2010 (10) TMI 906 - AT - Income Tax

Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings

Summary

Issues:
1. Enhanced assessment under section 80-IB of the Income-tax Act.
2. Claim of deduction under sections 80-IB and 80HHC independently on gross profit.

Issue 1: Enhanced assessment under section 80-IB of the Income-tax Act:

The appeal arose from an order enhancing the assessment by withdrawing the deduction allowed under section 80-IB of the Income-tax Act. The appellant, engaged in dehydration of onions, fruits, and vegetables, claimed the deduction under section 80-IB. However, the CIT(A) held that dehydration of onions did not constitute manufacturing or production of articles as required by section 80-IB. The appellant contended that it had been allowed the deduction in previous years and should be eligible in the current year as well. The Tribunal noted that conditions for deduction under section 80-IB should be examined in the initial year of the claim and followed consistently in subsequent years. Relying on case law, the Tribunal held that once deduction is allowed in the first year, it cannot be denied in subsequent years on the same ground. Consequently, the enhancement made by the CIT(A) was set aside.

Issue 2: Claim of deduction under sections 80-IB and 80HHC independently on gross profit:

The appellant sought a deduction under sections 80-IB and 80HHC independently on the gross profit. However, the Tribunal referenced a previous decision where it was held that restrictions on deductions under section 80-IA(9) applied to all deductions under Chapter VI-A of the Income-tax Act. The Tribunal emphasized that the legislative intent should be interpreted based on clear statutory language, and restrictions must be applied as specified. Referring to relevant case law and a circular, the Tribunal concluded that relief under section 80-IA should be deducted from profits before computing relief under section 80HHC. Citing precedents, the Tribunal dismissed the appellant's claim for deduction under both sections independently.

In conclusion, the Tribunal partly allowed the appellant's appeal, overturning the enhanced assessment under section 80-IB but dismissing the claim for deduction under sections 80-IB and 80HHC independently on gross profit.