REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 238 OF 2012 PLASTIBLENDS INDIA LIMITED APPELLANT(S) VERSUS ADDL. COMMISSIONER OF INCOME TAX, MUMBAI & ANR. RESPONDENT(S) WITH CIVIL APPEAL NO. 12828 OF 2017 CIVIL APPEAL NO. 12757 OF 2017 CIVIL APPEAL NO. 12758 OF 2017 CIVIL APPEAL NO. 12762 OF 2017 CIVIL APPEAL NO. 540 OF 2012 CIVIL APPEAL NO. 528 OF 2012 CIVIL APPEAL NO. 529 OF 2012 CIVIL APPEAL NO. 531 OF 2012 CIVIL APPEAL NO. 532 OF 2012 CIVIL APPEAL NO. 530 OF 2012 Signature Not Verified Digitally signed by CIVIL APPEAL NO. 535 OF 2012 ASHWANI KUMAR Date: 2017.10.09 16:37:23 IST Reason: CIVIL APPEAL NO. 536 OF 2012 CIVIL APPEAL NO. 533 OF 2012 2 CIVIL APPEAL NO. 534 OF 2012 CIVIL APPEAL NO. 537 OF 2012 CIVIL APPEAL NO. 538 OF 2012 CIVIL APPEAL NO. 543 OF 2012 CIVIL APPEAL NO. 544 OF 2012 CIVIL APPEAL NO. 541 OF 2012 CIVIL APPEAL NO. 542 OF 2012 CIVIL APPEAL NO. 546 OF 2012 CIVIL APPEAL NO. 545 OF 2012 CIVIL APPEAL NO. 547 OF 2012 CIVIL APPEAL NO. 548 OF 2012 CIVIL APPEAL NO. 539 OF 2012 CIVIL APPEAL NO. 550 OF 2012 CIVIL APPEAL NO. 549 OF 2012 CIVIL APPEAL NO. 551 OF 2012 CIVIL APPEAL NO. 12755 OF 2017 AND CIVIL APPEAL NO. 12980 OF 2017 JUDGMENT A.K. SIKRI, J. singular issue which needs to be considered in these appeals pertains to claim of depreciation under Section 80-IA of Income Tax 3 Act, 1961 (hereinafter referred to as Act ). Interpreting provisions of Section 32 of Act (which prevailed in relevant Assessment Years1) this Court in CIT v. Mahendra Mills2 held that it is choice of assessee whether to claim or not to claim depreciation. As aforesaid, that decision was rendered in context of assessing business income of assessee under Chapter IV of Act which is regulated by Sections 28 to 43D of Act. Section 32 deals with depreciation and allows deductions enumerated therein from profits and gains of business or profession. Section 80-IA of Act, on other hand, contains special provision for assessment of industrial undertakings or enterprises which are engaged in infrastructure development etc. This provision allows certain specific kind of deductions in respect of depreciation. issue is as to whether claim for deduction on account of depreciation under Section 80-IA is choice of assessees or it has to be necessarily taken into consideration while computing income under this provision. For better understanding of aforesaid issue, factual environment in which aforesaid question has germinated, needs to be recapitulated. For sake of convenience, facts appearing in Civil Appeal No. 238 of 2012 are taken note of. 1 Section 32 was amended by Finance Act, 2001 and Explanation 5 was added to nullify effect of Mahendra Mills case. 2 (2000) 243 ITR 56 4 2) Assessment Years involved in this appeal are 1997-98 to 2000-01. assessee is engaged in business of manufacture of master batches and compounds. For this purpose, it had manufacturing undertakings at Daman Units I and II. Units I and II began to manufacture article or things in previous years relevant to Assessment Years 1994-95 and 1995-96 respectively. Accordingly, for year under consideration i.e. Assessment Year 1997-98 profits of business of both undertakings were eligible for 100% deduction under Section 80-IA of Act. assessee did not claim depreciation while computing its income under head profits and gains of business. Consequently, deduction under Section 80-IA was also claimed on basis of such profits i.e. without reducing same by depreciation allowance. This position was accepted by Assessing Officer (AO) in intimation made under Section 143(1)(a) of Act. Likewise, for Assessment Year 1996-97, assessee did not claim deduction on account of depreciation. Though, this position was not accepted by AO, claim of assessee was upheld by Tribunal. 3) Coming to Assessment Year 1997-98, from which Assessment Year dispute has arisen, annual accounts prepared by assessee for year disclosed that it earned net profit of Rs.1,80,85,409/-. This was arrived at after charging depreciation of Rs.64,98,968/- in 5 accordance with Companies Act, 1956. assessee filed its return of income for Assessment Year 1997-98 determining gross total income at Rs.2,46,04,962/-. gross total income included profits and gains derived from business of undertakings I and II at Daman aggregating to Rs.2,46,04,962/- which profits were eligible for deduction under Section 80-IA of Act. After reducing gross total income by deductions available under Section 80-IA, total income was computed at Rs. Nil. AO initiated reassessment proceedings and passed assessment order under Section 143(3) read with Section 147 computing gross total income at Rs.34,15,583/-. Though, assessee had disclaimed deduction in respect of depreciation, AO allowed deduction on this account as well in respect of same in sum of Rs.2,13,89,379/- while computing profit and gains of business. After reducing gross total income by brought forward loss of Rs.98,47,170/-, he determined business loss to be carried forward to Assessment Year 1998-99 at Rs.66,25,587/-. Aggrieved by said assessment order, assessee filed appeal before Commissioner of Income Tax (Appeals) {CIT(A)} urging that AO erred in not considering Tribunal s decision in assessee s own case for Assessment Year 1996-97 wherein it had been held that depreciation cannot be thrust on it. CIT(A) upheld assessee s submission that claim for depreciation is optional, based 6 on Tribunal s order in its own case for Assessment Year 1996-97 and hence allowed appeal. Aggrieved by appellate order of CIT(A), AO filed appeal before Tribunal with plea that CIT(A) erred in directing him to work out business profit and deduction under Section 80-IA of Act without taking into account corresponding depreciation amount. Tribunal reversed appellate order of CIT(A) following decision of High Court of Bombay in Scoop Industries P. Ltd. v. Income-Tax Officer3. Aggrieved by Tribunal s order, assessee filed appeal thereagainst before High Court of Bombay under Section 260A of Act on basis that substantial question of law arose for consideration. High Court was pleased to admit appeal and formulated following question of law as arising for determination: Whether eligible income of undertaking in respect of which deductions available under Section 80-IA has to be reduced by allowance of depreciation for year even though assessee has exercised option not to claim depreciation under Section 32 in arriving at its income of undertaking for purposes of computing assessee s income under head profits and gains of business or profession? Division Bench of High Court at Bombay in assessee s case noticed that there was conflict of opinion in two earlier decisions viz. Grasim Industries Ltd. v. Assistant Commissioner of 3 (2007) 289 ITR 195 7 Income-Tax & Ors.4 wherein it was held that profits and gains eligible for deduction under Chapter VI-A shall be same as profits and gains computed in accordance with provisions of Act and included in gross total income and decision in Scoop Industries P. Ltd. where it was held that depreciation whether claimed or not has to be reduced for arriving at profits eligible for deduction under Chapter VI-A. Noticing this conflict of opinion, matter was referred to Full Bench, to resolve conflict. Full Bench of High Court of Bombay has upheld stand of Revenue, that, whilst computing deduction under Chapter VI-A, it was mandatory to grant deduction by way of depreciation. High Court has proceeded on basis that computation of profits and gains for purposes of Chapter VI-A is different from computation of profits under head profits and gains of business . It has, therefore, concluded that, even assuming that assessee had option to disclaim current depreciation in computing business income, depreciation had to be reduced for computing profits eligible for deduction under Section 80-IA of Act. High Court concluded that Section 80-IA provides for special deduction linked with profits and is code by itself and in so doing relied on decisions of this Court in case of Liberty India v. Commissioner of Income Tax5, 4 (2000) 245 ITR 677 5 (2009) 317 ITR 218 8 Commissioner of Income Tax v. Williamson Financial Services & Ors.6 and Commissioner of Income Tax, Dibrugarh v. Doom Dooma India Ltd.7. High Court proceeded on basis that this Court in aforementioned decisions has held that for computing such special deduction, any device adopted by assessee to reduce or inflate profits of such eligible business has to be rejected. High Court ultimately held that quantum of deduction eligible under Section 80-IA has to be determined by computing gross total income from business after taking into consideration all deductions allowable under Sections 30 to 43D including depreciation under Section 32. 4) After Full Bench answered reference in aforesaid manner, appeal of assessee was disposed of by Division Bench vide order dated November 03, 2009 following aforesaid opinion of Full Bench. This is how matter has travelled up to this Court. 5) relevant portion of provisions of Section 80-IA of Act, which was in vague during concerned Assessment Years 8, reads as under: 80-IA. Deductions in respect of profits and gains from industrial undertakings etc., in certain cases.- (1) Where gross total income of assessee includes any profits and gains derived from any business of industrial undertaking or hotel or operation of ship or developing, maintaining and 6 (2008) 297 ITR 17 7 (2009) 310 ITR 392 8 It may be mentioned that Section 80-IA inserted by Finance (No.2) Act, 1991 and was amended from time to time. provision was recasted and substituted by Finance Act, 2001 and certain amendments made to that provision also thereafter. We are, however, concerned with provision that was in force before its amendment vide Finance Act, 2001. 9 operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange services or construction and development of housing projects or operating industrial park or commercial production or refining of mineral oil in North Eastern Region or in any part of India on or after 1st day of April, 1997 (such business being hereinafter referred to as eligible business), to which this section applies, there shall, in accordance with and subject to provisions of this section, be allowed in computing total income of assessee, deduction from such profits and gains of amount equal to percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6). 6) It is not in dispute that all assessees in these appeals are those industrial undertakings which fulfil conditions mentioned in Section 80-IA and, therefore, are entitled to deductions as stipulated in sub-section (5) of said Section. It is also not in dispute that all assessees fall in that category of industrial undertakings which are entitled to 100% deduction of profits and gains derived from such industrial undertakings for specified number of years. It is also admitted fact that for Assessment Years in question, they were entitled to aforesaid deduction and their assessments were completed under Section 80-IA of Act. Submission of Mr. Pardiwala, learned senior counsel for assessees, was that deduction is to be allowed from such profits and gains and, therefore, in first instance, profits and gains which are earned by assessees in relevant Assessment Year are to be computed. For computation of such 10 profits and gains, one has to go back and apply provisions from Section 28 onwards contained in Part D of Chapter IV dealing with profits and gains from business or profession . Section 29 of Act, in this behalf, specifically stipulates that income referred to in Section 28 shall be computed in accordance with provisions contained in Sections 30 to 43D. In this hue, he argued, when it comes to claiming depreciation, Section 32 of Act gets attracted and interpreting this Section, it has been held in Mahendra Mills case that whether to claim depreciation or not is option of assessees and it cannot be thrusted upon assessees. Following passage from said judgment was relied upon by learned senior counsel: 40. We do not think that Gujarat High Court in case of Gujarat State Warehousing Corpn. [(1976) 104 ITR 1 (Guj)] has taken correct view in respect of issues with which we are concerned in present appeal. High Court has not properly appreciated context in which this Court made observations in case of Jaipuria China Clay Mines (P) Ltd. [(1966) 59 ITR 555 : AIR 1966 SC 1187] on which High Court has relied. In later two cases of Chokshi Metal Refinery [(1977) 107 ITR 63 (Guj)] and Arun Textile C [(1991) 192 ITR 700 (Guj)] Gujarat High Court has itself taken, if we may say so, different view falling in line with views of Bombay, Punjab and Haryana, Karnataka, Andhra Pradesh, Calcutta and Kerala High Courts which view commends to us. language of provisions of Sections 32 and 34 is specific and admits of no ambiguity. Section 32 allows depreciation as deduction subject to provisions of Section 34. Section 34 provides that deduction under Section 32 shall be allowed only if prescribed particulars have been furnished. We have seen Rule 5-AA of Rules which though since deleted provided for particulars required for purpose of deduction under Section 32. Even in absence of Rule 5-AA return of income in form prescribed itself requires particulars to be furnished if assessee claims depreciation. These particulars are required to be furnished in 11 great detail. There is circular of Board dated 31-8-1965, which provides that depreciation could not be allowed where required particulars have not been furnished by assessee and no claim for depreciation has been made in return. Income Tax Officer in such case is required to compute income without allowing depreciation allowance. circular of Board dated 11-4-1955 is of no help to Revenue. It imposes merely duty on officers of Department to assist taxpayers in every reasonable way, particularly, in matter of claiming and securing relief. officer is required to do no more than to advise assessee. It does not place any mandatory duty on officer to allow depreciation if assessee does not want to claim that. Provision for claim of depreciation is certainly for benefit of assessee. If he does not wish to avail that benefit for some reason, benefit cannot be forced upon him. It is for assessee to see if claim of depreciation is to his advantage. Rather, Income Tax Officer should advise him not to claim depreciation if that course is beneficial to assessee. That would be in our view spirit of circular dated 11-4-1955. Income under head Profits and gains of business or profession is chargeable to income tax under Section 28 and that income under Section 29 is to be computed in accordance with provisions contained in Sections 30 to 43-A. argument that since Section 32 provides for depreciation it has to be allowed in computing income of assessee cannot in all circumstances be accepted in view of bar contained in Section 34. If Section 34 is not satisfied and particulars are not furnished by assessee his claim for depreciation under Section 32 cannot be allowed. Section 29 is thus to be read with reference to other provisions of Act. It is not in itself complete code. 7) He also referred to sub-sections (9) and (10) of Section 80-IA which provide for specific eventualities for purpose of deductions under said Section and submitted that insofar as depreciation is concerned, that was not mentioned therein. Thus, according to him, it is these two sub-sections which contained special provisions and except that, for computing profits and gains of business, Sections 30 to 43D had to be applied which would embrace Section 32 as well. 12 8) Counsel appearing in other appeals for assessees made their submissions almost on same lines thereby virtually adopting arguments advanced by Mr. Percy. 9) Learned counsel for Revenue emphatically refuted aforesaid submissions. He extensively referred to Full Bench judgment of High Court, justifying view taken therein on reasoning contained in said judgment. In addition, he submitted that very basis of judgment of this Court in Mahendra Mills Limited has been knocked off by Parliament with addition of Explanation 5 to Section 32 vide Finance Act, 2001. Though, this provision was given effect to from April 1, 2002, his submission was that it is declaratory in nature and, therefore, has to be applied retrospectively. In order to buttress this submission, he relied upon following judgments: (i) CIT, Bombay v. M/s Gwalior Rayon Silk Manufacturing Co. Ltd.9 (ii) Commissioner of Income Tax v. M/s Alps Theatre10 (iii) Commissioner of Income Tax-I, Ahmedabad v. Gold Coin Health Food Private Limited11 10) In rejoinder, Mr. Percy argued that Explanation 5 to Section 32 was 9 (1992) 3 SCC 326 10 AIR 1967 SC 1437 = (1967) 3 SCR 181 11 (2008) 9 SCC 622 13 specifically made applicable w.e.f. April 1, 2002 and was, therefore, prospective in nature. In this behalf, he referred to three High Court judgments rendered by Kerala High Court, Madras High Court and Punjab & Haryana High Court which had taken view as projected by him in following cases: (i) Commissioner of Income-Tax v. Kerala Electric Lamp Works Ltd. & Anr.12, (ii) Commissioner of Income Tax v. Sree Senhavalli Textiles P. Ltd.13 and (iii) Shri Ram Nath Jindal and Shri Jaghjiwan Ram v. Commissioner of Income-Tax, Haryana, Rohtak14 He argued that wherever Legislature wanted particular amendment to be retrospective in nature, it was specifically provided so. 11) Before dealing with aforesaid submissions, let us first discern reasons which prevailed with Full Bench of Bombay High Court in arriving at said conclusion. 12) We have already mentioned that Full Bench of Bombay High Court answered reference by holding that depreciation had to be reduced for computing profits eligible for deduction under Section 80-IA of Act, as it was complete code in itself. For arriving at said conclusion, Full Bench took note of relevant provisions of 12 (2003) 261 ITR 721 13 (2003) 259 ITR 77 14 (2001) 252 ITR 590 14 Chapter VI-A, particularly, Section 80A, Section 80AB and Section 80B as well as Section 80-IA of Act. Contrasting provisions of Chapter VI-A with Chapter IV, High Court remarked that whereas Chapter IV contains provision relating to computation of total income under various heads of income as also deductions that are allowable under each head, Chapter VI contains provisions relating to aggregation of income and set off or carry forward of loss. Chapter VI-A of Act, on other hand, provides for special deductions that are allowed at such rates that are specified in respective provisions on gross total income of assessee. Keeping in view aforesaid scheme of these Chapters, High Court distinguished judgment of this Court in Mahendra Mills and held it to be not applicable, when dealing with cases under Section 80-IA of Act. In process, High Court gave following three reasons: 31. However, it is pertinent to note that firstly, decision of Apex Court in case of Mahendra Mills (supra) was rendered in context of determining total income of industrial undertaking under Chapter IV of Act and not in context of determining deduction under Chapter VIA of Act. Secondly, what is held by Apex Court in case of Mahendra Mills (supra) is that, when there are two provisions under which assessee can claim some benefit, it is for assessee to choose one and that consequence of assessee not claiming depreciation in current year would be that written down value would remain same for following year (see 243 ITR 56 at Page 62). Thirdly, Apex Court in case of Mahendra Mills (supra) has not laid down any proposition of law that by disclaiming depreciation, assessee can claim enhanced deduction allowable under any other provision in Act. 32. choice or option available to assessee to claim 15 or not to claim current depreciation as per decision of Apex Court in case of Mahendra Mills (supra) can be elucidated by illustration. Suppose assessee is carrying business in scientific research. That assessee would be entitled to deduction under section 32 (current depreciation on plant and machinery used for that business) as well as deduction under section 35(1)(iv) (capital expenditure on scientific research business). In such case, it cannot be said that legislature intended to give double deduction in respect of same business outgoing and assessee would have to choose one out of above two deductions and cannot claim both deductions. In these circumstances, Apex Court in case of Mahendra Mills(supra) has observed that assessee has option to disclaim depreciation and that consequence of disclaiming depreciation would be that written down value of asset would remain same for following year. Thus, even according to Apex Court, disclaiming of depreciation cannot result in enhancement in quantum of deduction that is allowable under any other provision in Act. 13) High Court also observed that in Mahendra Mills case, this Court neither consider scope of deduction under Chapter VI-A nor said decision can be read to mean that by disclaiming current depreciation, assessees can claim enhanced deduction under any other provisions in Act. 14) After removing applicability of Mahendra Mills on aforesaid grounds, High Court proceeded to consider as to whether it can be said that quantum of deduction allowable under Section 80-IA depend upon assessees claiming or not claiming current depreciation? Full Bench went on to answer this question with observations that it was no longer res integra as Apex Court had reflected thereupon in case of Liberty India and quoted following passage from said judgment in support of its aforesaid 16 remarks: 13. Before analyzing section 80-IB, as prefatory note, it needs to be mentioned that 1961 Act broadly provides for two types of tax incentives, namely, investment linked incentives and profit linked incentives. Chapter VI-A which provides for incentives in form of tax deductions essentially belong to category of profit linked incentives . Therefore, when section 80-IA/80-IB refers to profits derived from eligible business, it is not ownership of that business which attracts incentives. What attracts incentives under section 80-IA/80-IB is generation of profits (operational profits). For example, assessee company located in Mumbai may have business of building housing projects or ship in Nava Sheva. Ownership of ship per se will not attract section 80-IB (6). It is profits arising from business of ship which attracts sub-section (6). In other words, deduction under sub-section (6) at specified rate has linkage to profits derived from shipping operations. This what we mean in drawing distinction between profit linked tax incentives and investment linked tax incentives. It is for this reason that Parliament has confined deduction to profits derived from eligible businesses mentioned in sub-sections (3) to (11A) [as they stood at relevant time]. One more aspect needs to be highlighted. Each of eligible business in sub-sections (3) to (11A) constitutes stand-alone item in matter of computation of profits. That is reason why concent of Segment Reporting stands introduced in Indian Accounting Standards (IAS) by Institute of Chartered Accountants of India (ICAI). 14. Analysing Chapter VI-A, we find that sections 80-IB/80-IA are Code by themselves as they contain both substantive as well as procedural provisions . Therefore, we need to examine what these provisions prescribe for computation of profits of eligible business . It is evident that section 80-IB provides for allowing of deduction in respect of profits and gains derived from eligible business. words derived from in narrower in connotation as compared to words attributable to . In other words, by using expression derived from , Parliament intended to cover sources not beyond first degree. In present batch of cases, controversy which arises for determination is: whether DEPB credit/Duty drawback receipt comes within first degree sources? According to assessee(s), DEPB credit/duty drawback receipt reduces value of purchases (cost neutralization), hence, it comes within first degree source as it increases net profit proportionately. On other hand, 17 according to Department, DEPB credit, duty drawback receipt do not come within first degree source as said incentives flow from Incentive Schemes enacted by Government of India or from section 75 of Customs Act, 1962. Hence, according to Department, in present cases, first degree source is incentive scheme/provisions of Customs Act. In this connection, Department places heavy reliance on judgment of this Court in Sterling Food (supra). Therefore, in present cases, in which we are required to examine eligible business of industrial undertaking, we need to trace source of profits to manufacture [see CIT v. Kirloskar Oil Engines Ltd., reported in (1986) 157 ITR 762]. 15. Continuing our analysis of sections 80-IA/80-IB it may be mentioned that sub-section (13) of section 80-EB provides for applicability of provisions of sub-section (5) and sub-sections (7) to (12) to section 80-IA, so far as may be, applicable to eligible business under section 80-IB. Therefore, at outset, we stated that one needs to read sections 80-1, 80-IA and 80-EB as having common Scheme. On perusal of sub-section (5) of section 80-IA, it is noticed that it provides for manner of computation of profits of eligible business. Accordingly, such profits are to be computed as if such eligible business is only source of income of assessee. Therefore, devices adopted to reduce or inflate profits of eligible business has got to be rejected in view of overriding provisions of sub-section (5) of section 80-IA, which are also required to be read into section 80-IB. [see section 80-EB(13)]. We may reiterate that sections 801, 80-IA and 80-IB have common scheme and if so read it is clear that said sections provide for incentives in form of deduction(s) which are linked to profits and not to investment. On analysis of sections 80-IA and 80-EB it becomes clear that any industrial undertaking, which becomes eligible on satisfying sub-section (2), would be entitled to deduction under sub-section (1) only to extent of profits derived from such industrial undertaking after specified date(s). Hence, apart from eligibility, sub-section (1) purports to restrict quantum of deduction to specified percentage of profits. This is importance of words derived from industrial undertaking as against profits attributable to industrial undertaking. (Emphasis supplied) 15) High Court also took aid of following discussion from 18 judgment of this Court in Williamson Financial Services and held that: In this connection, it is also important to note that section 80A which falls in Chapter VI-A, deductions are allowed only from gross total income . object for making such provision is to limit amount of section 80HHC deduction. It is true that section 80HHC provides for deduction of percentage of export profits. percentage is calculated with reference to export profits, but deduction is only from gross total income as defined under section 80B(5) of 1961 Act. Therefore, very scheme of 1961 Act is to treat deductions under Chapter VI-A as deductions only from gross total income in order to arrive at total income . In other cases falling under section 28 where computation of income falls under head Business , allowances are deductible from income but not from gross total income . It is, therefore, not possible to accept contention that section 80HHC is part of provisions for computation of business income. Section 80 HHC does not have any direct impact on computation of business income in manner in which, for example, section 72 affects computation of business income. 16) High Court also noted that in Doom Dooma India Ltd., this Court had specifically remarked that Chapter VI-A refers to special deduction. It is distinct code by itself. It was also held in said judgment that there was clear distinction between deductions/allowances in Section 30 to 43D and deductions admissible under Chapter VI-A inasmuch as deductions/ allowances provided in Sections 30 to 43D are allowed in determining gross total income and are not chargeable to tax because same constitute charge on profit, whereas, deductions under Chapter VI-A are allowed from gross total income chargeable to tax. After discussing aforesaid three judgments of this Court, High Court noticed that Section 80-IA is 19 code by itself and deduction allowable under Section 80-IA is special deduction which is linked to profits, unlike deductions contained in Chapter IV of Act which are linked to investment. 17) aforesaid conclusion of Full Bench is based on judgments of this Court and there is no reason to disagree with same, on finding that judgments of this Court are rightly analysed and ratio thereof is correctly understood and applied. We, thus, entirely agree with Full Bench judgment of Bombay High Court in Plastiblends India Limited v. Additional Commissioner of Income-Tax & Ors.15 and following manner in which position has been summed up by High Court: 44. To summarise, firstly, Apex Court decision in case of Mahendra Mills (supra) cannot be construed to mean that by disclaiming depreciation, assessee can claim enhanced quantum of deduction under section 80IA. Secondly, Apex Court in case of Distributors (Baroda) P. Ltd. (supra) and in case of Liberty India (supra) has clearly held that special deduction under Chapter VIA has to be computed on gross total income determined after deducting all deductions allowable under sections 30 to 43D of Act and any device adopted to reduce or inflate profits of eligible business has got to be rejected. Thirdly, this Court in case of Albright Morarji and Pandit Ltd. (supra), Grasim Industries Ltd. (supra) and Asian Cable Corporation Ltd. (supra) has only followed decisions of Apex Court in case of Distributors Baroda (supra). Thus, on analysis of all decisions referred hereinabove, it is seen that quantum of deduction allowable under section 80-IA of Act has to be determined by computing gross total income from business, after taking into consideration all deductions allowable under sections 30 to 43D of Act. Therefore, whether assessee has claimed deductions allowable under sections 30 to 43D of Act or not, quantum of 15 (2009) 318 ITR 352 20 deduction under section 80IA has to be determined on total income computed after deducting all deductions allowable under sections 30 to 43D of Act. 18) As is clear from arguments advanced by Mr. Pardiwala, main thrust of his argument was predicated on judgment of this Court in Mahendra Mills, which according to us, cannot be applied while interpreting Section 80-IA of Act. It may be stated at cost of repetition that judgment in Mahendra Mills was rendered while construing provisions of Section 32 of Act, as it existed at relevant time, whereas we are concerned with provisions of Chapter VI-A of Act. Marked distinction between two Chapters, as already held by this Court in judgments noted above, is that not only Section 80-IA is code by itself, it contains provision for special deduction which is linked to profits. In contrast, Chapter IV of Act, which allows depreciation under Section 32 of Act is linked to investment. This Court has also made it clear that Section 80-IA of Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate profits of eligible business has to be rejected. assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in subsequent years. This would be anathema to scheme under Section 80-IA of Act which is linked to profits and if contention of assessees is 21 accepted, it would allow them to inflate profits linked incentives provided under Section 80-IA of Act which cannot be permitted. 19) Having interpreted provisions of Section 80-IA in aforesaid manner, it is not necessary to go into other question, viz., whether Explanation 5 to Section 32 of Act is declaratory in nature or it is to be applied prospectively. Judgments cited by both sides on this aspect, therefore, need not be dealt with. 20) Result of aforesaid discourse would be to hold that there is no merit in any of appeals filed by assessees which are accordingly dismissed. J. (A.K. SIKRI) J. (ASHOK BHUSHAN) NEW DELHI; OCTOBER 9, 2017. Plastiblends India Limited v. Addl. Commissioner of Income-tax, Mumbai & Anr