2001 (6) TMI 42 - HC - Income Tax

Summary

Issues involved: The judgment addresses the questions of law arising from an order passed by the Income-tax Appellate Tribunal regarding deductions claimed under sections 80HH and 80J of the Income-tax Act, 1961.

Deductions under sections 80HH and 80J:
The assessee, having established a new industrial undertaking in a backward area, claimed deductions under sections 80HH and 80J of the Act. The Assessing Officer allowed deduction under section 80HH but reduced the deduction under section 80J by the amount claimed under section 80HH. The Commissioner of Income-tax (Appeals) directed the full allowance of both deductions without reduction. The Tribunal upheld this decision, citing similar rulings for previous assessment years.

Legal Interpretation - Section 80HH and 80J:
The court analyzed sections 80HH and 80J, noting that section 80HH allows a deduction of 20% of profits from specified industries, while section 80J permits a deduction based on a percentage of capital employed in new industries. The court emphasized that the benefits under these sections differ, with section 80J providing for a maximum deduction of 6% of capital employed.

Arguments and Rulings:
The Revenue argued that there is an overall ceiling for deductions under sections 80HH, 80HHA, and 80J, limited to 6% of capital employed. Conversely, the respondent-assessee contended that previous tribunal decisions supported full deductions under both sections. The court held that section 80HH must be applied first, followed by section 80J, and any unclaimed deduction under section 80J can be carried forward. Imposing a ceiling on section 80J deductions would defeat the legislative intent to incentivize new industries, especially in backward areas.

Conclusion:
The court ruled in favor of the assessee, affirming the Tribunal's decision to allow full deductions under sections 80HH and 80J. Citing consistency with previous court and Supreme Court decisions, the judgment emphasized the distinct purposes of the two sections and upheld the assessee's entitlement to the claimed deductions. Both questions of law were answered in favor of the assessee, resolving the reference with no costs awarded.