd. [1999]239 ITR 232 (Mad)	Relied upon by the Revenue in support of its position.	Noted as reliance by Revenue; did not determine the court's ultimate conclusion on Section 80HHC in favour of Revenue.
CIT v. A.V. Thomas and Co. Ltd. [1997]225 ITR 29 (Ker)	A Kerala High Court decision favourable to the assessee's view that Section 80AB does not control Section 80HHC.	The court found the view in A.V. Thomas persuasive and referred to it in preferring the assessee's interpretation.
CIT v. Shirke Construction Equipments Ltd. [2000]246 ITR 429 (Bom)	Bombay High Court decision which considered earlier Kerala decisions and held that Section 80AB does not control Section 80HHC and that Section 80HHC is a complete code by itself.	The court expressly stated respectful agreement with the Bombay High Court's conclusion and applied that reasoning in answering Question No. 5 in favour of the assessee.
CIT v. Strawboard Manufacturing Co. Ltd. [1989]177 ITR 431 (SC)	Principle that relief-giving provisions should be interpreted liberally to effectuate the intention of granting relief rather than curtailing it.	The court invoked this principle in favour of a liberal reading of Section 80HHC where appropriate to support the assessee's position.
Mysore Minerals Ltd. v. CIT [1999]239 ITR 775 (SC)	Principle that where two interpretations are possible, an interpretation in favour of the assessee should be adopted.	The court noted and applied this interpretative principle in its consideration of Sections 80HHC and 80AB.

Court's Reasoning and Analysis

The court proceeded question by question and applied binding or persuasive precedent where available; for the first four questions the court accepted that the issues were already concluded by higher authorities or this Court and therefore did not require full factual exposition.

Questions 1 and 2 (Section 40(c) and Section 40A(5)):

For reimbursement of medical expenses, the court followed Aroon K. Basak (Delhi High Court) holding that reimbursement must be considered for computing disallowance under Section 40(c).
For house rent allowance (HRA) paid to managing directors, the court followed the Supreme Court decision in CIT v. Mafatlal Gangabhai and Co. (P.) Ltd., which held that HRA should not be included for the purpose of disallowance under Section 40(c); accordingly, the house rent allowance element was excluded for Section 40(c) purposes.
On Question 2, the court again relied on Mafatlal to hold that cash payment of HRA to employees is not to be considered for disallowance under Section 40A(5).

Question 3 (Royalty paid to Mettur Beardsell Ltd.):

The court relied on its own earlier decision in CIT v. Ashoka Mills Ltd. which held that the payment on account of royalty to Mettur Beardsell Ltd. is deductible. The court therefore answered Question No. 3 in the affirmative for the assessee.

Question 4 (Rule 60D / Rule 6D disallowance computation):

The court referred to an unreported decision in CIT v. Nulan Mills Ltd. (since reported at [2002]254 ITR 519 (Guj)) holding that the disallowance under rule 6D must be computed by taking each trip undertaken by an employee separately and that tours in a year should not be clubbed together. On that basis the court answered Question No. 4 in the negative (in favour of the Revenue and against the assessee).

Question 5 (Deduction under Section 80HHC):

The Tribunal's order relied on its earlier reasoning for a different assessment year and did not set out independent reasons; the matter was argued before the court by both parties.
The Revenue's central contention was that Section 80AB (introduced 1981) applies to sections under heading C of Chapter VI-A and therefore controls Section 80HHC (introduced by the Finance Act, 1983, effective April 1, 1983), leading to the necessity of profits from export activity before Section 80HHC deduction could be claimed.
The court conducted a textual and contextual analysis of Sections 80HHC and 80AB and the surrounding statutory scheme:
- It observed that Section 80HHC, on a plain reading, allows a deduction equal to specified percentages of export turnover and does not describe the deduction as a percentage of income or condition it on profits from exports.
- It noted that Section 80AB applies where a deduction under a section included in heading C is in respect of "any income of the nature specified in that section which is included in the gross total income of the assessee," but that Section 80HHC, as enacted for the relevant years, did not require any such income to be included in gross total income in the manner contemplated by Section 80AB.
- The court compared the language of the provisions falling under heading C and found Section 80HHC linguistically distinct from most other provisions in that heading, which generally operate by reference to profits and gains included in gross total income.
- It considered the chronological legislative history (Section 80AB introduced earlier; Section 80HHC introduced later) and concluded that it was not reasonable to read Section 80AB as overriding or subsuming Section 80HHC when the legislative language and structure showed deliberate differentiation.
- The court also examined the scheme of total income (Sections 4, 5 and definition of total income and income, including capital gains under Section 2(24)(vi)) to explain how deductions under Section 80HHC operate in the computation of total income, but emphasized the plain statutory language of Section 80HHC permitting deduction measured by export turnover rather than conditioned on profits.
- The court found persuasive the view of the Bombay High Court in CIT v. Shirke Construction Equipments Ltd. [2000]246 ITR 429 (Bom) that Section 80AB does not control Section 80HHC and that Section 80HHC is a complete code by itself; the court stated respectful agreement with that view.
- Finally, the court invoked interpretative authority (Strawboard and Mysore Minerals) in support of applying a liberal construction to relief-giving provisions and adopting an interpretation favourable to the assessee where two interpretations were possible.
On this basis the court held that the Tribunal was correct in allowing the assessee the deduction under Section 80HHC for the facts and circumstances of the case.

Holding and Implications

Core Rulings (answers to the five referred questions):

Question No. 1: Reimbursement of medical expenses is to be considered for computing disallowance under Section 40(c) — (answered against the assessee). House rent allowance paid to managing directors is not to be included for that purpose — (answered against the Revenue / in favour of the assessee).
Question No. 2: Cash payment of house rent allowance to employees is not to be considered for computing disallowance under Section 40A(5) — (answered in the negative; in favour of the assessee and against the Revenue).
Question No. 3: The assessee is entitled to the deduction of Rs. 2,69,842 paid to Mettur Beardsell Ltd. on account of royalty — (answered in the affirmative; in favour of the assessee and against the Revenue).
Question No. 4: Disallowance under Rule 60D (rule 6D) is not to be computed by grouping together all tours of a person during the year; each tour/trip is to be considered separately — (answered in the negative; in favour of the Revenue and against the assessee).
Question No. 5: The assessee was entitled to deduction under Section 80HHC on the facts and circumstances of the case; Section 80HHC is not controlled by Section 80AB and may be read as a self-contained provision permitting the specified deductions measured by export turnover — (answered in the affirmative; in favour of the assessee and against the Revenue).

Final Disposition: Reference disposed of accordingly with no order as to costs.

Direct Consequences for the Parties: The answers above resolve the five questions referred by the Tribunal. Practically, (a) medical expense reimbursements are to be taken into account for Section 40(c) disallowance calculations, but HRA paid to managing directors and cash HRA to employees are excluded from the respective disallowances; (b) the royalty payment to Mettur Beardsell Ltd. is deductible; (c) Rule 6D disallowances must be computed per trip rather than by aggregating all tours of an employee in the year; and (d) the assessee is entitled to the deduction under Section 80HHC as applied in the assessed year.

The opinion principally applies and reconciles existing authorities and statutory language to resolve the referred issues. It adopts existing precedents and interpretative principles rather than announcing novel legal propositions beyond the application of the cited authorities and the statutory analysis set out above.

Show all summary ...

D.A. Mehta, J.

1. The Income Tax Appellate Tribunal, Ahmedabad Bench A, has referred the following five questions for the opinion of this court :

"1. Whether, the reimbursement of medical expenses and house rent allowance to the managing directors are to be considered for the purpose of computing the disallowance under Section 40(c) of the Act ?

2. Whether, the cash payment of house rent allowance to the employees is to be considered for the purpose of computing the disallowance under Section 40A(5) of the Act ?

3. Whether, in law and on facts, the assessee is entitled to a deduction of Rs. 2,69,842 paid to Mettur Beardsell Ltd., on account of royalty ?

4. Whether, the disallowance under Rule 60D is to be computed by grouping together all the tours undertaken by a person during the year ?

5. Whether, in law and on facts, the assessee was entitled to deduction under Section 80HHC of the Act ?"

2. The assessment year is 1984-85 and the relevant accounting period is 1983. So far as questions Nos. 1 to 4 are concerned, it is common ground between the parties that the issues are concluded by the decisions of the apex court or this court and, hence, it is not necessary to set out the facts in detail.

3. Questions No. 1 is in relation to two items, viz., (i) reimbursement of medical expenses, and (ii) house rent allowance paid to the managing directors and whether the said items are required to be considered for the purpose of computing the limits for disallowance under Section 40(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). In so far as the reimbursement of medical expenses is concerned, this court in the case of Aroon K. Basak v. Union of India [1999]236ITR931(Delhi) has laid down that the same is required to be considered for the purpose of computing disallowance under Section 40(c) of the Act. As far as house rent allowance is concerned, the apex court has in the case of CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. [1996]219ITR644(SC) laid down that the said item is not to be included for the purpose of disallowance under Section 40(c) of the Act. Question No. 1 is therefore answered accordingly, i.e., the first portion against the assessee and the second portion against the Revenue.

4. The second question is also concluded by the Supreme Court in the case of CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. [1996]219ITR644(SC) and for the reasons stated in the said decision, it has to be held that cash payment of house rent allowance paid to the employees is not to be considered for the purpose of computing disallowance under Section 40A(5) of the Act. The second question is therefore answered in the negative, i.e., in favour of the assessee and against the Revenue.

5. The third question is concluded by the decision of this court in the case of CIT v. Ashoka Mills Ltd. [1996] 218 ITR 526, wherein it is held that the payment on account of royalty to Mettur Beardsell Ltd. is a deductible item of expenditure. The third question is therefore answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

6. In so far as question No. 4 is concerned in an unreported decision in the case of CIT v. Nulan Mills Ltd. (since reported in [2002]254ITR519(Guj) ) in Income Tax Reference No. 54 of 1988, dated February 6, 2001, it is held that the disallowance under rule 6D of the Income Tax Rules, 1962, has to be computed by taking each trip undertaken by an employee separately and all the tours undertaken by such a person during the year have not to be clubbed together for the purpose of computing the disallowable limit. We accordingly answer question No. 4 in the negative, i.e., in favour of the Revenue and against the assessee.

7. So far as question No. 5 is concerned, the Tribunal has relied upon its own order in Income Tax Appeal No. 2689/AHD of 1985 with cross-objection No. 69/AHD of 1986 for the assessment year 1983-84 and has therefore not assigned any independent reason in the order under reference, because according to the Tribunal there is no difference in the facts and circumstances for the assessment years in question. In so far as the issue regarding Section 80HHC of the Act is concerned, the Revenue had come up in appeal in the assessee's own case and the said reference was registered as Income Tax Reference No. 134 of 1987. The said matter was also taken up for hearing today by consent of both the sides along with this reference.

8. We have heard Mr. B.B. Nayak, learned standing counsel for the Revenue and Shri J.P. Shah, learned counsel for the assessee. It was submitted by Mr. Nayak that the provisions of Section 80AB of the Act are applicable to all the sections which fall under the heading "C-- Deductions in respect of certain incomes" and that Section 80HHC is a provision which falls within the said heading. Elaborating on the contention raised, it was submitted that it was necessary that there should be profits from export activity and in the absence of such profits from export business the Tribunal was clearly in error in holding that the assessee was entitled to deduction under Section 80HHC of the Act against the income from other head, viz., capital gains, as in the present case. Reliance was placed on the following decisions in support of his submissions :

CIT v. V.T. Joseph [1997]225ITR731(Ker) ;

CIT v. K.K. Doshi and Co. [2000]245ITR849(Bom) ;

H.H. Sir Rama Varma v. CIT [1994]205ITR433(SC) ; and

CIT v. M.K. Raju Consultants (P.) Ltd. [1999]239ITR232(Mad) .

9. As against this, on behalf of the assessee, Mr. Shah has submitted that the provisions of Section 80HHC were unambiguous and on a plain reading it was not possible to state that the said section was governed by the provision of Section 80AB of the Act. Mr. Shah further submitted that the provision of Section 80HHC of the Act as it stood for the relevant assessment year did not envisage that there should be any profits from the business of exports and the language as employed in the section did not support the proposition canvassed by the Revenue. He further contended that the provision of Section 80AB in the opening portion read : "deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee ; that in the case of the provision of Section 80HHC there was no question of claiming deduction in respect of any income, because the section did not provide that any income of the nature specified in Section 80HHC was to be included in the gross total income. Referring to Section 80HHC, it was submitted that an assessee would be entitled to a deduction of a specified amount of the export turnover of such goods or merchandise as specified. That the deduction was neither envisaged as a percentage of the income nor was it necessary to establish that the business from exports had resulted in profits. Section 80HHC and Section 80AB as they stood for the years under consideration are in the following terms :

"80HHC. (1) Where the assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, the following deductions, namely :--

(a) a deduction of an amount equal to one per cent, of the export turnover of such goods or merchandise during the previous year ; and

(b) a deduction of an amount equal to five per cent, of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding previous year.

(2) (a) This section applies to all goods or merchandise [other than those specified in Clause (b)] if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange.

(b) The goods or merchandise referred to in Clause (a) are the following, namely :--

(i) agricultural primary commodities, not being produce of plantations ;

(ii) mineral oil;

(iii) minerals and ores ; and

(iv) such other goods or merchandise as the Central Government may, by notification in the Official Gazette, specify in this behalf.

(3) No deduction under Clause (b) of Sub-section (1) shall be allowed unless the assessee had, during the immediately preceding previous year, exported out of India goods or merchandise to which this section applies.

10. Explanation.--For the purposes of this section,--

(a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder ;

(b) 'export turnover' means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962)."

"80AB. Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C--Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income."

11. On a plain reading of Section 80HHC, it is apparent that a deduction can be claimed by an assessee if such assessee exports out of India during the previous year relevant to the assessment year any goods or merchandise as specified in the section. The deduction has to be made while computing the total income of the assessee of an amount specified of the export turnover of such goods or merchandise. Whereas Section 80AB requires that a deduction which is required to be made or allowed under any section (except Section 80M) included in Chapter VI-A under the heading "C.--Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee. As can be seen there is no income of the nature specified in Section 80HHC (as it then stood) which would be included in the gross total income of the assessee, and if that is so, it would not be possible to read that such was the requirement of Section 80HHC of the Act.

12. Heading C which deals with deductions in respect of certain incomes commences with the provision of Section 80HH and ends with Section 80TT of the Act. When we compare the language of all the provisions which fall under the heading C of Chapter VI-A, we find that except for Section 80HHC in all other provisions the language used is to the effect that where the gross total income of an assessee includes any profits and gains as specified a deduction has to be allowed from such profits and gains of the specified amount in each of the provisions. On comparison Section 80HHC stands out by virtue of the language employed and it is not possible to state that on a plain reading it would fall within the same set of provisions which have been contemplated to be governed by the provisions of Section 80AB of the Act.

13. Section 80AB of the Act was introduced by the Finance (No. 2) Act of 1980, with effect from April 1, 1981. While Section 80HHC was introduced by the Finance Act, 1983, with effect from April 1, 1983. Therefore, the contention raised on behalf of the Revenue that Section 80AB should override the provision of Section 80HHC cannot be accepted as it is not possible to hold that the Legislature was not aware of the difference in other provisions falling under heading C of Chapter VI-A and the language employed in Section 80HHC of the Act. On the contrary, there is an inherent indication in the Act when one reads the provision of Section 80HHB of the Act which was introduced by the Finance Act, 1982, with effect from April 1, 1983. The language employed in both the provisions is entirely different though both the provisions have been made effective from the same date.

14. Considering the matter from a slightly different angle, the provision of Section 80HHC requires that deduction is to be made from the total income of an assessee. The scheme of the Act as can be seen is to fasten the charge of Income Tax by virtue of Section 4 of the Act in respect of the total income of the previous year, the term "total income" has been defined by Section 2(45) of the Act to mean the total amount of income referred to in Section 5, computed in the manner laid down in this Act. Section 5 deals with the scope of total income to provide that the "total income" of any previous year would include all income from whatever source. Once the Legislature has provided for inclusion of all incomes, the definition of "income" as provided in Section 2(24) of the Act becomes relevant. Sub-clause (vi) of Section 2(24) states that income includes any capital gains chargeable under Section 45 of the Act. Therefore, once capital gains form part of the income, which is to be included for the purpose of ascertaining the total income, the charge specified in Section 4 of the Act gets attracted. Thus, the moment this exercise has been undertaken, the figure of total income is arrived at and it is from this figure that deduction under Section 80HHC is provided being the specified percentage of the export turnover.

15. The decision of the Kerala High Court in the case of CIT v. V.T. Joseph [1997]225ITR731(Ker) relied upon by learned counsel for the Revenue is rendered on September 26, 1996. While the decision of the Kerala High Court in the case of CIT v. A.V. Thomas and Co. Ltd. [1997]225ITR29(Ker) has been rendered on January 10, 1997. The view expressed by the Kerala High Court in the latter decision in the case of A.V. Thomas [1997]225ITR29(Ker) commends itself to us. Moreover, the decision of the Bombay High Court in the case of CIT v. Shirke Construction Equipments Ltd. [2000]246ITR429(Bom) has already taken into consideration both the aforesaid decisions of the Kerala High Court and the Bombay High Court has dissented respectfully from the earlier view of the Kerala High Court in the case of V.T. Joseph [1997]225ITR731(Ker) and agreed with the decision in the case of A.V. Thomas [1997]225ITR29(Ker) . The Bombay High Court has specifically held that Section 80AB does not control Section 80HHC and that Section 80HHC is a complete code by itself. We are, therefore, in respectful agreement with the view expressed by the Bombay High Court in the case of Shirke Construction Equipments Ltd. [2000]246ITR429(Bom) .

16. Mr. Shah in support of his contention referred to the Supreme Court decision in the case of CIT v. Strawboard Manufacturing Co. Ltd. [1989]177ITR431(SC) to contend that while interpreting relief giving provision liberal interpretation should be adopted and the provision must be so read as to effectuate the intention of granting relief instead of curtailing the same. Mr. Shah also pressed into service the Supreme Court decision in the case of Mysore Minerals Ltd. v. CIT [1999]239ITR775(SC) , in support of his submission that where two interpretations were possible an interpretation in favour of the assessee should be adopted. While arriving at the aforesaid decision we have borne in mind the principles stated by the apex court in the aforesaid decisions.

17. In view of the aforesaid discussion, we hold that the Tribunal had rightly held that the assessee was entitled to deduction under Section 80HHC of the Act on the facts and in the circumstances of the case. Question No. 5 is therefore answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

18. The reference stands disposed of accordingly with no order as to costs.