In this case assessee has raised following grounds: "A. Claim of deduction under s. 80HHC learned CIT(A) erred in rejecting claim of deduction under s. 80HHC as per appellants working consistent with his decision for asst. yr. 1996-97 against which appellants is in appeal before your honour. learned CIT(A) did not appreciate that what could be excluded from computation of business profits for purpose of deduction under s. 80HHC is amount included in such profits and not gross receipts. learned CIT(A) did not appreciate facts with regard to deduction of freight and insurance from Export turnover. B. Claim of deduction under s. 80-IA learned CIT(A) erred in holding that benefit of deduction under s. 80-IA was not permissible to appellant as deduction was already allowed under s. 80HHC. learned CIT(A) did not appreciate that his conclusion as above was not warranted by any provisions of IT Act, 1961 as in force at relevant time. learned CIT(A) erred in holding that insertion of s. 80-IA(9) though prospective, has been mainly to clarify or declare earlier existing provisions." first ground is regarding exclusion of freight and insurance from direct cost of trading goods. CIT(A) had decided issue against assessee by following his order for asst. yr. 1996-97. This order came up for consideration before Tribunal in ITA No. 2347/Mum/2004. Vide their order dt. 11th July, 2005, Hon ble Tribunal observed as under: "We have considered rival submissions and we are inclined to agree with contention of learned counsel for assessee that freight and insurance attributable to transport of goods beyond custom station cannot be added to direct cost of goods as same is already excluded from export turnover. But for limited purpose of verification as to whether freight and insurance added by AO to direct cost of trading export is attributable to transport of goods beyond custom station, we set aside this matter to file of AO with direction to verify this fact and if it is found that this payment of freight and insurance is attributable to transport of goods beyond custom station, then it should not be added to direct cost and if it is found that it is attributable to transport of goods within custom station then it can be added to direct cost but shall not be excluded from export turnover as per definition of export turnover given in Expln. (b) of s. 80HHC(4C). This ground of assessee stands allowed for statistical purposes." Since facts and circumstances of case this year are same as for previous year, we respectfully following decision of Tribunal as referred above, restore issue to file of AO to verify whether freight and insurance are attributable to transport of goods beyond custom station , and if yes, then it should not be added to direct cost and if it relates to transportation within custom station , then it should be added to direct cost and will not be excluded from turnover. Hence, issue is set aside. This ground is allowed for statistical purpose. Ground No. 2, relates to whether deduction under s. 80-IA would be available along with deduction under s. 80HHC or deduction under s. 80-IA would be restricted because assessee is also getting deduction under s. 80HHC. AO disallowed claim of Rs. 17,75,930 under s. 80-IA. It was argued before CIT(A) that (i) s. 80HHC and s. 80-IA are independent of each other. Deduction under both can be claimed (ii) sub-s. 9A of s. 80-IA was introduced w.e.f. 1st April, 1999 and was not retrospective. It is also not declaratory (iii) prior to 1st April, 1999 there is no provision under ss. 80HHC and 80-IA to effect that if deduction under one section is claimed then deduction in other section cannot be claimed or has to be restricted (iv). as per decision of J.P. Tobacco Products (P) Ltd. vs. CIT (1997) 140 CTR (MP) 329: (1998) 229 ITR 123 (MP) deduction under both ss. 80MM and 80-IA can be claimed. CIT(A) considered submission of assessee and held that assessee could not claim deduction on same profits twice under two different sections. Assessee has got 100 per cent deduction under s. 80HHC or profits and if further deduction is allowed then total deduction would be more than 100 per cent. learned CIT(A) relied on observation of Hon ble Supreme Court in Escorts Ltd. vs. Union of India (1992) 108 CTR (SC) 275: (1993) 199 ITR 43 (SC) given in context of claim of deductions under ss. 10(2)(vi) and 10(2)(xiv) of 1922 Act, i.e., usual depreciation as well as special allowance for scientific research. Hon ble Supreme Court held that two deductions on same asset or expenditure could not be allowed. Further where two deductions are to be allowed then same should be specifically provided in statute. In absence of specific provision in statute, two deductions on same asset/expenditure could not be provided. learned CIT(A) further observed that Hon ble Judges of apex Court in Escorts Ltd. s case (supra) also expressed their view on insertion of legislation and held that "in our view intention of legislature is not to allow double deduction (of 200 per cent) in respect of same asset once under s. 35 and again by way of depreciation under s. 32". According to learned CIT(A) while introducing sub-s. (9A) in s. 80-IA, intention of legislature was to provide that where deduction on profits and gain of industrial undertaking is claimed under said section then profits to that extent shall not qualify for deduction under any other provisions of Chapter VIA. learned CIT(A) then referred to Memorandum Explaining Provisions in Finance (No. 2) Bill, 1998 to effect that this amendment intended to prevent tax payers from taking advantage of existing provisions by claiming repeated deduction in respect of same amount of eligible income. This Bill was proposed to be effective w.e.f. 1st April, 1990. Thus, legislature intended to clarify that sub-s. (9A) is declaratory in nature. learned CIT(A) then referred to decision of Hon ble Supreme Court in CIT vs. Anand Theatres (2000) 160 CTR (SC) 492: (2000) 110 TAXMAN 338 (SC) for proposition that real intent of IT Act is to get true picture of real income of business and if double deduction on same income, exceeding more than 100 per cent is allowed, real income of assessee would not be arrived at. Thus, main thrust of learned CIT(A) was that assessee is claiming double deduction on same income, once under s. 80HHC and then under s. 80-IA. He, thus, confirmed order of AO. Before us learned Authorised Representative of assessee Mr. Dastur submitted that sub-s. (9A) in s. 80-IA was added to statute w.e.f. 1st April, 1999. It was initially proposed to be made effective from 1st April, 1990 as per Finance (No. 2) Bill introduced in Parliament but finally, it was made prospective by making it effective from 1st April, 1999. Thus, intention of legislation is clear. They did not want to make it applicable to assessment year prior to 1st April, 1999. This aspect was considered by Hon ble Rajasthan High Court in CIT vs. Rochiram & Sons (2004) 191 CTR (Raj) 472: (2004) 271 ITR 444 (Raj); Hon ble Tribunal (Bangalore) in Mittal Clothing Co. vs. Dy. CIT (2005) 4 SOT 626 (Bang) held that when more than 100 per cent deduction of profits are not claimed then deduction under s. 80-IB as well as under s. 80HHC can be allowed. He further submitted that deduction under s. 80HHC is claimed in respect of profits whereas deduction under s. 80-IA is allowable only on income. Hence there is no double deduction as such on same income or profits. bases for working out deductions under two sections are different. On other hand, learned Departmental Representative relied on orders of authorities below and submitted that in any case there is double deduction. On same income/profit which is not permissible in view of Hon ble Supreme Court decision in Escorts Ltd. s case (supra). Further, sub-s. (9A) of s. 80-IA should be held declaratory as it intended to explain intention of legislature. Finally, learned Departmental Representative submitted that, without prejudice to above arguments, total deductions under Chapter VI-A should not exceed gross total income worked out before deductions under this Chapter. We have heard rival submission; case laws cited by parties and perused material on record. Following issues arise in this case. (i) How is capping under s. 80-IA (9A) is workable (ii) whether introduction of sub-s. (9A) in s. 80-IA is prospective or retrospective or whether it can be called declaratory so that it would be effective for assessment prior to 1st April, 1999 (iii) whether deduction under s. 80-IA would affect computation of deduction under s. 80HHC or vice versa (iv) whether deduction under both sections are permissible and whether s. 80A would be operative on combined deductions. Issue 1 Sub-s. (9A) to s. 80-IA introduced by Finance Act (No. 2) of 1998 w.e.f. 1st April, 1999 reads as under: "9A. Where any amount of profits and gains of industrial undertaking or of hotel in case of assessee is claimed and allowed under this section for any assessment year, deduction to extent of such profits and gains shall not be allowed under any other provisions of this Chapter under heading C- Deductions in respect of certain income and shall in no case exceed profits and gains of undertaking or hotel, as case may be." It envisages situation where deduction under s. 80-IA is claimed and allowed to eligible industrial undertaking then deduction to that extent shall not be allowed under any other ss. of 80HH to 80RRA falling under heading "C Deduction in respect of certain income". Upper limit of multiple deductions under different sections in heading C under Chapter VI-A is total profits and gains of undertaking. Thus, for example, where one industrial undertaking is also exporting, it is entitled to deductions both under ss. 80HHC as well as 80-IA and where deduction under s. 80-IA is higher than deduction under s. 80HHC, then total deduction under two sections will be limited to deduction under s. 80- IA. On other hand, where deduction under s. 80HHC is higher than deduction under s. 80-IA then total deductions under two sections will be limited to deduction granted under s. 80HHC. In other words, after allowing one of two deductions under one section, balance would be allowed in other section. If higher of two is already allowed in one section, nothing further will be allowed in other section. But in no case total deduction under two sections will exceed profits and gains of industrial undertaking. Prior to 1st April, 1999 two deductions were held mutually exclusive as held in CIT vs. Choksi Contacts (P) Ltd. (2001) 166 CTR (Raj) 383: (2001) 251 ITR 587 (Raj) as under: "Chapter VI-A, which consists of ss. 80A to 80V of IT Act, 1961, becomes operative on reaching last stage of computation of income from different sources. expression "gross total income", in various sections of Chapter VI-A, has been assigned special meaning to mean total income computed in accordance with provisions of IT Act, 1961, except any provision under Chapter VI-A. Computation of gross total income of industrial undertaking for purpose of deduction under s. 80HH and s. 80-I operates independently and has to be made without making any deduction under Chapter VI-A. language and intent of provisions of sub-s. (9) of s. 80HH make it clear that three deductions, viz., under s. 80HH, s. 80-I and s. 80J, are simultaneously permissible and not mutually exclusive. provision only fixes priority of order in which deduction under each provision is to be adjusted in gross total income derived from such industrial undertaking to which s. 80HH or s. 80-I or s. 80J respectively apply simultaneously. In case any industrial undertaking falls in category of new unit established in backward area and it is entitled to avail of benefit under all provisions, deduction under s. 80HH is to be made in first instance which is with object to promote industrial establishment in backward areas and only thereafter deduction computed under s. 80-I or s. 80J shall be given effect to." From above, if follows that deduction under ss. 80HHC and 80-IA are not mutually exclusive and both are simultaneously permissible. Issue 2 Revenue has contended that introduction of sub-s. (9A) to s. 80-IA i s declaratory in nature and hence would be effective for years earlier to 1st April, 1999 even though mentioned in Amendment Act as effective from 1st April, 1999. We are not convinced. controversy, if any, has been set on rest by decision of Hon ble Rajasthan High Court in CIT vs. Rochiram & Sons (supra). head notes from that decision are as under: "The provisions of s. 80-IA of IT Act, 1961, have been amended by insertion of sub-s. (9A) which provides that if deduction under any of sections has been allowed under Chapter VI-A and if any further deduction is to be allowed under any other section, that should be allowed only on balance amount. This amendment has been brought by Act of 1998 and made effective from 1st April, 1999. Prior to amendment, s. 80-IA did not provide that if deduction under s. 80HHC has been allowed on gross total income, deduction under s. 80-IA should be allowed only on balance income, i.e., amount remaining after deduction under s. 80HHC. When there is no such provision or intention of legislature to allow deduction under s. 80-IA on balance amount, there is no justification to allow deduction under s. 80-IA only on balance amount, i.e., amount which remained after deduction under s. 80HHC." Even legislature intends is contrary to what revenue has contended. As per Financial (No. 2) Bill, 1989 (Bill No. 51 of 1998), this amendment was intended to be inserted w.e.f. 1st April, 1991 to be effective from asst. yr. 1991-92 as under: "It is proposed to insert new sub-s. (9A) in s. 80-IA so as to provide that where amount of profits and gains of industrial undertaking or hotel, is claimed and allowed under said section, profits to that extent shall not qualify for deduction for any assessment year under any other provision of Chapter VI-A and in no case shall exceed eligible profits of industrial undertakings or hotel, as case may be. This amendment will take effect retrospectively from 1st April, 1991, and will, accordingly, apply to asst. yr. 1991-92 and subsequent years." Memorandum Explaining Provisions of Finance Bill reads out as under: "Therefore, object of insertion of s. 80-IA(9A), which later became 80- IA(9) in present section, was to prevent deduction of more than 100 per cent of profits and gains of undertaking by claiming multiple deduction. object of insertion of s. 80-IA(9A) was not to prevent claim of deduction under more than one section, under Chapter VI-A, where assessee satisfies conditions of these sections, but only to ensure that sum total of deductions so claimed by assessee does not exceed profits and gains of undertaking in respect of which deductions are allowable." However, when bill was passed, amendment was made effective from 1st April, 1999. In other words, conscious intention was expressed to make amendment effective w.e.f. 1st April, 1999 even though it was proposed in bill that it would be made effective from 1st April, 1991. We are, therefore, in agreement with views canvassed by learned counsel for assessee that introduction of sub-s. (9A) in s. 80-IA was not declaratory as well as it was only prospective to be effective for and from asst. yr. 2000-01. Issue 3 In our considered view computation of deduction under s. 80HHC and s . 80-IA would not affect each other. Both are based on different provisions. Deduction under s. 80HHC is based on exports and foreign exchange brought into India whereas deduction under s. 80-IA is available for specific industrial activity. Certain percentage of eligible profits from that industrial undertaking is allowed as deduction. Question involved was whether deduction allowed under s. 80HHC could be reduced from total income for computation of deduction under s. 80-IA. This question was considered by Hon ble Rajasthan High Court in Rochiram & Sons case (supra) as under: "The only dispute between assessee and Department is as to whether deduction under s. 80-IA should be allowed only on balance amount, i.e., amount remained after deduction under s. 80HHC or on gross total income. Even s. 80-IA of Act does not provide that if deduction under s. 80HHC has been allowed on gross total income, deduction under s. 80-IA should be allowed only on balance income, i.e., amount remained after deduction under s. 80HHC. When there is no such provision or intention of legislature to allow deduction under s. 80-IA on balance amount, there is no justification to allow deduction under s. 80-IA only on balance amount i.e., amount remained after deduction under s. 80HHC of Act. In absence of such intention, deduction under s. 80-IA of Act should also be allowed on gross total amount, as words used in sub-s. (1) of s. 80A of Act for deduction are "gross total income" and not on balance amount after any deduction made under any section." It is thus clear that deduction under one section cannot be reduced while computing deduction under other section. Thus computation of total deduction is to be done independently without being affected by each other. However, thereafter provisions of s. 80A would come into operation and restriction on total deduction under two sections will be placed. One of two restrictions (one being that total deductions under two sections together would not exceed higher of two after 1st April, 1999) is that total deduction under two sections will not exceed total profits and gains of industrial undertaking, i.e., it will not be more than 100 per cent of profits of industrial undertaking. It has been elaborately discussed in decision of Tribunal in Mittal Clothing Co. vs. Dy. CIT (2005) 4 SOT 626 (Bang) wherein it has held as under: "The object of insertion of s. 80-IA(9A), which later became s. 80-IA(9), present s., was to prevent deduction of more than 100 per cent of profits and gains of undertaking by claiming multiple deduction. object of insertion of s. 80-IA(9A) was not to prevent claim of deduction under more than one section under Chapter VI-A, where assessee satisfies conditions of those sections, but only to ensure that sum total of deduction so claimed by assessee does not exceed profits and gains of undertaking in respect of which deductions are allowable." Issue 4 Now last issue relevant to present appeals is as to whether provisions of s. 80A would be operative. In our considered view, as supported by decision of Hon ble Rajasthan High Court in Rochiram & Sons case (supra), total deduction under Chapter VI-A cannot exceed gross total income. Sec. 80A reads as under: "80A. Deductions to be made in computing total income. (1) In computing total income of assessee, there shall be allowed from his gross total income, in accordance with and subject to provisions of this Chapter, deductions specified in ss. 80C to 80U. (2) aggregate amount of deductions under this Chapter shall not, in any case, exceed gross total income of assessee. (3) Where, in computing total income of AOP or BOI, any deduction is admissible under s. 80G or s. 80GGA or s. 80HH or s. 80HHA or s. 80HHB or s. 80HHC or s. 80HHD or s. 80-I or s. 80-IA or s. 80J or s. 80JJ, no deduction under same section shall be made in computing total income of member of AOP or BOI in relation to share of such member in income of AOP or BOI." Thus it is clear from sub-s. (2) that total deduction under Chapter VI-A will not exceed gross total income computed before giving deduction under Chapter VI-A. As result we hold that; (a) Sub-s. (9A) to s. 80-IA is prospective to be effective from 1st April, 1999. It is also not declaratory. (b) Deduction under ss. 80HHC and 80-IA are mutually exclusive prior to 1st April, 1999. (c) After 1st April, 1999 capping on two deductions is to be done as per s. 80-IA(9A). (d) Before 1st April, 1999 capping on two deductions will be in accordance with s. 80A only. As result we allow appeal of assessee on this ground. assessee is entitled to deduction under s. 80HHC as well as under s. 80-IA subject to limitation under s. 80A. assessee has raised additional ground as under: "1. learned CIT(A) erred in holding in conformity with assessee that appellant was not entitled to deduction under s. 80-IA of IT Act, 1961. appellant submits that omission of above ground of appeal in original memo of appeal was not wilful and same has been now raised as advised by simply raises purely legal grounds which does not involved fresh investigation of facts." We admit same as it is elaborative of grounds already taken. And in view of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249: (1998) 229 ITR 383 (SC) as no investigation is required. ground is disposed of in accordance with discussion held in respect of ground No. 2. This ground is accordingly allowed. appeal of assessee is, therefore, allowed. ITA 5289/Mum/2001 (Asst. yr. 1998-99) In this year assessee has raised following grounds: learned CIT(A) erred in holding that appellants were not entitled to deductions under s. 80HHC. learned CIT(A) erred in not appreciating facts with regard to deduction of freight and insurance from export turnover. learned CIT(A) erred in dismissing ground of appeal levy of interest under s. 234B. First ground is same as second ground for asst. yr. 1997-98. In accordance with discussion on subject in that year we allowed claim of assessee. order of CIT(A) is reversed on this ground. Second ground is also allowed in favour of assessee as per discussions in ground No. 1 for asst. yr. 1997-98. third ground is consequential. AO will recomputed interest chargeable under s. 234B on basis of income finally assessed. As result, appeal of assessee is partly allowed. *** REGENCY EXPORTS (P) LTD. v. JOINT COMMISSIONER OF INCOME TAX